10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from                        to                       

Commission File Number 1-6479-1

OVERSEAS SHIPHOLDING GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	13-2637623
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
666 Third Avenue, New York, New York	10017
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 212-953-4100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock (par value $1.00 per share)	New York Stock Exchange
	Pacific Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act:  NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x   No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  o   No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x                Accelerated filer o                Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange  Act). Yes o   No x

The aggregate market value of the Common Stock held by non-affiliates of the registrant on June 30, 2005, the last business day of the registrant’s most recently completed second quarter, was $2,077,168,507, based on the closing price of $59.65 per share on the New York Stock Exchange on that date. (For this purpose, all outstanding shares of Common Stock have been considered held by non-affiliates, other than the shares beneficially owned by directors, officers and certain 5% shareholders of the registrant; certain of such persons disclaim that they are affiliates of the registrant.)

As of February 24, 2006, 39,531,417 shares of Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed by the registrant in connection with its 2006 Annual Meeting of Shareholders are incorporated by reference in Part III.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
	Overview	1
	Forward-Looking Statements	6
	Operations	6
	Charter Types	8
	Fleet Summary	9
	International Fleet Operations	10
	U.S. Flag Fleet Operations	11
	LNG	12
	Joint Ventures and Equity Method Investments	12
	Competition	13
	Environmental and Security Matters Relating to Bulk Shipping	14
	International Environmental and Safety Restrictions and Regulations	15
	Domestic Environmental and Safety Restrictions and Regulations	17
	Security Regulations	19
	Insurance	19
	Taxation of the Company	20
	Detailed Fleet List as of December 31, 2005	22
	Glossary	27
	Available Information	29
Item 1A.	Risk Factors	30
Item 1B.	Unresolved Staff Comments	38
Item 2.	Properties	38
Item 3.	Legal Proceedings	38
Item 4.	Submission of Matters to a Vote of Security Holders	39
	Executive Officers of the Registrant	39
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	40
Item 6.	Selected Financial Data	41
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
	General	42
	Acquisition of Stelmar Shipping Ltd.	42
	Sale of Seven Tankers to Double Hull Tankers	42
	Operations	43
	Critical Accounting Policies	48
	Income from Vessel Operations	52
	Equity in Income of Joint Ventures	59
	Interest Expense	60
	Provision/(Credit) for Federal Income Taxes	61
	Effects of Inflation	61
	Liquidity and Sources of Capital	62
	Earnings per Share Adjusted for Gain on Vessel Sales and Securities Transactions	65
	Risk Management	66
	Interest Rate Sensitivity	67
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	68
Item 8.	Financial Statements and Supplementary Data	68
	Management’s Report on Internal Controls over Financial Reporting	108

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	109
Item 9A.	Controls and Procedures	109
Item 9B.	Other Information	109
PART III
Item 10.	Directors and Executive Officers of the Registrant	110
Item 11.	Executive Compensation	110
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	110
Item 13.	Certain Relationships and Related Transactions	110
Item 14.	Principal Accounting Fees and Services	110
PART IV
Item 15.	Exhibits, Financial Statement Schedules	111
Signatures		116

PART I

ITEM 1.BUSINESS

Overview

Overseas Shipholding Group, Inc. (“OSG” or the “Company”) is one of the world’s leading independent bulk shipping companies engaged primarily in the ocean transportation of crude oil and petroleum products. The Company owns or operates a modern fleet of 89 vessels (aggregating 11.4 million deadweight tons) of which 79 vessels operate in the international market and 10 operate in the U.S. Flag market. OSG’s newbuilding program includes four LNG carriers, four International Flag Product Carriers and ten U.S. Flag Product Carriers, bringing the Company’s total operating and newbuild fleet at December 31, 2005 to 107 vessels.

OSG’s vessel operations are organized into strategic business units: crude oil tankers, Product Carriers, U.S. Flag vessels and Liquefied Natural Gas (“LNG”) Carriers. The crude oil tanker unit manages International Flag V-Plus, VLCC, Aframax and Panamax tankers; the Product Carriers unit principally manages Handysize Product Carriers; the U.S. Flag unit manages most U.S. Flag vessels; and the LNG unit is developing its chartering and commercial capabilities in preparation for the delivery of four LNG carriers beginning in late 2007. Each strategic business unit has dedicated chartering and commercial personnel while the Company’s technical ship management operations and corporate departments support all four business units.

The Company charters its vessels either for specific voyages (“Voyage Charter”) at spot rates or for specific periods of time (“Time Charter”) at fixed monthly amounts. Spot market rates are highly volatile, while time charter rates are fixed for a specific period of time, and provide a more predictive stream of Time Charter Equivalent Revenues. For a more detailed discussion on factors influencing spot and time charter markets, see Operations - - Charter Types.

A glossary of shipping terms (the “Glossary”) that should be used as a reference when reading this Annual Report on Form 10-K begins on page 27. Capitalized terms that are used in this Annual Report are either defined when they are first used or in the Glossary.

Business Strategy

The Company’s strategy is to be a market leader in each of the segments in which it operates. OSG believes that it differentiates itself from its competitors through the scale and diversity of its fleet, the skills, experience and capabilities of its sea-based crew and shore-based personnel, and its ability to and reputation of providing reliable, safe transportation services while protecting its crews and the environment. To support its goal of market leadership, OSG intends to expand its International and U.S. Flag fleets on an opportunistic basis, strive for operational excellence, and maintain a strong balance sheet to support future growth.

Balanced Growth—The Company believes that by balancing the types of vessels it deploys as well as actively managing the mix of Charters and the ownership profile of its fleet, it can maximize returns on invested capital while making it less dependent on any particular market sector.

Operational Excellence—The Company is committed to technical excellence across its fleet. To support this goal, the Company has a high quality, modern fleet operated by experienced crews. The Company has established operational practices and procedures that are designed to ensure that it complies with all applicable environmental, regulatory and safety standards and has invested in technology and machinery to further such compliance. The Company’s operating policies and procedures are audited by an internal team that reports to the Company’s Head of Shipping Operations. Furthermore, the Company employs an operational compliance officer who reports directly to the Company’s President.

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Financial Flexibility—The Company believes its strong balance sheet, high credit rating and high level of unencumbered assets give it access to both the unsecured bank markets and to the public debt markets, allowing it to borrow primarily on an unsecured basis and to reduce its financing costs and cash flow breakeven levels in each of its vessel classes. This financial flexibility permits the Company to pursue attractive business opportunities.

Summary of 2005 Acquisitions and Transactions

During 2005, the Company pursued several initiatives to expand the number of vessels in its fleet and to reduce the average age of its vessels. Among these initiatives were the following transactions:

International Crude Oil Tankers

·On October 13, 2005, OSG sold seven tankers (three VLCCs and four Aframaxes) to Double Hull Tankers, Inc. (“DHT”), in connection with DHT’s initial public offering. The total purchase price paid for the vessels, after giving effect to the exercise of the over-allotment option granted by OSG to the underwriters of the DHT offering, was $419.9 million in cash and 13.4 million shares in DHT, constituting a 44.5% interest in DHT. OSG time chartered the vessels back from DHT for initial periods of five to six and one-half years with various renewal options up to an additional five to eight years, depending on the vessel. Under related agreements, a subsidiary of the Company provides Technical Management services for these vessels for DHT for amounts that have been fixed (except for vessel insurance premiums) over the term of the agreements. Such management agreements are cancelable by DHT upon 90 days notice.

·On June 1, 2005, a subsidiary of OSG acquired its partner’s 50.1% interest in a joint venture that owned four double hull V-Plus tankers for $69.0 million. Subsequently, OSG sold two of the four V-Pluses to the former joint venture partner in a cash transaction valued at $168.5 million (net of repayment of subordinated partner loans) and retained ownership of the remaining two V-Plus tankers. Each V-Plus is capable of carrying up to 3.2 million barrels of crude oil, nearly 50% greater than a VLCC, thus providing customers a lower delivered cost per barrel than other vessel types. These modern, double hull tankers have design features that extend their trading lives to 40 years and enhance their safety and efficiency on long haul routes.

·During 2005, the Company sold its single hull Suezmax, its 50% interest in a 13 year old double sided Aframax, an 11 year old Aframax, two approximately 18 year old double sided Panamaxes, two 12 year old Panamaxes (which the Company bareboat chartered back for 50 months) and its 30% interest in a single hull VLCC.

International Product Carriers

·On October 7, 2005, OSG signed an agreement to time charter-in four newbuild Product Carriers for a period of ten years each. The vessels are scheduled for delivery to OSG between September 2006 and June 2007 and will be able to transport petroleum products, vegetable oils and IMO III chemicals.

·On January 20, 2005, OSG acquired Stelmar Shipping Ltd. (“Stelmar”), a leading international provider of petroleum product and crude oil transportation services. Stelmar’s modern fleet consisted of 40 vessels, aggregating 2.3 million dwt. The acquisition resulted in numerous financial and operational benefits, including the addition of 24 Product Carriers, which primarily operate on time charters providing revenue stability that balances OSG’s spot market exposure in the crude oil segment. The purchase also included sixteen additional Panamax and Aframax vessels, which enhanced the Company’s crude oil fleet and its presence in the Pacific trades between South America and Central America and the U.S.

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·During 2005, the Company sold four double sided Handysize Product Carriers with an average age of approximately 16 years. Simultaneously with these sales, the Company bareboat chartered back such vessels for terms of three and one-half years to four years. With these sales, the Company’s entire fleet of owned International Flag Product Carriers are double hull.

U.S. Flag Fleet

·In June 2005, OSG signed agreements to bareboat charter-in ten Jones Act Product Carriers to be constructed by Aker Philadelphia Shipyard, Inc. (“APSI”). Following construction, APSI will sell the vessels to subsidiaries of American Shipping Corporation (“ASC”), an affiliate of APSI, which will bareboat charter the vessels to subsidiaries of OSG for initial terms of five and seven years, with OSG having extension options for the life of the vessels. The bareboat charterers of the vessels will, in turn, time charter the vessels to an entity owned jointly by a subsidiary of OSG and an affiliate of ASC. The vessels are scheduled to be delivered beginning in late 2006 through 2010. Each bareboat charter will commence upon delivery of the respective vessel. OSG has entered into long-term time charters with two major oil companies for the first four vessels to be delivered.

·In February 2005, the Company signed agreements with the Maritime Administrator of the U.S. Department of Transportation pursuant to which it entered into the U.S. Maritime Security Program three U.S. Flag Product Carriers and one U.S. Flag Pure Car Carrier for ten-year terms (see “U.S. Flag Fleet Operations” on page 11). The program affords OSG the opportunity to bid on contracts to transport cargoes of select government programs as well as receive an annual subsidy in exchange for the assurance that the vessels will be made available if called upon by the U.S. government.

·During 2005, the Company sold its three 28 year old single hull U.S. Flag Crude Tankers, upon the expiration of their respective bareboat charters, which coincided with the dates that applicable laws preclude such vessels from calling on U.S. ports.

LNG

In November 2004, the Company and Qatar Gas Transport Company Limited (Nakilat) formed a joint venture that ordered four 216,000 cbm LNG Carriers for an aggregate purchase price of $908 million. The LNG Carriers will, upon delivery in 2007 and 2008, commence 25-year time charters (with options to extend) to Qatar Liquefied Gas Company Limited (II). The vessels are intended for use on a new project to transport liquefied natural gas from Qatar to the United Kingdom. These state-of-the-art vessels will have twin slow-speed diesel engines and on-board reliquefaction capability to handle cargo boil-off.

Tax Changes Benefiting OSG’s International Shipping Operations

In October 2004, Congress passed the American Jobs Creation Act of 2004 which, for taxable years beginning in 2005, reinstates the indefinite deferral of United States taxation on international shipping income until such income is repatriated to the United States as dividends. From 1987 through 2004, the Company’s international shipping income was subject to current taxation. The new tax law effectively restores the pre-1976 tax treatment of international shipping income beginning in 2005 and places the Company’s international fleet on a level playing field with its offshore competitors for the first time since 1986 (see “Taxation of the Company” on page 20).

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Fleet Highlights

As of December 31, 2005, OSG owned or operated (including newbuilds ordered) an aggregate of 107 vessels. Of this total, 87 vessels are International Flag and 20 vessels are U.S. Flag. The Marshall Islands is the principal flag of registry of the Company’s International Flag vessels. Additional information about the Company’s fleet, including its ownership profile, is set forth below under Operations—Fleet Summary, as well as on the Company’s website, www.osg.comwww.osg.com. The Company’s fleet includes:

·Forty-eight International Flag tankers engaged in the transportation of crude oil worldwide;

·Twenty-nine International Flag Product Carriers (including two Aframaxes and two Panamaxes that are currently reflected in the International Flag Crude Tankers reportable segment) engaged in the transportation of refined petroleum products;

·Two International Flag Dry Bulk Carriers that transport primarily coal and iron ore;

·Ten U.S. Flag vessels, seven of which are Product Carriers (including three that trade primarily in the international market and are therefore reflected in the International Flag Product Carriers reportable segment) that transport refined and unrefined petroleum products, two of which are Dry Bulk Carriers and one of which is a car carrier; and

·Four International Flag newbuild Product Carriers (scheduled for delivery in 2006 and 2007), ten newbuild U.S. Flag Jones Act Product Carriers (scheduled for delivery between 2006 and 2010) and four newbuild LNG carriers (scheduled for delivery in 2007 and 2008).

In the international market, the Company has one of the industry’s most modern and efficient fleets. At a time when customers are demonstrating an increasingly clear preference for modern tonnage based on concerns about the environmental risks associated with older vessels, 100% of OSG’s owned International Flag fleet is double hull. The young age of the Company’s International Flag fleet and the Company’s Technical Management expertise has resulted in minimal service disruptions for these vessels.

Commercial Pools

To increase vessel utilization and thereby revenues, the Company participates in Commercial Pools with other owners of modern crude oil tankers. By operating a large number of vessels as an integrated transportation system, Commercial Pools offer customers greater flexibility and a higher level of service while achieving improved scheduling efficiencies. All of the Company’s V-Plus and VLCC vessels are managed in the Tankers International pool which, as of December 31, 2005, operated an aggregate of 47 VLCC and V-Plus tankers that trade on long haul routes throughout the world. All but one of OSG’s Aframax tankers are in the Aframax International pool, which at year end 2005 consisted of 36 Aframaxes that generally trade in the Atlantic Basin, North Sea and the Mediterranean on short and medium haul routes. The remaining Aframax is expected to join Aframax International in March 2006, upon completion of its current time charter. Nine of the Company’s 13 Panamax tankers participate in Panamax International, which operated a total of 13 Panamaxes as of December 31, 2005 on short and medium haul routes between South and Central America, the U.S. and Caribbean. These commercial ventures negotiate charters with customers primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and Contracts of Affreightment (“COAs”), thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market. For detailed information on the pools, See Operations—International Fleet Operations.

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Technical Operations

OSG believes that its commercial success depends in part on the Company’s compliance with quality, safety and environmental standards mandated by worldwide regulators and customers. Technical operations for the Company’s crude oil tankers, Product Carriers and U.S. Flag fleet is managed from Newcastle, United Kingdom, Athens, Greece and New York, New York, respectively, by an integrated team of shore side and sea-based personnel. The Company has established operational practices and procedures that are designed to ensure that all applicable quality, safety and environmental standards are satisfied and has provided all of its operational personnel with appropriate training and machinery to fully implement these practices and procedures. In 2005, OSG established an operational integrity group, responsible for auditing compliance with vessel operating procedures, vessel compliance with environmental regulatory requirements, vessel safety and maintenance standards and responding to the Company’s open, self reporting system of possible violations of Company policies and procedures. The Company has also hired an independent compliance officer of its practices, procedures and training programs.

Commercial Operations

OSG’s commercial operations teams based in its offices in London, New York and Singapore permit customers to have access at all times to information about their cargo’s position and status. The Company believes that the scale of its fleet, its commercial management skills and extensive market knowledge allow it to achieve better rates than smaller, independent shipowners. OSG’s reputation in the marketplace is a result of longstanding relationships with its customers and business partners. Investments in technology, including database and software tools, have enabled OSG to improve the speed, quality and information it provides to its customers.

Customers

OSG’s customers include major independent and state-owned oil companies, oil traders, and U.S. and international government entities. The Company believes that it distinguishes itself in the shipping market through an emphasis on service, safety, reliability and its ability to maintain and grow long-term customer relationships.

Liquidity

The Company believes that the strength of its balance sheet, and the financial flexibility that it affords, distinguishes it from many of its competitors. At December 31, 2005, shareholders’ equity increased by $450 million to $1.88 billion and liquidity, including undrawn bank facilities, increased to more than $1.42 billion. On February 9, 2006, OSG entered into a new $1.5 billion unsecured credit facility which replaced bank facilities that provided up to $1.33 billion of unsecured financing.

Liquidity adjusted debt to capital was 24.5% at December 31, 2005, a reduction of close to 26 percentage points from a pro forma 50.3% as of December 31, 2004, adjusted to reflect the Stelmar acquisition and the sales of Product Carriers in January 2005. For this purpose, liquidity adjusted debt is defined as long-term debt reduced by cash and the tax adjusted balance in the Capital Construction Fund. Notably in 2005, the Company used the proceeds of the DHT transaction to pay down debt, while simultaneously expanding its fleet by chartering-in tonnage, which requires no capital commitment.

5

Employees

As of December 31, 2005, the Company had 3,337 employees: 3,187 seagoing personnel and 250 shore side staff. The Company has collective bargaining agreements with two different maritime unions covering 204 seagoing personnel employed on the Company’s U.S. Flag vessels. These agreements are in effect through June 15, 2006 with one of the unions and June 15, 2015 with the other union. Under the collective bargaining agreements, the Company is obligated to make contributions to pension and other welfare programs. OSG believes that it has a satisfactory relationship with its employees.

Forward-Looking Statements

This Form 10-K contains forward-looking statements regarding the outlook for tanker markets, and the Company’s prospects, including prospects for certain strategic alliances and investments. There are a number of factors, risks and uncertainties that could cause actual results to differ from the expectations reflected in these forward-looking statements, including changes in production of or demand for oil and petroleum products, either globally or in particular regions; greater than anticipated levels of newbuilding orders or less than anticipated rates of scrapping of older vessels; changes in trading patterns for particular commodities significantly impacting overall tonnage requirements; changes in the rates of growth of the world and various regional economies; risks incident to vessel operation, including discharge of pollutants; unanticipated changes in laws and regulations; increases in costs of operation; drydocking schedules differing from those previously anticipated; the availability to the Company of suitable vessels for acquisition or chartering-in on terms it deems favorable; changes in the pooling arrangements in which the Company participates, including withdrawal of participants or termination of such arrangements; the ability to attract and retain customers; the ability to restore refining capacity and crude oil production damaged by hurricanes in the Gulf of Mexico; the impact on the Company’s financial statements of the sale of seven vessels to Double Hull Tankers, Inc. and the charter back of such vessels; estimates of future costs and other liabilities for certain environmental matters and investigations; and projections of the costs needed to develop and implement the Company’s strategy of being a market leader in the segments in which the Company competes. The Company assumes no obligation to update or revise any forward-looking statements. Forward-looking statements in this Form 10-K and written and oral forward-looking statements attributable to the Company or its representatives after the date of this Form 10-K are qualified in their entirety by the cautionary statement contained in this paragraph and in other reports hereafter filed by the Company with the Securities and Exchange Commission.

Operations

The bulk shipping of crude oil, refined and unrefined petroleum products has many distinct market segments based, in large part, on the size and design configuration of vessels required and, in some cases, on the flag of registry. Freight rates in each market segment are determined by a variety of factors affecting the supply and demand for suitable vessels. Tankers and Product Carriers are not bound to specific ports or schedules and therefore can respond to market opportunities by moving between trades and geographical areas. The Company has established three reportable business segments:  International Flag Crude Tankers and International Handysize Product Carriers, and U.S. Flag Vessels.

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The following chart reflects the percentage of TCE revenues generated by the Company’s three reportable segments for each year in the three-year period ended December 31, 2005 and excludes the Company’s proportionate share of TCE revenues of joint ventures. Segment information for 2004 and 2003 has been reclassified to conform to the 2005 presentation.

	Percentage of TCE Revenues
	2005		2004		2003
International Flag
Crude Tankers	71.1	%	84.3	%	73.1	%
Product Carriers	17.8	%	3.2	%	4.4	%
Other	2.7	%	3.2	%	5.1	%
Total International Flag Segments	91.6	%	90.7	%	82.6	%
U.S. Flag	8.4	%	9.3	%	17.4	%
Total	100.0	%	100.0	%	100.0	%

The following chart reflects the percentage of income from vessel operations accounted for by each reportable segment. Income from vessel operations is before general and administrative expenses and the Company’s share of income from joint ventures:

	Percentage of Income from Vessel Operations
	2005		2004		2003
International Flag
Crude Tankers	80.3	%	91.9	%	80.2	%
Product Carriers	12.8	%	2.3	%	3.0	%
Other	0.9	%	0.4	%	5.0	%
Total International Flag Segments	94.0	%	94.6	%	88.2	%
U.S. Flag	6.0	%	5.4	%	11.8	%
Total	100.0	%	100.0	%	100.0	%

For additional information regarding the Company’s three reportable segments for the three years ended December 31, 2005, see Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 7, and Note D to the Company’s consolidated financial statements set forth in Item 8.

The increase in the relative contribution of International Flag Product Carriers to TCE revenues and income from vessel operations in 2005 compared with both 2004 and 2003 reflects the addition of 24 Handysize Product Carriers as a result of the Stelmar acquisition in 2005. Revenues from International Flag Crude Tankers are derived principally from voyage charters and are, therefore, significantly affected by prevailing spot rates. During 2003, spot rates, particularly for VLCCs and Aframaxes, were significantly lower than their levels for 2005 and 2004.

In contrast to the International Flag Crude Tankers, revenues from International Flag Product Carriers and the vessels included in the U.S. Flag reportable segment are derived principally from time charters generating a more predictable level of TCE earnings. Accordingly, the relative contributions of the Handysize Product Carriers and the U.S. Flag segment’s vessels to consolidated TCE revenues and to consolidated income from vessel operations are influenced by the level of freight rates then existing in the international market for crude oil tankers, increasing when such rates decrease and decreasing when such rates increase. The reduction in the relative contribution of the vessels of the U.S. Flag segment also reflects the sale of all four U.S. Flag Crude Tankers between February 2004 and year end 2005.

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Charter Types

The Company believes that by balancing the mix of TCE revenues generated by voyage charters and time charters, the Company is able to maximize its financial performance throughout shipping cycles.

Spot Market

Voyage charters, including vessels operating in Commercial Pools that predominantly operate in the spot market, constituted 69% of the Company’s TCE revenues in 2005, 85% in 2004 and 79% in 2003. Accordingly, the Company’s shipping revenues are significantly affected by prevailing spot rates for voyage charters in the markets in which the Company’s vessels operate. Spot market rates are highly volatile. Rates are determined by market forces such as local and worldwide demand for the commodities carried (such as crude oil or petroleum products), volumes of trade, distances that the commodities must be transported, and the amount of available tonnage both at the time such tonnage is required and over the period of projected use. Seasonal trends greatly affect world oil consumption and consequently tanker demand. While trends in consumption vary with season, peaks in tanker demand quite often precede seasonal consumption peaks as refiners and suppliers try to anticipate consumer demand. Seasonal peaks in oil demand are principally driven by increased demand prior to Northern Hemisphere winters, as heating oil consumption increases, and increased demand for gasoline prior to the summer driving season in the U.S. Available tonnage is affected over time, by the volume of newbuilding deliveries, the removal (principally through scrapping) of existing vessels from service, and by the greater efficiency of modern tonnage. Scrapping is affected by the level of freight rates, by the level of scrap prices and by international and U.S. governmental regulations that require the maintenance of vessels within certain standards and mandate the retirement of tankers lacking double hulls.

Time Charter Market

A significant portion of the Company’s U.S. Flag fleet, its International Flag Product Carriers and upon delivery, the LNG fleet is, or will be, on time charters, providing a significant and predictable level of earnings, which is not subject to fluctuations in spot-market rates. Time charters constituted 31% of the Company’s TCE revenues in 2005, 15% in 2004 and 21% in 2003. Some of the Company’s older chartered-in vessels are chartered through the remainder of their commercial lives. The following table sets forth the percentage of the fleet based on number of vessels as of December 31, 2005, that traded in the spot market and the time charter market. The vessels in commercial pools are included in the spot market because these pools predominantly perform voyage charters.

Operating Fleet (weighted by ownership percentage)

	As of December 31, 2005						As of December 31, 2004
Vessel Type	% on Spot Charter			% on Time Charter			% on Spot Charter			% on Time Charter
VLCC (including V-Plus)		100	%		—			95	%		5	%
Aframax*		94	%		6	%		100	%		—
Panamax		38	%		62	%		50	%		50	%
Summary International Flag Crude Tankers		81	%		19	%		92	%		8	%
International Flag Handysize Product Carriers		8	%		92	%		—			100	%
International Flag Dry Bulk Carriers		—			100	%		—			100	%
U.S. Flag Vessels		40	%		60	%		20	%		80	%
Summary Operating Fleet		55	%		45	%		68	%		32	%

*For the Aframax International pool, the percentage of vessels trading on time charters increased to 17% as of December 31, 2005 from 11% as of December 31, 2004.

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Fleet Summary

As of December 31, 2005, OSG’s International Flag and U.S. Flag operating fleet consisted of 89 vessels, 44% of which are chartered-in under operating or capital leases, the balance of which is owned.  In order to maximize returns on invested capital, particularly during periods of time when newbuilding prices and second hand vessel prices are near all-time highs, the Company charters-in tonnage, enabling it to expand its fleet without making additional capital commitments. Vessels chartered-in may be Bareboat Charters (where OSG is responsible for all Vessel Expenses) or Time Charters (where the shipowner pays Vessel Expenses). For more detailed information see the notes to the Detailed Fleet List later in this section.

	Vessels Owned				Vessels Chartered-in				Total at December 31, 2005
Vessel Type	Number		Weighted by Ownership		Number		Weighted by Ownership		Vessels		Vessels Weighted by Ownership		Total Dwt
VLCC (including V-Plus)		12		12		10		6.25		22		18.25	6,994,410
Aframax		9		9		8		7.00		17		16.00	1,758,994
Panamax		11		11		2		2.00		13		13.00	904,709
Summary International Flag Crude Tankers		32		32		20		15.25		52		47.25	9,658,113
International Flag Handysize Product Carriers		12		12		13		13.00		25		25.00	1,074,834
International Flag Dry Bulk Carriers		—		—		2		2.00		2		2.00	319,843
Total International Flag Operating Fleet		44		44		35		30.25		79		74.25	11,052,790
U.S. Flag Operating Fleet		6		6		4		4.00		10		10.00	386,047
Total Operating Fleet		50		50		39		34.25		89		84.25	11,438,837
Newbuild Fleet
International Flag Handysize Product Carriers		—		—		4		4.00		4		4.00	204,000
U.S. Flag Product Carriers		—		—		10		10.00		10		10.00	460,000
Subtotal of Crude Tankers, Product Carriers and Dry Bulk Carriers		50		50		53		48.25		103		98.25	12,102,837
Newbuild LNG Carriers		4		2		—		—		4		2.00	864,000 cbm
Total Operating and Newbuild Fleet		54		52		53		48.25		107		100.25	—

OSG has one of the youngest International Flag fleets in the industry. The Company believes its modern, well maintained fleet is a significant competitive advantage in the global market. The table below reflects the average age of the Company’s owned International Flag fleet in comparison with the world fleet.

Vessel Type	Average Age of OSG’s Owned Fleet at 12/31/05		Average Age of OSG’s Owned Fleet at 12/31/04		Average Age of World Fleet at 12/31/05*
VLCC (including V-Plus)		5.7 years		4.7 years		8.5 years
Aframax		8.1 years		7.0 years		9.2 years
Panamax		2.8 years		18.4 years		11.1 years
Handysize Product Carrier		4.9 years		15.8 years		13.1 years

*Source:  Clarkson database as of January 1, 2006.

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International Fleet Operations

Crude Oil Tankers

In order to enhance vessel utilization and TCE revenues, the Company has placed its V-Plus, VLCC and all but one of its Aframax tankers as well as a number of Panamax tankers into commercial ventures that are responsible for the Commercial Management of these vessels. The pools collect revenue from customers, pay voyage-related expenses, and distribute TCE revenues to the participants, after deducting administrative fees, according to formulas based upon the relative carrying capacity, speed, and fuel consumption of each vessel.

·Tankers International (“Tankers International”)—Tankers International was formed in December 1999, by OSG and other leading tanker companies in order to pool the commercial operation of their modern VLCC fleets. As of December 31, 2005, Tankers International had nine participants and managed a fleet of 47 modern VLCCs, including all 22 of the Company’s V-Plus and VLCC owned and chartered-in vessels.

Tankers International performs the Commercial Management of its participants’ vessels. The large number of vessels managed by Tankers International give it the ability to enhance vessel utilization through backhaul cargoes and COAs, thereby generating greater TCE revenues. In recent years, crude oil shipments from West Africa to Asia have expanded, increasing opportunities for vessels otherwise returning in ballast (i.e., without cargo) from Europe and North America to load cargoes in West Africa for delivery in Asia. Such combination voyages are used to maximize vessel utilization by minimizing the distance vessels travel in ballast.

By consolidating the Commercial Management of its substantial fleet, Tankers International is able to offer its customers access to an expanded fleet of high-quality VLCCs and V-Pluses. The size of the fleet enables Tankers International to become the logistics partner of major customers, providing new and improved tools to help them better manage their shipping programs, inventories, and risk.

·Aframax Pool (“Aframax International”)—Since 1996, the Company and PDV Marina S.A., the marine transportation subsidiary of the Venezuelan state-owned oil company, have pooled the Commercial Management of their Aframax fleets. As of December 31, 2005, there were seven participants in Aframax International and the pool Commercially Managed 36 vessels (including 16 of the Company’s owned and chartered-in vessels) that generally trade in the Atlantic Basin, North Sea and the Mediterranean. The Aframax International pool has been able to enhance vessel utilization with backhaul cargoes and COAs, thereby generating higher TCE revenues than would otherwise be attainable in the spot market.

·Panamax Joint Venture (“Panamax International”)—Panamax International, in which the Company has a 50% interest, was formed in April 2004 to provide for Commercial Management of the Panamax fleets of its two partners. As of December 31, 2005, Panamax International managed a fleet of 13 modern Panamaxes, which includes five of the Company’s Panamaxes, as well as four that are time chartered to the other pool partner.

Product Carriers

Building on its commercial platform and technical expertise managing Product Carriers, the Stelmar acquisition in early 2005 expanded OSG’s International Flag Product Carrier fleet to 29 vessels as of December 31, 2005. International Flag Handysize Product Carriers constitutes one of the Company’s reportable business segments. The Company’s substantial expansion of its presence in the product carrier market diversified OSG’s fleet and reduced its dependence on the crude oil sector.

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In addition, because the Product Carriers trade predominantly on time charters, they provide a more predictive stream of revenue than vessels that trade primarily in the spot market.

U.S. Flag Fleet Operations

The tax law changes that resulted from the American Jobs Creation Act passed by Congress in late 2004, coupled with converging events of a declining fleet capacity in the United States as a result of the phase out of single hull tankers required by the U.S. Oil Pollution Act of 1990 (“OPA 90”) and the expected continued growth in demand by U.S. consumers for crude oil and petroleum products transported by sea, served as the basis for OSG making a significant commitment to expanding its presence in the U.S. Flag and Jones Act market. Under the Jones Act, shipping between United States ports, including the movement of Alaskan crude oil to U.S. ports, is reserved for U.S. Flag vessels that are built in the U.S. and owned by U.S. companies, more than 75% owned and controlled by U.S. citizens. Four U.S. Flag Product Carriers qualify for and operate in trades protected by the Jones Act. In 2005, OSG actively pursued new commercial and government business opportunities, reflagged three Product Carriers (acquired through the Stelmar acquisition) to satisfy the requirements of the U.S. Government’s Military Security Program described below and bareboat chartered ten Jones Act Product Carriers that will be constructed at the Aker Philadelphia Shipyard and are scheduled for delivery from late 2006 through 2010. In addition to Product Carriers, OSG owns or operates two Dry Bulk Carriers and one Pure Car Carrier. The Company’s U.S. Flag vessels constitute one of the Company’s reportable business segments.

·Dry Bulk Cargo—The Merchant Marine Act of 1936, as amended, requires that preference be given to U.S. Flag vessels, if available at reasonable rates, in the shipment of at least half of all U.S. government-generated cargoes and 75% of all food-aid cargoes. The Company’s two U.S. Flag Dry Bulk Carriers generate most of their revenue from these preference trades.

·Military Security Program—Since late 1996, the Company’s U.S. Flag Pure Car Carrier has participated in the U.S. Maritime Security Program (the “Program”), which ensures that militarily useful U.S. Flag vessels are available to the U.S. Department of Defense in the event of war or national emergency. In February 2005, the Company signed four agreements with the Maritime Administrator of the Department of Transportation pursuant to which, in October 2005, the Company entered the three recently reflagged U.S. Flag Product Carriers and re-entered its U.S. Flag Pure Car Carrier into the Program. The terms of the three agreements relating to the reflagged Product Carriers are four years, subject to extension to a total of ten years in the event that the Company is awarded certain construction subsidies under the National Defense Tanker Vessel Construction Program (“NDTVCP”) and substitutes appropriate newbuild vessels constructed with such subsidies for the reflagged Product Carriers. Congressional funding of the NDTVCP has not been approved and there can be no assurance that Congress will provide such construction subsidies, that such subsidies will be awarded to the Company or that terms of these agreements will be extended if the Company does not substitute newbuild vessels constructed with such subsidies. Under the Company’s ten-year agreement relating to the Pure Car Carrier, the Company’s U.S. Flag Pure Car Carrier will continue in the Program through 2007, at which time the Company will need to substitute a modern U.S. Flag Car Carrier into the Program. Under the Program, the Company receives approximately $2.6 million per year for each vessel through 2008, $2.9 million per year for each vessel from 2009 through 2011, and $3.1 million per year for each vessel from 2012 through 2016, subject in each case to annual Congressional appropriations.

·Capital Construction Fund—To encourage private investment in U.S. Flag vessels, the Merchant Marine Act of 1970 permits deferral of taxes on earnings from U.S. Flag vessels deposited into a Capital Construction Fund and amounts earned thereon, which can be used for the

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construction or acquisition of, or retirement of debt on, qualified U.S. Flag vessels (primarily those limited to foreign, Great Lakes, and noncontiguous domestic trades). The Company is a party to an agreement under such Act. Under the agreement, the general objective is for U.S. Flag vessels to be constructed or acquired through the use of assets accumulated in the fund. If the agreement is terminated or amounts are withdrawn from the Capital Construction Fund for non-qualified purposes, such amounts will then be subject to federal income taxes. Monies can remain tax-deferred in the fund for a maximum period of 25 years (commencing January 1, 1987 for deposits prior thereto). The Company had approximately $296 million in its Capital Construction Fund as of December 31, 2005. The Company’s balance sheet at December 31, 2005 includes a liability of approximately $93 million for deferred taxes on the fund deposits and earnings thereon.

·Alaska Tanker Company—The Company maintains a 37.5% stake in Alaska Tanker Company, LLC (“ATC”), a joint venture that was formed in 1999 among OSG, BP p.l.c. (“BP”) and Keystone Shipping Company (“Keystone”), to provide marine transportation services in the environmentally sensitive Alaskan crude-oil trade. ATC, which is also owned 37.5% by Keystone and 25% by BP, manages the vessels carrying BP’s Alaskan crude oil. The Company’s U.S. Flag Crude Tankers were bareboat chartered to ATC, before such vessels were sold during 2005. The Company’s participation in ATC provides the Company with the ability to earn additional income (incentive hire) based upon ATC’s meeting certain predetermined performance standards. Such income, which is included in equity in income of joint ventures, amounted to $8.1 million in 2005, $7.1 million in 2004, and $7.6 million in 2003.

LNG

The Company’s LNG vessels will constitute one of the Company’s business segments upon delivery and commencement of operations, expected in late 2007, with reported operations to be included in equity in income of joint ventures.

In November 2004, after a competitive tender process, Qatar Liquefied Gas Company (II) selected a joint venture in which the Company has a 49.9% interest to time charter to it four LNG Carrier newbuildings for twenty-five years, with options to extend. The joint venture, which is between the Company and Qatar Gas Transport Company Limited (Nakilat), ordered four 216,000 cbm LNG Carriers at a total purchase price of $908 million for delivery in 2007 and 2008, at which times the time charters will begin. The Company will provide Technical Management for these state-of-the art vessels. Through the award of these time charters, the Company is strategically diversifying its business, entering a market that the Company believes offers significant opportunities.

Joint Ventures and Equity Method Investments

The following chart reflects the percentage of equity in income of joint ventures by each reportable segment.

	Percentage of Equity in Income of Joint Ventures
	2005		2004		2003
International Flag
Crude Tankers	82.2	%	84.4	%	77.5	%
Product Carriers	—		—		—
Other	(0.6	%)	—		0.2	%
Total International Flag Segments	81.6	%	84.4	%	77.7	%
U.S. Flag	18.4	%	15.6	%	22.3	%
Total	100.0	%	100.0	%	100.0	%

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In October 2005, the Company sold seven tankers (three VLCCs and four Aframaxes) to DHT in connection with DHT’s initial public offering. These vessels are time chartered back to OSG at fixed rates for initial periods of five to six and one-half years. The charters provide for the payment of additional hire, on a quarterly basis, by OSG when the aggregate revenue earned by these vessels for the Company exceeds the sum of the basic hire paid during the quarter by the Company, as it did in the fourth quarter of 2005.

As a result of the 2005 sales of Front Tobago (a VLCC in which the Company held a 30% joint venture interest) and the Compass I (an Aframax in which OSG held a 50% joint venture interest) and the Company’s purchase of its partner’s 50.1% interest in a joint venture that owned four V-Pluses, the only operating vessels held in companies accounted for by the equity method at December 31, 2005 are those held through DHT, all of which are on time charters, with profit sharing.

The relative contribution of equity in income from joint ventures of the Company’s International Flag joint ventures (or investments accounted for by the equity method) in 2005 and 2004 increased compared with 2003 because of the significant increase in spot market rates earned by such vessels relative to the Company’s share of incentive hire received from ATC (U.S. Flag vessels), which does not fluctuate with rates.

In 2004, the Company completed a transaction with its partner covering six joint venture companies, each of which owned a VLCC. This transaction provided for an exchange of joint venture interests that resulted in the Company owning 100% of the Dundee, Sakura I and Tanabe, and the joint venture partner owning 100% of the Edinburgh, Ariake and Hakata. The results of the Dundee, Sakura I and Tanabe are included in the International Flag Crude Tankers segment from the effective date of the transaction.

In July 2004, a joint venture in which the Company has a 49.9% interest, acquired four double hull V-Pluses. The four V-Pluses, which are the only double hull V-Pluses in the world, are capable of carrying up to 3.2 million barrels of crude oil, more than 50% greater than VLCCs, at a lower delivered cost per barrel. These four vessels incorporate many design features intended to extend their trading lives to 40 years and enhance their safety and efficiency in the long haul crude trade. On June 1, 2005, a subsidiary of OSG acquired its partner’s 50.1% interest in this joint venture, then sold two of the four V-Pluses to the former joint venture partner in exchange for cash. The results of the two V-Pluses the Company owns, TI Africa and TI Oceania, are included in the International Flag Crude Tankers segment from the effective date of the transaction.

Competition

The shipping industry is highly competitive and fragmented with OSG competing with other owners of U.S. and International Flag tankers and dry cargo ships. Competitors include other independent shipowners, oil companies and state owned entities with their own fleets.

OSG’s vessels compete with all other vessels of a size and type required by the customer that can be available at the date specified. In the spot market, competition is based primarily on price, although charterers are becoming more selective with respect to the quality of the vessel they hire considering other key factors such as the vessel age, the reliability and quality of operations and preference for modern double hull vessels based on concerns about environmental risks associated with older vessels. Consequently owners of large modern double hull fleets have gained a competitive advantage over owners of older fleets. In the time charter market, factors such as the age and quality of the vessel and reputation of its owner and operator tend to be more significant in competing for business.

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As of December 31, 2005, OSG’s fleet of VLCCs and V-Pluses consisted of 22 vessels, all of which are commercially managed through Tankers International, a venture where several owners and operators pool their vessels together providing additional services and opportunities to both potential customers and pool members. Tankers International with a total of 47 VLCCs as of December 31, 2005, competes with more than 90 owners and has more tonnage than its main competitors, which include Frontline Ltd., Mitsui OSK Lines, Ltd., Nippon Yusen Kabushiki Kaisha, VELA International Marine Ltd., the shipping arm of the Saudi Arabian oil company, World-Wide Shipping Agency (S) Pte. Ltd and Kristen Navigation Inc.

OSG also operates as part of Aframax International, which consists of 36 Aframaxes trading primarily in the Atlantic Basin, North Sea and Mediterranean. More than 160 owners operate in the Aframax market sector with Aframax International being the second largest operator in this market sector. Aframax International’s main competitors include Teekay Shipping Corporation, Malaysian International Shipping Corporation Berhad, General Maritime Corp. and Minerva Marine Inc.

OSG’s main competitors in the highly fragmented Panamax trade include owners and pool operators. Nine of OSG’s Panamaxes operate as part of Panamax International, which is a joint venture that commercially manages 13 double hull vessels. Main competitors include the larger Star Tankers Heidenreich Marine Inc. and A/S Dampskibsselskabet Torm, as well as Glencore International AG, Jacob-Scorpio Pool Management S.A.M. and China Shipping Group.

In the Handysize Product Carrier segment, OSG owns or charters-in a fleet of 28 vessels that competes with over 200 owners and pool operators. Main competitors include the larger Glencore International AG, Handytankers K/S and Vitol Group, as well as Mitsui O.S.K. Lines, Ltd., OMI Corporation, China Ocean Group Companies (“COSCO”), Trafigura, A/S Dampskibsselskabet Torm and Dorado Tankers.

In the U.S. Flag trades, the Company competes with other owners of U.S. Flag vessels. Demand for U.S. Flag Product Carriers is linked to changes in refining activity levels and regional energy demands. U.S. Flag Product Carriers also compete with ocean-going barges, pipelines and are affected by the level of imports carried on International Flag Product Carriers. Competitors include Seacor Holdings, Inc., Maritrans Inc. and U.S. Shipping Partners L.P.

Environmental and Security Matters Relating to Bulk Shipping

Government regulation significantly affects the operation of the Company’s vessels. They are subject to international conventions, national, state and local laws and regulations in force in the countries in which the Company’s vessels may operate or are registered.

The Company’s vessels undergo regular and rigorous in-house safety reviews. In addition, a variety of governmental and private entities subject the Company’s vessels to both scheduled and unscheduled inspections. These entities include local port state control authorities (U.S. Coast Guard, harbour master or equivalent), Classification Societies, flag state administration (country of registry) and charterers, particularly terminal operators and oil companies. Certain of these entities require OSG to obtain permits, licenses and certificates for the operation of the Company’s vessels. Failure to maintain necessary permits or approvals could require OSG to incur substantial costs or temporarily suspend operation of one or more of the Company’s vessels.

The Company believes that the heightened level of environmental and quality concerns among insurance underwriters, regulators and charterers is leading to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older tankers throughout the industry. Increasing environmental concerns have created a demand for tankers that conform to the stricter environmental standards. The Company is required to maintain operating standards for all of its tankers emphasizing operational safety, quality maintenance, continuous training of its officers and

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crews and compliance with international and U.S. regulations. OSG believes that the operation of its vessels will be in substantial compliance with applicable environmental laws and regulations; however, because such laws and regulations are frequently changed and may impose increasingly stringent requirements, OSG cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of its tankers.

International Environmental and Safety Restrictions and Regulations

Phase Out of Non Double Hull Tankers:

In April 2001, the International Maritime Organization (“IMO”) adopted regulations under the International Convention for the Prevention of Pollution from Ships, or MARPOL, requiring new tankers of 5,000 dwt and over, contracted for construction since July 6, 1993, to have double hull, mid-deck or equivalent design. At that time the regulations also required the phase out of non double hull tankers by 2015, with tankers having double sides or double bottoms permitted to operate until the earlier of 2017 or when the vessel reaches 25 years of age. Existing single hull tankers were required to be phased out unless retrofitted with double hull, mid-deck or equivalent design no later than 30 years after delivery. These regulations were adopted by over 150 nations, including many of the jurisdictions in which the Company’s tankers operate. Subsequent amendments to the MARPOL regulations accelerated the phase out of single hull tankers to 2005 for Category I vessels and 2010 for Category II vessels. Category I vessels are crude oil tankers of 20,000 dwt and above and product carriers of 30,000 dwt and above that are pre-MARPOL Segregated Ballast Tanks (“SBT”) carriers. Category II tankers are crude oil tankers of 20,000 dwt and above and product carriers of 30,000 dwt and above that are post-MARPOL SBT tankers. In addition, a Condition Assessment Scheme (“CAS”) will apply to all single hull tankers 15 years or older. Flag states, however, may permit the continued operation of Category II tankers beyond 2010, subject to satisfactory CAS results, but only to 2015 or 25 years of age, whichever comes earlier. Category II tankers fitted with double bottoms or double sides not used for the carriage of oil will be permitted to trade beyond 2010 to 25 years of age, subject to the approval of the flag state. Although flag states may grant life extensions to Category II tankers, port states are permitted to deny entry to their ports and offshore terminals to single hull tankers operating under such life extensions after 2010, and to double sided or double bottomed tankers after 2015.

MARPOL Regulation 13H bans the carriage of heavy grade oils in single hull tankers of more than 5,000 dwt after April 5, 2005, except that flag states may permit Category II tankers to continue to carry heavy grade oil beyond 2005, subject to satisfactory CAS results. This regulation predominantly affected heavy crude oil from Latin America, as well as heavy fuel oil, bitumen, tar and related products.

The IMO may adopt additional regulations in the future that could further restrict the operation of single hull vessels.

European Union (“EU”) regulation (EC) No. 417/2002, which was introduced in the wake of the sinking of the Erika off the coast of France in December 1999, provided a timetable for the phase out of single hull tankers from EU waters.In 2003, in response to the Prestige oil spill in November 2002, the EU adopted legislation that (a) banned all Category I single hull tankers over the age of 23 years immediately, (b) phased out all other Category I single hull tankers in 2005 and (c) prohibits all single hull tankers used for the transport of oil from entering its ports or offshore terminals after 2010, with double sided or double bottomed tankers permitted to trade until 2015 or until reaching 25 years of age, whichever comes earlier. The EU, following the lead of certain EU nations such as Italy and Spain, also banned all single hull tankers carrying heavy grades of oil from entering or leaving its ports or offshore terminals or anchoring in areas under its jurisdiction.

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Many users of oil transportation services operating around Europe are showing a willingness to pay a higher freight rate for double hull tankers than for single hull tankers. It is becoming increasingly more difficult to obtain clearance for single hull tankers from many countries and oil terminals.

OSG’s International Flag tanker fleet is comprised of modern double hull vessels, except for the 13 chartered-in Handysize Product Carriers, which do not qualify as double hull for MARPOL or EU purposes. The direct impact to the Company of the revised and accelerated IMO phase out schedule will be limited, as all of the Company’s crude oil tankers, and all but these 13 chartered-in International Flag Product Carriers, are double hull, and the charters-in expire prior to the date of the respective vessels’ IMO phase out. However, because six of these 13 vessels are not already chartered out through the end of their respective charters-in, they are less likely to command premium rates when their current time charters out end. The Company’s four double bottom U.S. Flag Product Carriers participate in the U.S. Jones Act trades and are therefore not affected by the IMO phase-out schedule. The U.S. has not adopted the 2001 amendments to the MARPOL regulations, which were viewed as less restrictive than OPA 90 regulations that were already in place. For additional information concerning a pending government investigation of the Company’s handling of waste oils, see Item 3. Legal Proceedings.

The IMO has also negotiated international conventions that impose liability for oil pollution in international waters and a signatory’s territorial waters.

Other International Environmental and Safety Regulations:

In September 1997, the IMO adopted Annex VI to the International Convention for the Prevention of Pollution from Ships to address air pollution from ships. Annex VI, which became effective in May 2005, sets limits on sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances, such as chlorofluorocarbons. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions. All of the Company’s vessels are currently compliant with these regulations. Additional or new conventions, laws and regulations may be adopted that could adversely affect the Company’s ability to comply with applicable air pollution regulations in the future.

Under the International Safety Management Code, or ISM Code, promulgated by the IMO, vessel operators are required to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. OSG has developed such a safety management system. The ISM Code also requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel’s management with code requirements for a safety management system. No vessel can obtain a certificate unless its operator has been awarded a document of compliance, issued by the flag state of that vessel, under the ISM Code.

All of the Company’s vessels are certified under the standards reflected in International Standards Organization’s 9002 quality assurance program and IMO’s International Safety Management safety and pollution prevention protocols. In 2002, the Company’s New York office obtained 14001 Certification for Environmental Management Systems. The International Safety Management Code requires a certificate of compliance to be obtained both for the vessel manager and for each vessel that it operates. The Company has obtained such certificates for its shoreside offices and for all of the vessels that it manages. OSG will be required to renew these documents of compliance and safety management certificates annually.

Noncompliance with the ISM Code and other IMO regulations may subject the shipowner or charterer to increased liability, may lead to decreases in available insurance coverage for affected

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vessels and may result in the denial of access to, or detention in, some ports. For example, the U.S. Coast Guard and EU authorities have indicated that vessels not in compliance with the ISM Code will be prohibited from trading in U.S. and EU ports.

Although the United States is not a party to these conventions, many countries have ratified and follow the liability plan adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage of 1969. Under this convention, depending on whether the country in which the damage results is a party to the 1992 Protocol to the International Convention on Civil Liability for Oil Pollution Damage, a vessel’s registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain complete defenses. Under an amendment to the Protocol that became effective on November 1, 2003, for vessels of 5,000 to 140,000 gross tons (a unit of measurement for the total enclosed spaces within a vessel), liability will be limited to approximately $6.4 million plus $902 for each additional gross ton over 5,000. For vessels of over 140,000 gross tons, liability will be limited to approximately $128 million. As the convention calculates liability in terms of a basket of currencies, these figures are based on currency exchange rates on December 31, 2005. Under the 1969 Convention, the right to limit liability is forfeited where the spill is caused by the owner’s actual fault; under the 1992 Protocol, a ship-owner cannot limit liability where the spill is caused by the owner’s intentional or reckless conduct. Vessels trading to states that are parties to these conventions must provide evidence of insurance covering the liability of the owner. In jurisdictions where the International Convention on Civil Liability for Oil Pollution Damage has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to that convention. The Company believes that its P&I insurance will cover the liability under the plan adopted by the IMO. See the discussion of Insurance below.

IMO regulations also require owners and operators of vessels to adopt Ship Oil Pollution Emergency Plans, or SOPEPs. Periodic training and drills for response personnel and for vessels and their crews are required.

The EU has adopted legislation that: (1) bans manifestly sub-standard vessels (defined as those over 15 years old that have been detained by port authorities at least twice in a six month period) from European waters, creates an obligation for port states to inspect at least 25% of vessels using these ports annually and provides for increased surveillance of vessels posing a high risk to maritime safety or the marine environment, and (2) provides the EU with greater authority and control over Classification Societies, including the ability to seek to suspend or revoke the authority of negligent societies. In addition, the EU is considering the adoption of criminal sanctions for certain pollution events, such as the unauthorized discharge of tank washings. It is impossible to predict what legislation or additional regulations, if any, may be promulgated by the EU or any other country or authority.

Domestic Environmental and Safety Restrictions and Regulations

The United States regulates the tanker industry with an extensive regulatory and liability regime for environmental protection and cleanup of oil spills, consisting primarily of OPA 90, and the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA. OPA 90 affects all owners and operators whose vessels trade with the United States or its territories or possessions, or whose vessels operate in the waters of the United States, which include the U.S. territorial sea and the 200 nautical mile exclusive economic zone around the United States. CERCLA applies to the discharge of hazardous substances (other than oil) whether on land or at sea. Both OPA 90 and CERCLA impact the Company’s operations.

Under OPA 90, vessel owners, operators and bareboat or demise charterers are ‘‘responsible parties’’ who are liable, without regard to fault, for all containment and clean-up costs and other

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damages, including property and natural resource damages and economic loss without physical damage to property, arising from oil spills and pollution from their vessels.

In general, OPA 90 limits the liability of responsible parties to the greater of $1,200 per gross ton or $10 million per tanker that is over 3,000 gross tons (subject to possible adjustment for inflation). The statute specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states have enacted legislation providing for unlimited liability for discharge of pollutants within their waters. In some cases, states that have enacted this type of legislation have not yet issued implementing regulations defining tanker owners’ responsibilities under these laws. CERCLA, which applies to owners and operators of vessels, contains a similar liability regime and provides for cleanup, removal and natural resource damages associated with discharges of hazardous substances (other than oil). Liability under CERCLA is limited to the greater of $300 per gross ton or $5 million.

These limits of liability do not apply, however, where the incident is caused by violation of applicable U.S. federal safety, construction or operating regulations, or by the responsible party’s gross negligence or wilful misconduct. Similarly, these limits do not apply if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with the substance removal activities. OPA 90 and CERCLA each preserve the right to recover damages under existing law, including maritime tort law.

OPA 90 also requires owners and operators of vessels to establish and maintain with the U.S. Coast Guard evidence of financial responsibility sufficient to meet the limit of their potential strict liability under the statute. The U.S. Coast Guard has enacted regulations requiring evidence of financial responsibility consistent with the maximum limits of liability described above for OPA 90 and CERCLA (combined), or $1,500 per gross ton for tankers. Under the regulations, evidence of financial responsibility may be demonstrated by insurance, surety bond, self-insurance, guaranty or an alternative method subject to approval by the Director of the U.S. Coast Guard National Pollution Funds Center. Under OPA 90 regulations, an owner or operator of more than one tanker is required to demonstrate evidence of financial responsibility for the entire fleet in an amount equal only to the financial responsibility requirement of the tanker having the greatest maximum strict liability under OPA 90  and CERCLA. OSG has provided the requisite guarantees and has received certificates of financial responsibility from the U.S. Coast Guard for each of its tankers required to have one.

OSG has insurance for each of its tankers with pollution liability insurance in the amount of $1 billion. However, a catastrophic spill could exceed the insurance coverage available, in which event there could be a material adverse effect on the Company’s business.

Under OPA 90, oil tankers for which a contract for construction or major conversion was put in place after June 30, 1990 are required to have double hulls. Furthermore, OPA 90 calls for the elimination of all single hull vessels by the year 2010 on a phase-out schedule that is based on size and age, unless the tankers are retrofitted with double hulls. The law permits then existing single hull vessels to operate until 2015 if they discharge at deep water ports, or lighter (i.e., offload cargo) more than 60 miles offshore.

The Company’s four double bottom U.S. Flag Product Carriers will be affected by the OPA 90 phase-out schedule in 2012 and 2013; however, two of these vessels are operated under capital leases expiring in 2011, before their phase-out dates. The other two vessels will be close to 30 years old at the dates they are first affected by the OPA 90 phase-out schedule. The OPA 90 phase-out dates for the Company’s non double hull International Flag Product Carriers are subsequent to their respective IMO phase-out dates.

OPA 90 also amended the Federal Water Pollution Control Act to require owners and operators of vessels to adopt vessel response plans for reporting and responding to oil spill scenarios up to a ‘‘worst case’’ scenario and to identify and ensure, through contracts or other approved means, the availability of necessary private response resources to respond to a ‘‘worst case discharge.’’  The plans must include contractual commitments with clean-up response contractors in order to ensure

18

an immediate response to an oil spill. The Company has developed and filed its vessel response plans with the U.S. Coast Guard and has received approval of such plans.The U.S. Coast Guard has announced its intention to propose similar regulations requiring certain vessels to prepare response plans for the release of hazardous substances.

OPA 90 also requires periodic training programs and drills for shore and response personnel and for vessels and their crews.

OPA 90 does not prevent individual U.S. states from imposing their own liability regimes with respect to oil pollution incidents occurring within their boundaries. In fact, most U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law.

Security Regulations

As of July 1, 2004, all ships involved in international commerce and the port facilities that interface with those ships must comply with the new International Code for the Security of Ships and of Port Facilities (“ISPS Code”). This includes passenger ships, cargo ships over 500 gross tons, and mobile offshore drilling rigs. The ISPS Code, which was adopted by the IMO in December 2002, provides a set of measures and procedures to prevent acts of terrorism, which threaten the security of passengers and crew and the safety of ships and port facilities. All of OSG’s Ship Security Plans for its vessels have been approved by the appropriate regulatory authorities and have been implemented.

All of the Company’s ships have obtained an International Ship Security Certificate from a recognized security organization approved by the appropriate flag states and each vessel has developed and implemented an approved Ship Security Plan.

Insurance

Consistent with the currently prevailing practice in the industry, the Company presently carries protection and indemnity (“P&I”) insurance coverage for pollution of $1.0 billion per occurrence on every vessel in its fleet. P&I insurance is provided by mutual protection and indemnity associations (“P&I Associations”). The P&I Associations that comprise the International Group insure approximately 90% of the world’s commercial tonnage and have entered into a pooling agreement to reinsure each association’s liabilities. Each P&I Association has capped its exposure to each of its members at approximately $4.25 billion. As a member of a P&I Association which is a member of the International Group, the Company is subject to calls payable to the Associations based on its claim record as well as the claim records of all other members of the individual Association of which it is a member, and the members of the pool of P&I Associations comprising the International Group. The Company is currently a member of three P&I Associations with each of its vessels insured by one of these three Associations. While the Company has historically been able to obtain pollution coverage at commercially reasonable rates, no assurances can be given that such insurance will continue to be available in the future.

The Company carries marine hull and machinery and war risk insurance, which includes the risk of actual or constructive total loss, for all of its vessels. The vessels are each covered up to at least their fair market value, with deductibles ranging from $100,000 to $250,000 per vessel per incident. The Company is self insured for hull and machinery claims in amounts in excess of the individual vessel deductibles up to a maximum aggregate loss of $3,000,000 per policy year.

The Company currently maintains loss of hire insurance to cover loss of charter income resulting from accidents or breakdowns of its vessels that are covered under the vessels’ marine hull and machinery insurance. Loss of hire insurance covers up to 120 days lost charter income per vessel per incident in excess of the first 60 days lost for each covered incident which is borne by the Company.

19

Taxation of the Company

The following summary of the principal United States tax laws applicable to the Company, as well as the conclusions regarding certain issues of tax law, are based on the provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed U.S. Treasury Department regulations, administrative rulings, pronouncements and judicial decisions, all as of the date of this Annual Report. No assurance can be given that changes in or interpretation of existing laws will not occur or will not be retroactive or that anticipated future circumstances will in fact occur. The Company’s views should not be considered official, and no assurance can be given that the conclusions discussed below would be sustained if challenged by taxing authorities.

Substantially all of the Company’s International Flag vessels are owned or operated by foreign corporations that are subsidiaries of OSG International, Inc., a wholly owned subsidiary of the Company incorporated in the Marshall Islands (“OIN”). These corporations have made special U.S. tax elections under which they are treated as “branches” of OIN rather than separate corporations for U.S. federal income tax purposes. For 2005, OIN and its subsidiaries contributed substantially all of the Company’s pre-tax income.

As a result of changes made by the American Jobs Creation Act of 2004 (“2004 Act”), as discussed below, for taxable years beginning after December 31, 2004, the Company is no longer required to report in taxable income on a current basis the undistributed foreign shipping income earned by OIN under the “Subpart F” provisions of the Code.

Taxation to OIN of its Shipping Income:  In General

OIN derives substantially all of its gross income from the use and operation of vessels in international commerce. This income principally consists of hire from time and voyage charters for the transportation of cargoes and the performance of services directly related thereto, which is referred to herein as “shipping income.”

Shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the U.S. will be considered to be 50% derived from sources within the United States. Shipping income attributable to transportation that both begins and ends in the United States will be considered to be 100% derived from sources within the United States. OIN does not engage in transportation that gives rise to 100% U.S. source income. Shipping income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from sources outside the United States. Shipping income derived from sources outside the U.S. will not be subject to any U.S. federal income tax. OIN’s vessels will operate in various parts of the world, including to or from U.S. ports. Unless exempt from U.S. taxation under Section 883 of the Code, OIN will be subject to U.S. federal income taxation of 4% of its U.S. source shipping income on a gross basis without the benefit of deductions.

Application of Code Section 883

Under Section 883 of the Code, OIN will be exempt from the foregoing U.S. taxation of its U.S source shipping income if it is a “controlled foreign corporation” within the meaning of Section 957 of the Code and, under Treasury regulations that were promulgated prior to the enactment of the 2004 Act, more than 50% of OIN’s shipping income is includible in the gross income of U.S. persons that own 10% or more of OIN’s stock. While OIN is a controlled foreign corporation, as a result of the passage of the 2004 Act, the Company is longer required to include OIN’s undistributed shipping income in its income under Subpart F of the Code. In these circumstances, prior to a recent written IRS announcement, it was unclear whether the IRS would interpret the Treasury regulations as currently written in a manner that would deprive OIN of the benefits of Section 883 of the Code. The IRS has now clarified that it will interpret the Treasury regulations in a manner that will allow OIN to

20

continue to benefit from the application of Section 883 of the Code. To the extent OIN is unable to qualify for exemption from tax under Section 883, OIN’s U.S. source shipping income will become subject to the 4% gross basis tax regime described below.

Taxation to OSG of OIN’s Shipping Income

For taxable years beginning on or after January 1, 1987 and ending on or before December 31, 2004, the Company, as a 10% shareholder of controlled foreign corporations, was subject to current taxation on the shipping income of its foreign subsidiaries. To make U.S.-controlled shipping companies competitive with foreign-controlled shipping companies, through the passage of the 2004 Act, Congress repealed the current income inclusion by 10% shareholders of the shipping income of controlled foreign corporations. Accordingly, for years beginning on or after January 1, 2005, the Company is not required to include in income OIN’s undistributed shipping income.

For taxable years beginning on or after January 1, 1976 and ending on or before December 31, 1986, the Company was not required to include in income the undistributed shipping income of its foreign subsidiaries that was reinvested in qualified shipping assets. For taxable years beginning on or after January 1, 1987, the Company is required to include in income the deferred shipping income from this period to the extent that at the end of any year the investment in qualified shipping assets is less than the corresponding amount at December 31, 1986. By virtue of the nature of OIN’s business, the Company anticipates that the recognition of this deferred income will be postponed indefinitely. This is discussed in more detail in Note K to the Company’s consolidated financial statements set forth in Item 8.

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Detailed Fleet List as of December 31, 2005

			Year	Deadweight		Interest			Hull
Foreign Flag		Vessel Name	Built	Tonnage		Percentage			Type(6)
	V Pluses
		TI OCEANIA(1)	2003		441,585		100.0	%		DH
		TI EUROPE(1)	2002		441,561		100.0	%		DH
	VLCCs
		OVERSEAS ROSALYN(1)	2003		317,972		100.0	%		DH
		OVERSEAS MULAN(1)	2002		318,518		100.0	%		DH
		TANABE(1)	2002		298,561		100.0	%		DH
		SAKURA I(1)	2001		298,644		100.0	%		DH
		RAPHAEL(1)	2000		309,614		100.0	%		DH
		OVERSEAS DONNA(1)	2000		309,498		100.0	%		DH
		EQUATORIAL LION(1)	1997		300,349		100.0	%		DH
		SOVEREIGN UNITY(1)	1996		309,892		100.0	%		DH
		MAJESTIC UNITY(1)	1996		300,549		100.0	%		DH
		CROWN UNITY(1)	1996		300,482		100.0	%		DH
	VLCCs Chartered-in
		V. K. EDDIE(1,2)	2005		305,261		40.0	%		DH
		ARDENNE V(1,2)	2004		318,658		40.0	%		DH
		SEA FORTUNE(1,2)	2003		298,833		30.0	%		DH
		OVERSEAS ANN(1,2)	2001		309,327		100.0	%		DH
		OVERSEAS CHRIS(1,2)	2001		309,285		100.0	%		DH
		C. DREAM(1,2)	2000		298,570		15.0	%		DH
		REGAL UNITY(1,2)	1997		309,966		100.0	%		DH
		MERIDIAN LION(1,2)	1997		300,579		100.0	%		DH
		TI NINGBO(1,2)	1996		298,306		50.0	%		DH
		TI QINGDAO(1,2)	1995		298,306		50.0	%		DH
	Aframaxes
		OVERSEAS PORTLAND(3)	2002		112,139		100.0	%		DH
		OVERSEAS JOSEFA CAMEJO(3)	2001		112,200		100.0	%		DH
		OVERSEAS FRAN(3)	2001		112,118		100.0	%		DH
		OVERSEAS SHIRLEY(3)	2001		112,056		100.0	%		DH
		PACIFIC RUBY(3)	1994		96,358		100.0	%		DH
		PACIFIC SAPPHIRE(3)	1994		96,173		100.0	%		DH
		OVERSEAS ELIANE(3,7)	1994		94,813		100.0	%		DH
		BERYL(3)	1994		94,799		100.0	%		DH
		OVERSEAS KEYMAR(3)	1993		95,822		100.0	%		DH
	Aframaxes Chartered-in
		OVERSEAS CATHY(2,3)	2004		112,028		100.0	%		DH
		OVERSEAS SOPHIE(2,3)	2003		112,045		100.0	%		DH
		OVERSEAS JACAMAR(5,7)	1999		104,024		100.0	%		DH
		CAPE ASPRO (2,3)	1998		105,337		50.0	%		DH
		CAPE AVILA(2,3)	1998		105,337		50.0	%		DH
		TAKAMAR(3,5)	1998		104,024		100.0	%		DH
		REBECCA(2,3)	1994		94,873		100.0	%		DH
		ANIA(2,3)	1994		94,848		100.0	%		DH

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Foreign Flag	Vessel Name	Year Built	Deadweight Tonnage		Interest Percentage			Hull Type(6)
Panamaxes
	OVERSEAS REGINAMAR	2004		70,313		100.0	%		DH
	OVERSEAS REINEMAR	2004		70,313		100.0	%		DH
	CABO SOUNION	2004		69,636		100.0	%		DH
	OVERSEAS REYMAR(4)	2004		69,636		100.0	%		DH
	CABO HELLAS	2003		69,636		100.0	%		DH
	OVERSEAS JADEMAR(4)	2002		69,708		100.0	%		DH
	OVERSEAS PEARLMAR(4)	2002		69,697		100.0	%		DH
	OVERSEAS GOLDMAR	2002		69,684		100.0	%		DH
	OVERSEAS ROSEMAR	2002		69,629		100.0	%		DH
	OVERSEAS SILVERMAR	2002		69,609		100.0	%		DH
	OVERSEAS RUBYMAR	2002		69,599		100.0	%		DH
Panamaxes Chartered-in
	OVERSEAS CLELIAMAR(4,5)	1993		68,626		100.0	%		DH
	OVERSEAS POLYS(4,5,8)	1993		68,623		100.0	%		DH
Handysize Product Carriers
	OVERSEAS ALCMAR(7)	2004		46,248		100.0	%		DH
	OVERSEAS ALCESMAR (7)	2004		46,214		100.0	%		DH
	OVERSEAS ANDROMAR (7)	2004		46,195		100.0	%		DH
	OVERSEAS ANTIGMAR (7)	2004		46,168		100.0	%		DH
	OVERSEAS ARIADMAR (7)	2004		46,205		100.0	%		DH
	OVERSEAS ATALMAR	2004		46,205		100.0	%		DH
	OVERSEAS PETROMAR	2001		35,768		100.0	%		DH
	OVERSEAS AQUAMAR	1998		47,236		100.0	%		DH
	OVERSEAS RIMAR	1998		45,999		100.0	%		DH
	OVERSEAS NEDIMAR	1996		46,821		100.0	%		DH
	OVERSEAS LIMAR	1996		46,171		100.0	%		DH
	OVERSEAS ALMAR	1996		46,169		100.0	%		DH
Handysize Product Carriers
	NEPTUNE(5)	1989		40,085		100.0	%		DS
	OVERSEAS ERMAR(5)	1989		39,977		100.0	%		DS
	VEGA(5)	1989		39,711		100.0	%		DS
	DELPHINA(5)	1989		39,674		100.0	%		DS
	OVERSEAS FULMAR(5)	1989		39,521		100.0	%		DS
	OVERSEAS CAMAR(5)	1988		46,100		100.0	%		DD
	OVERSEAS JAMAR(5)	1988		46,100		100.0	%		DD
	OVERSEAS ALLENMAR(5)	1988		41,570		100.0	%		DD
	URANUS(5)	1988		40,085		100.0	%		DS
	OVERSEAS PRIMAR(5)	1988		39,539		100.0	%		DS
	OVERSEAS ATHENS(5)	1987		39,729		100.0	%		DS
	OVERSEAS COLMAR(5)	1987		39,729		100.0	%		DS
	OVERSEAS CAPEMAR(5)	1987		37,615		100.0	%		DS
Handysize Product Carriers on Order, to be Chartered-in
	OVERSEAS HERCULES (HULL S2022)(2)	2006		51,000		100.0	%		DH
	OVERSEAS ORION (HULL S2023)(2)	2006		51,000		100.0	%		DH
	OVERSEAS CYGNUS (HULL S1223)(2)	2007		51,000		100.0	%		DH
	OVERSEAS SEXTANS (HULL S2024)(2)	2007		51,000		100.0	%		DH
Capesize Bulk Carrriers Chartered-in
	MATILDE(2)	1997		160,013		100.0	%		N/A
	CHRISMIR(2)	1997		159,830		100.0	%		N/A

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		Year	Deadweight		Interest			Hull
U.S. Flag	Vessel Name	Built	Tonnage		Percentage			Type(6)
HandysizeProduct Carriers
	OVERSEAS AMBERMAR	2002		35,970		100.0	%		DH
	OVERSEAS MAREMAR	1998		47,225		100.0	%		DH
	OVERSEAS LUXMAR	1998		45,999		100.0	%		DH
	PUGET SOUND	1983		50,860		100.0	%		DB
	S/R GALENA BAY	1982		50,920		100.0	%		DB
Handysize Product Carriers Chartered-in
	OVERSEAS NEW ORLEANS(5)	1983		43,643		100.0	%		DB
	OVERSEAS PHILADELPHIA(5)	1982		43,387		100.0	%		DB
Handysize	Product Carriers on Order, to be Chartered-in
	HULL 005(5)	2006		46,000		100.0	%		DH
	HULL 006(5)	2007		46,000		100.0	%		DH
	HULL 007(5)	2007		46,000		100.0	%		DH
	HULL 008(5)	2008		46,000		100.0	%		DH
	HULL 009(5)	2008		46,000		100.0	%		DH
	HULL 010(5)	2009		46,000		100.0	%		DH
	HULL 011(5)	2009		46,000		100.0	%		DH
	HULL 012(5)	2009		46,000		100.0	%		DH
	HULL 013(5)	2010		46,000		100.0	%		DH
	HULL 014(5)	2010		46,000		100.0	%		DH
Bulk Carriers Chartered-in
	OVERSEAS HARRIETTE(5)	1978		25,951		100.0	%		N/A
	OVERSEAS MARILYN(5)	1978		25,951		100.0	%		N/A
Pure Car Carriers
	OVERSEAS JOYCE	1987		16,141		100.0	%		N/A

			Year		Interest			Hull
LNG Carriers		Vessel Name	Built	Cbm	Percentage			Type(6)
	LNG	Carriers on Order
		TENBEK (HULL 1605)	2007	216,200		49.9	%		DH
		AL MAFYAR (HULL 1791)	2007	216,200		49.9	%		DH
		AL SHEEHANIYA (HULL 1606)	2008	216,200		49.9	%		DH
		AL GHARRAFA (HULL 1792)	2008	216,200		49.9	%		DH

(1)Commercially Managed by Tankers International.     

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(2) Time Charter-in:

	Commencement	Expiry
V. K. Eddie	May-05	May-10
Ardenne V	September-04	September-09
Sea Fortune	March-04	March-07
Overseas Ann	October-05	April-12
Overseas Chris	October-05	October-11
C. Dream	March-04	March-09
Regal Unity	October-05	April-11
Meridian Lion	June-03	June-11
TI Ningbo	April-04	April-07
TI Qingdao	May-04	May-07
Overseas Cathy	October-05	January-12
Overseas Sophie	October-05	July-11
Cape Aspro	March-04	March-09
Cape Avila	March-04	March-09
Rebecca	October-05	October-10
Ania	October-05	October-10
Overseas Hercules (Hull S2022)		10 years from delivery
Overseas Orion (Hull S2023)		10 years from delivery
Overseas Cygnus (Hull S1223)		10 years from delivery
Overseas Sextans (Hull S2024)		10 years from delivery
Matilde	December-03	December-10
Chrismir	December-03	December-10

(3)   Commercially Managed by Aframax International.

(4)Commercially Managed by Panamax International.

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(5) Bareboat Charter-in:

	Commencement	Expiry
Overseas Jacamar	January-04	January-11
Takamar	January-04	January-11
Overseas Cleliamar	July-05	September-09
Overseas Polys	July-05	September-09
Neptune	January-05	July-08
Overseas Ermar	July-04	July-09
Vega	January-05	January-09
Delphina	January-05	January-09
Overseas Fulmar	July-04	July-09
Overseas Camar	July-04	July-09
Overseas Jamar	July-04	July-09
Overseas Allenmar	July-04	July-09
Uranus	January-05	July-08
Overseas Primar	July-04	July-09
Overseas Athens	July-04	July-09
Overseas Colmar	July-04	July-09
Overseas Capemar	July-04	July-09
Overseas New Orleans	October-89	October-11
Overseas Philadelphia	November-89	November-11
Hull 005		7 years from delivery
Hull 006		7 years from delivery
Hull 007		7 years from delivery
Hull 008		7 years from delivery
Hull 009		7 years from delivery
Hull 010		5 years from delivery
Hull 011		5 years from delivery
Hull 012		5 years from delivery
Hull 013		5 years from delivery
Hull 014		5 years from delivery
Overseas Harriette	November-78	November-06
Overseas Marilyn	November-78	November-07

(6)DH = double hull; DS = double sided; DB = double bottom; DD = double hull design (built before MARPOL Regulation 13F). DS, DB and DD do not qualify as double hull for MARPOL or EU purposes.

(7)Reflects name change made subsequent to December 31, 2005.

(8)Hull type reflects change made subsequent to December 31, 2005.

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Glossary

Aframax—A medium size crude oil tanker of approximately 80,000 to 120,000 deadweight tons. Because of their size, Aframaxes are able to operate on many different routes, including from Latin America and the North Sea to the U.S. They are also used in lightering (transferring cargo from larger tankers, typically VLCCs, to smaller tankers for discharge in ports from which the larger tankers are restricted). Modern Aframaxes can generally transport from 500,000 to 800,000 barrels of crude oil.

Bareboat Charter—A Charter under which a customer pays a fixed daily or monthly rate for a fixed period of time for use of the vessel. The customer pays all costs of operating the vessel, including voyage and vessel expenses. Bareboat charters are usually long term.

Bostonmax Product Carrier—A small size Product Carrier of approximately 39,000 deadweight tons and the largest size capable of accessing all Boston-area terminals.

Capesize Bulk Carrier—A large Dry Bulk Carrier (any vessel used to carry non-liquid bulk commodities) with a carrying capacity of more than 80,000 deadweight tons that mainly transports iron ore and coal.

Charter—Contract entered into with a customer for the use of the vessel for a specific voyage at a specific rate per unit of cargo (“Voyage Charter”), or for a specific period of time at a specific rate per unit (day or month) of time (“Time Charter”).

Classification Societies—Organizations that establish and administer standards for the design, construction and operational maintenance of vessels. As a practical matter, vessels cannot trade unless they meet these standards.

Commercial Management or Commercially Managed—The management of the employment, or chartering, of a vessel and associated functions, including seeking and negotiating employment for vessels, billing and collecting revenues, issuing voyage instructions, purchasing fuel, and appointing port agents.

Commercial Pool—A commercial pool is a group of similar size and quality vessels with different shipowners that are placed under one administrator or manager. Pools offer participants opportunities for scheduling and other operating efficiencies such as multi-legged charters and Contracts of Affreightment and other operating efficiencies

Condition Assessment Scheme—An inspection program designed to check and report on the vessel’s physical condition and on its past performance based on survey and IMO’s International Safety Management audit reports and port state performance records.

Contract of Affreightment or COA—COA is the abbreviation for Contract of Affreightment, which is an agreement providing for the transportation of a specific quantity of cargo over a specific time period but without designating specific vessels or voyage schedules, thereby allowing flexibility in scheduling. COAs can either have a fixed rate or a market-related rate. An example would be two shipments of 70,000 tons per month for the next two years at the prevailing spot rate at the time of each loading.

Crude Oil—Oil in its natural state that has not been refined or altered.

Cubic Meters or Cbm—Cbm is the abbreviation for cubic meters, the industry standard for measuring the carrying capacity of a LNG Carrier.

Deadweight tons or Dwt—Dwt is the abbreviation for deadweight tons, representing principally the cargo carrying capacity of a vessel, but including the weight of consumables such as fuel, lube oil, drinking water and stores.

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Demurrage—Additional revenue paid to the shipowner on its Voyage Charters for delays experienced in loading and/or unloading cargo, which are not deemed to be the responsibility of the shipowner, calculated in accordance with specific Charter terms.

Double Hull—Hull construction design in which a vessel has an inner and an outer side and bottom separated by void space, usually two meters in width.

Drydocking—An out-of-service period during which planned repairs and maintenance are carried out, including all underwater maintenance such as external hull painting. During the drydocking, certain mandatory Classification Society inspections are carried out and relevant certifications issued. Normally, as the age of a vessel increases, the cost of drydocking increases.

Handysize Product Carrier—A small size Product Carrier of approximately 30,000 to 50,000 deadweight tons. This type of vessel generally operates on shorter routes (short haul).

IMO—IMO is the abbreviation for International Maritime Organization, an agency of the United Nations, which is the body that is responsible for the administration of internationally developed maritime safety and pollution treaties, including MARPOL 73/78.

International Flag vessel—A vessel that is registered under a flag other than that of the U.S.

Jones Act—U.S. law that applies to port-to-port shipments within the continental U.S. and between the continental U.S. and Hawaii, Alaska, Puerto Rico, and Guam, and restricts such shipments to U.S. Flag Vessels that are built in the U.S. and that are owned by a U.S. company that is more than 75% owned and controlled by U.S. citizens.

LNG Carrier—A vessel designed to carry liquefied natural gas, that is, natural gas cooled to ~163° centigrade, turning it into a liquid and reducing its volume to 1/600 of its volume in gaseous form. LNG is the abbreviation for liquefied natural gas.

MARPOL 73/78—International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto. This convention includes regulations aimed at preventing and minimizing pollution from ships by accident and by routine operations.

OPA 90—OPA 90 is the abbreviation for the U.S. Oil Pollution Act of 1990.

Panamax—A medium size vessel of approximately 50,000 to 80,000 deadweight tons.

Product Carrier—General term that applies to any tanker that is used to transport refined oil products, such as gasoline, jet fuel or heating oil.

Pure Car Carrier—A single-purpose vessel with many decks, designed to carry automobiles, which are driven on and off using ramps.

Scrapping—The disposal of vessels by demolition for scrap metal.

Special Survey—An extensive inspection of a vessel by classification society surveyors that must be completed within five years. Special Surveys require a vessel to be drydocked.

Suezmax—A large crude oil tanker of approximately 120,000 to 200,000 deadweight tons. Modern Suezmaxes can generally transport about one million barrels of crude oil.

Technical Management—The management of the operation of a vessel, including physically maintaining the vessels, maintaining necessary certifications, and supplying necessary stores, spares, and lubricating oils. Responsibilities also generally include selecting, engaging and training crew, and arranging necessary insurance coverage.

Time Charter—A Charter under which a customer pays a fixed daily or monthly rate for a fixed period of time for use of the vessel. Subject to any restrictions in the Charter, the customer decides

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the type and quantity of cargo to be carried and the ports of loading and unloading. The customer pays all voyage expenses such as fuel, canal tolls, and port charges. The shipowner pays all vessel expenses such as the Technical Management expenses.

Time Charter Equivalent or TCE—TCE is the abbreviation for Time Charter Equivalent. TCE revenues, which is voyage revenues less voyage expenses, serves as an industry standard for measuring and managing fleet revenue and comparing results between geographical regions and among competitors.

U.S. Flag vessel—A U.S. Flag vessel must be crewed by U.S. sailors, and owned and operated by a U.S. company.

Vessel Expenses—Includes crew costs, vessel stores and supplies, lubricating oils, maintenance and repairs, insurance and communication costs associated with the operations of vessels.

VLCC—VLCC is the abbreviation for Very Large Crude Carrier, a large crude oil tanker of approximately 200,000 to 320,000 deadweight tons. Modern VLCCs can generally transport two million barrels or more of crude oil. These vessels are mainly used on the longest (long haul) routes from the Arabian Gulf to North America, Europe, and Asia, and from West Africa to the U.S. and Far Eastern destinations.

Voyage Charter—A Charter under which a customer pays a transportation charge for the movement of a specific cargo between two or more specified ports. The shipowner pays all voyage expenses, and all vessel expenses, unless the vessel to which the Charter relates has been time chartered in. The customer is liable for Demurrage, if incurred.

Voyage Expenses—Includes fuel, port charges, canal tolls, cargo handling operations and brokerage commissions paid by the Company under Voyage Charters. These expenses are subtracted from shipping revenues to calculate Time Charter Equivalent Revenues for Voyage Charters.

V-Plus—A large crude oil tanker of more than 350,000 deadweight tons. Modern V Pluses can transport three million barrels of crude oil and are mainly used on the same long haul routes as VLCCs.

Worldscale—Industry name for the Worldwide Tanker Nominal Freight Scale published annually by the Worldscale Association as a rate reference for shipping companies, brokers, and their customers engaged in the bulk shipping of oil in the international markets. Worldscale is a list of calculated rates for specific voyage itineraries for a standard vessel, as defined, using defined voyage cost assumptions such as vessel speed, fuel consumption, and port costs. Actual market rates for voyage charters are usually quoted in terms of a percentage of Worldscale.

Available Information

The Company makes available free of charge through its internet website, www.osg.com, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission.

The Company also makes available on its website, its corporate governance guidelines, its code of business conduct, and charters of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee of the Board of Directors.

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ITEM 1A.RISK FACTORS

The following important risk factors could cause actual results to differ materially from those contained in the forward-looking statements made in this report or presented elsewhere by management from time to time. If any of the circumstances or events described below actually arise or occur, the Company’s business, results of operations and financial condition could be materially adversely affected.

Industry specific risk factors:

The highly cyclical nature of the tanker industry may lead to volatile changes in charter rates and vessel values, which may adversely affect the Company’s  earnings

Factors affecting the supply and demand for tankers are outside of the Company’s control, and the nature, timing and degree of changes in industry conditions are unpredictable and may adversely affect the values of the Company’s vessels and result in significant fluctuations in the amount of charter hire the Company may earn, which could result in significant fluctuations in OSG’s quarterly results. The factors that influence the demand for tanker capacity include:

·demand for oil and oil products, which affect the need for tanker capacity;

·global and regional economic and political conditions which among other things, could impact the supply of oil as well as trading patterns and the demand for various types of vessels;

·changes in the production of crude oil, particularly by OPEC and other key producers, which impact the need for tanker capacity;

·developments in international trade;

·changes in seaborne and other transportation patterns, including changes in the distances that cargoes are transported;

·environmental concerns and regulations;

·new pipeline construction and expansions;

·weather; and

·competition from alternative sources of energy.

The factors that influence the supply of tanker capacity include:

·the number of newbuilding deliveries;

·the scrapping rate of older vessels;

·the number of vessels that are out of service; and

·environmental and maritime regulations.

An increase in the supply of tankers without an increase in demand for tankers could cause charter rates to decline, which could have a material adverse effect on OSG’s  revenues and profitability

Historically, the tanker industry has been cyclical. The profitability and asset values of companies in the industry have fluctuated based on changes in the supply and demand of tankers. The supply of tankers generally increases with deliveries of new vessels and decreases with the scrapping of older vessels. The newbuilding order book equaled 24.6% of the existing world tanker fleet as of December  31, 2005 and no assurance can be given that the order book will not increase further in proportion to

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the existing fleet. If the number of new ships delivered exceeds the number of vessels being scrapped, tanker capacity will increase. If the supply of tanker capacity increases and the demand for tanker capacity does not, the charter rates for the Company’s vessels could decline significantly. A decline in charter rates could have a material adverse effect on OSG’s revenues and profitability.

Charter rates may decline from their current level, which could have a material adverse effect on OSG’s revenues and profitability

Because many of the factors that influence the supply of, and demand for, tanker capacity are unpredictable and beyond the Company’s control, the nature, timing and degree of changes in charter rates are unpredictable. A decline in charter rates could have a material adverse effect on OSG’s revenues and profitability.

OSG’s revenues are subject to seasonal variations

OSG operates its tankers in markets that have historically exhibited seasonal variations in demand for tanker capacity, and therefore, charter rates. Charter rates for tankers are typically higher in the fall and winter months as a result of increased oil consumption in the Northern Hemisphere. Because a majority of the Company’s vessels trade in the spot market, seasonality has affected OSG’s operating results on a quarter-to-quarter basis and could continue to do so in the future.

Terrorist attacks and international hostilities can affect the tanker industry, which could adversely affect OSG’s business

Additional terrorist attacks like those in New York on September 11, 2001 and in London on July 7, 2005, the outbreak of war or the existence of international hostilities could damage the world economy, adversely affect the availability of and demand for crude oil and petroleum products and adversely affect the Company’s ability to re-charter its vessels on the expiration or termination of the charters and the charter rates payable under any renewal or replacement charters. The Company conducts its operations internationally, and its business, financial condition and results of operations may be adversely affected by changing economic, political and government conditions in the countries and regions where its vessels are employed. Moreover, OSG operates in a sector of the economy that is likely to be adversely impacted by the effects of political instability, terrorist or other attacks, war or international hostilities.

The market value of vessels fluctuates significantly, which could adversely affect OSG’s liquidity, result in breaches of its financing agreements or otherwise adversely affect its financial condition

The market value of vessels has fluctuated over time. The fluctuation in market value of oil tankers over time is based upon various factors, including:

·age of the vessel;

·general economic and market conditions affecting the tanker industry;

·number of vessels in the world fleet;

·types and sizes of vessels available;

·changes in trading patterns affecting demand for particular sizes and types of vessels;

·cost of newbuildings;

·prevailing level of charter rates;

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·competition from other shipping companies;

·other modes of transportation; and

·technological advances in vessel design and propulsion.

Declining vessel values of the Company’s tankers could adversely affect its liquidity by limiting its ability to raise cash by refinancing vessels. Declining vessel values could also result in a breach of loan covenants or trigger events of default under relevant financing agreements that require the Company to maintain certain loan-to-value ratios. In such instances, if OSG is unable to pledge additional collateral to offset the decline in vessel values, its lenders could accelerate its debt and foreclose on its vessels pledged as collateral for the loans.

Shipping is a business with inherent risks, and OSG’s insurance may not be adequate to cover its losses

OSG’s vessels and their cargoes are at risk of being damaged or lost because of events such as:

·marine disasters;

·bad weather;

·mechanical failures;

·human error;

·war, terrorism and piracy; and

·other unforeseen circumstances or events.

In addition, transporting crude oil creates a risk of business interruptions due to political circumstances in foreign countries, hostilities, labor strikes, port closings and boycotts. Any of these events may result in loss of revenues and increased costs.

The Company carries insurance to protect against most of the accident-related risks involved in the conduct of its business. OSG currently maintains one billion dollars in coverage for each of its vessels for liability for spillage or leakage of oil or pollution. OSG also carries insurance covering lost revenue resulting from vessel off-hire due to vessel damage. Nonetheless, risks may arise against which the Company is not adequately insured. For example, a catastrophic spill could exceed OSG’s insurance coverage and have a material adverse effect on its operations. In addition, OSG may not be able to procure adequate insurance coverage at commercially reasonable rates in the future, and OSG cannot guarantee that any particular claim will be paid. In the past, new and stricter environmental regulations have led to higher costs for insurance covering environmental damage or pollution, and new regulations could lead to similar increases or even make this type of insurance unavailable. Furthermore, even if insurance coverage is adequate to cover the Company’s losses, OSG may not be able to timely obtain a replacement ship in the event of a loss. OSG may also be subject to calls, or premiums, in amounts based not only on its own claim records but also the claim records of all other members of the P & I Associations through which OSG obtains insurance coverage for tort liability. OSG’s payment of these calls could result in significant expenses which would reduce its profits or cause losses.

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Because OSG conducts its business on a worldwide basis, OSG faces a number of significant risks that could result in losses or higher costs

The Company’s vessels operate all over the world, exposing it to many risks, including:

·changing economic, political and social conditions in the countries where OSG does business or where its vessels are registered or flagged;

·the imposition of increased environmental and safety regulations by international organizations, Classification Societies, flag states and port states;

·the imposition of taxes by flag states, port states and jurisdictions in which OSG or its subsidiaries are incorporated or where its vessels operate;

·currency fluctuations;

·terrorism, piracy and war, including the possible outbreak of hostilities that could reduce or otherwise affect the movement of oil from the Middle East; and

·expropriation of its vessels.

As a result of these risks, OSG may incur losses or higher costs, including those incurred as a result of the impairment of its assets or a curtailment of its operations.

Compliance with environmental laws or regulations may adversely affect OSG’s  business

The Company’s operations are affected by extensive and changing international, national and local environmental protection laws, regulations, treaties, conventions and standards in force in international waters, the jurisdictional waters of the countries in which OSG’s vessels operate, as well as the countries of its vessels’ registration. Many of these requirements are designed to reduce the risk of oil spills and other pollution, and OSG’s compliance with these requirements can be costly.

These requirements can affect the resale value or useful lives of the Company’s vessels, require a reduction in carrying capacity, ship modifications or operational changes or restrictions, lead to decreased availability of insurance coverage for environmental matters or result in the denial of access to certain jurisdictional waters or ports, or detention in, certain ports. Under local, national and foreign laws, as well as international treaties and conventions, OSG could incur material liabilities, including cleanup obligations, in the event that there is a release of petroleum or other hazardous substances from our vessels or otherwise in connection with its operations. OSG could also become subject to personal injury or property damage claims relating to the release of or exposure to hazardous materials associated with its current or historic operations. Violations of or liabilities under environmental requirements also can result in substantial penalties, fines and other sanctions, including in certain instances, seizure or detention of the Company’s vessels.

OSG could incur significant costs, including cleanup costs, fines, penalties, third-party claims and natural resource damages, as the result of an oil spill or other liabilities under environmental laws. OPA 90 affects all vessel owners shipping oil or hazardous material to, from or within the United States. OPA 90 allows for potentially unlimited liability without regard to fault for owners, operators and bareboat charterers of vessels for oil pollution in U.S. waters. Similarly, the International Convention on Civil Liability for Oil Pollution Damage, 1969, as amended, which has been adopted by most countries outside of the United States, imposes liability for oil pollution in international waters. OPA 90 expressly permits individual states to impose their own liability regimes with regard to hazardous materials and oil pollution incidents occurring within their boundaries. Coastal states in the United States have enacted pollution prevention liability and response laws, many providing for unlimited liability.

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OPA 90 provides for the scheduled phase out of all non double hull tankers that carry oil in bulk in U.S. waters. IMO and the European Union also have adopted separate phase out schedules applicable to single hull tankers operating in international and EU waters. These regulations will reduce the demand for single hull tankers, force the remaining single hull vessels into less desirable trading routes, increase the number of ships trading in routes open to single hull vessels and could increase demands for further restrictions in the remaining jurisdictions that permit the operation of these vessels. As a result, single hull vessels are likely to be chartered less frequently and at lower rates.

In addition, in complying with OPA, IMO regulations, EU directives and other existing laws and regulations and those that may be adopted, shipowners may incur significant additional costs in meeting new maintenance and inspection requirements, in developing contingency arrangements for potential spills and in obtaining insurance coverage. Government regulation of vessels, particularly in the areas of safety and environmental requirements, can be expected to become more strict in the future and require the Company to incur significant capital expenditures on its vessels to keep them in compliance, or even to scrap or sell certain vessels altogether. As a result of accidents such as the November 2002 oil spill from the Prestige, a 26 year old single hull tanker unrelated to the Company, OSG believes that regulation of the shipping industry will continue to become more stringent and more expensive for the Company and its competitors. In recent years, the IMO and EU have both accelerated their existing non double hull phase out schedules in response to highly publicized oil spills and other shipping incidents involving companies unrelated to OSG. Future accidents can be expected in the industry, and such accidents or other events could be expected to result in the adoption of even stricter laws and regulations, which could limit the Company’s operations or its ability to do business and which could have a material adverse effect on OSG’s business and financial results. For additional information concerning a pending government investigation of the Company’s handling of waste oils, see the Company specific risk factor with such heading on Page 37.

The market value of OSG’s vessels, which are at or near historically high levels, may be depressed at a time and in the event that it sells a vessel

Tankers values have generally experienced high volatility and values are currently at or near historically high levels. The fair market value of the Company’s tankers can be expected to fluctuate, depending on general economic and market conditions affecting the tanker industry and competition from other shipping companies, types and sizes of vessels and other modes of transportation. In addition, although OSG has a modern fleet, as vessels grow older, they generally decline in value. These factors will affect the value of the Company’s vessels at the time of any vessel sale. If for any reason, OSG sells a tanker at a time when tanker prices have fallen, the sale may be at less than the tanker’s carrying amount on its financial statements, with the result that the Company would also incur a loss on the sale and a reduction in earnings and surplus.

Company specific risk factors:

The Company’s substantial debt could adversely affect our financial condition

OSG has substantial debt and debt service requirements. At December 31, 2005, the Company’s consolidated total debt, including capital lease obligations, was $993 million and its unused borrowing capacity under revolving credit facilities was $1.15 billion.

The amount of the Company’s debt could have important consequences. For example, it could:

·increase OSG’s vulnerability to general adverse economic and industry conditions;

·limit OSG’s ability to fund future capital expenditures, working capital and other general corporate requirements;

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·require the Company to dedicate a substantial portion of its cash flow from operations to make interest and principal payments on its debt;

·limit OSG’s flexibility in planning for, or reacting to, changes in its business and the shipping industry;

·place OSG at a competitive disadvantage compared to competitors that have less debt; and

·limit OSG’s ability to borrow additional funds, even when necessary to maintain adequate liquidity.

When OSG’s credit facilities mature, it may not be able to refinance or replace them

When OSG’s indebtedness matures, the Company may need to refinance it and may not be able to do so on favorable terms or at all. If OSG is able to refinance maturing indebtedness, the terms of any refinancing or alternate credit arrangements may contain terms and covenants that restrict OSG’s financial and operating flexibility.

The Company is highly dependent upon volatile spot market charter rates

OSG depends on spot charters for a significant portion of its revenues. In 2005, 2004 and 2003, OSG derived approximately 69%, 85% and 79%, respectively, of its TCE revenues in the spot market.

Although chartering a significant portion of OSG’s vessels on the spot market affords it greater opportunity to increase income from operations when rates rise, dependence on the spot market could result in earnings volatility.

OSG may not be able to renew time charters when they expire or enter into new time charters for newbuilds

There can be no assurance that any of the Company’s existing time charters will be renewed or that it will be successful in entering into new time charters on certain of the newbuilds that the Company is chartering-in; or if renewed or entered into, that they will be at favorable rates. If, upon expiration of the existing time charters or delivery of newbuilds, OSG is unable to obtain time charters or voyage charters at desirable rates, the Company’s profitability may be adversely affected.

OSG is dependent on the creditworthiness of its customers

As OSG increases the portion of its revenues from time charters, it increases its reliance on the ability of time charterers to pay charter hire, especially when spot market rates are less than previously agreed upon time charter rates. Historically, the Company has not experienced any material problem collecting charter hire.

Termination or change in the nature of OSG’s relationship with any of the pools in which it participates could adversely affect its business

All of the Company’s VLCCs participate in the Tankers International pool. All but one (which is operating on time charter) of OSG’s Aframaxes participate in the Aframax International pool. Five of its Panamaxes participate in Panamax International. Participation in these pools enhances the financial performance of the Company’s vessels as a result of the higher vessel utilization. Any participant in any of these pools has the right to withdraw upon notice in accordance with the relevant pool agreement. The termination of any of these pools or the withdrawal of any participants could adversely affect OSG’s ability to commercially market the respective types of vessels.

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OSG may not be able to grow its fleet

One part of OSG’s strategy is to continue to grow its fleet on an opportunistic basis. The Company’s ability to grow its fleets will depend upon a number of factors, many of which the Company cannot control. These factors include OSG’s ability to:

·identify acquisition candidates and joint venture opportunities;

·consummate acquisitions or joint ventures;

·integrate any acquired vessels or businesses successfully with its existing operations;

·hire and train qualified personnel; and

·obtain required financing.

OSG’s strategy of growing its business in part through acquisitions is capital intensive, time consuming and subject to a number of inherent risks

Part of OSG’s business strategy is to opportunistically acquire complementary businesses or vessels such as the Company’s acquisition of Stelmar Shipping Ltd. in January 2005. If the Company fails to develop and integrate any acquired businesses or vessels effectively, its earnings may be adversely affected. In addition, the Company’s management team will need to devote substantial time and attention to the integration of the acquired businesses or vessels, which could distract them from their other duties and responsibilities.

Operating costs and capital expenses will increase as the Company’s vessels age

In general, capital expenditures and other costs necessary for maintaining a vessel in good operating condition increase as the age of the vessel increases. Accordingly, it is likely that the operating costs of OSG’s older vessels will increase. In addition, changes in governmental regulations and compliance with Classification Society standards may require OSG to make additional expenditures for new equipment. In order to add such equipment, OSG may be required to take its vessels out of service. There can be no assurance that market conditions will justify such expenditures or enable OSG to operate its older vessels profitably during the remainder of their economic lives.

OSG’s purchase of second hand vessels carries risks associated with the quality of those vessels

OSG’s expansion strategy includes the opportunistic acquisition of quality second hand vessels. Second hand vessels typically do not carry warranties with respect to their condition, whereas warranties are generally available for newbuildings. While the Company generally inspects all second hand vessels prior to purchase, such an inspection would normally not provide OSG with as much knowledge about vessel condition as the Company would possess if the vessels had been built for it.

In the highly competitive international tanker market, OSG may not be able to effectively compete for charters with companies with greater resources

The Company’s vessels are employed in a highly competitive market. Competition arises from other tanker owners, including major oil companies, which may have substantially greater resources than OSG does. Competition for the transportation of crude oil and other petroleum products depends on price, location, size, age, condition, and the acceptability of the vessel operator to the charterer. The Company believes that because ownership of the world tanker fleet is highly fragmented, no single vessel owner is able to influence charter rates. To the extent OSG enters into

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new geographic regions or provide new services, it may not be able to compete profitably. New markets may involve competitive factors which differ from those of the Company’s current markets, and the competitors in those markets may have greater financial strength and capital resources than it does.

OSG is being investigated by the U.S. Department of Justice relating to the handling of waste oils

On October 1, 2003, the U.S. Department of Justice served a grand jury subpoena directed at our International Flag Product Carrier, the Uranus, and our handling of waste oils and maintenance of books and records relating thereto. The U.S. Department of Justice has subsequently served related subpoenas requesting documents concerning the Uranus and other vessels in the Company’s fleet and a number of witnesses have appeared before grand juries. In 2004 and the first quarter of 2005, the Company made a total provision of $10 million (including $4 million in the first quarter of 2005) for anticipated fines and contributions to environmental protection programs associated with a possible settlement of the investigation. The Company has been cooperating with the investigation, including self-reporting to the government beginning in the second half of 2005 of possible additional violations of applicable environmental laws. Currently, management cannot reasonably estimate a range of such fines and contributions, which fines and contributions could be higher than the amount accrued. Negotiations with the U.S. Department of Justice are continuing but there can be no assurance that a satisfactory settlement can be achieved.

OSG’s vessels call on ports located in countries that are subject to restrictions imposed by the U.S. government, which could negatively affect the trading price of the Company’s common stock

From time to time, vessels in OSG’s fleet call on ports located in countries subject to sanctions and embargoes imposed by the U.S. government and countries identified by the U.S. government as state sponsors of terrorism, such as Libya, Syria and Iran. Libya currently is not subject to economic sanctions imposed by the U.S. government, but continues to be identified as a state sponsor of terrorism. Although these sanctions and embargoes do not prevent OSG’s vessels from making calls to ports in these countries, potential investors could view such port calls negatively, which could adversely affect the Company’s reputation and the market for its common stock.

OSG depends on its key personnel and may have difficulty attracting and retaining skilled employees

OSG’s success depends to a significant extent upon the abilities and efforts of its key personnel. The loss of the services of any of the Company’s key personnel or its inability to attract and retain qualified personnel in the future could have a material adverse effect on OSG’s business, financial condition and operating results. In addition, of the Company’s ten executive officers, seven have served in their current positions for less than one year and two of the remaining three officers have served in such positions for less than two years.

The Company may face unexpected drydock costs for its vessels

Vessels must be drydocked periodically. The cost of repairs and renewals required at each drydock are difficult to predict with certainty and can be substantial. The Company’s insurance does not cover these costs. In addition, vessels may have to be drydocked in the event of accidents or other unforeseen damage. OSG’s insurance may not cover all of these costs. Large drydocking expenses could significantly decrease the Company’s profits.

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Maritime claimants could arrest OSG’s tankers, which could interrupt its cash flow

Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting a vessel through foreclosure proceedings. The arrest or attachment of one or more of the Company’s vessels could interrupt OSG’s cash flow and require it to pay a significant amount of money to have the arrest lifted. In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel that is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert “sister ship” liability against one vessel in the Company’s fleet for claims relating to another vessel in its fleet.

Governments could requisition OSG’s vessels during a period of war or emergency without adequate compensation

A government could requisition one or more of OSG’s vessels for title or for hire. Requisition for title occurs when a government takes control of a vessel and becomes her owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes her charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances. Although OSG would be entitled to compensation in the event of a requisition of one or more of its vessels, the amount and timing of payment would be uncertain. Government requisition of one or more of OSG’s vessels may negatively impact its revenues.

ITEM 1.B.UNRESOLVED STAFF COMMENTS

None.

ITEM 2.PROPERTIES

See Item 1.

ITEM 3.LEGAL PROCEEDINGS

On October 1, 2003, the U.S. Department of Justice served a grand jury subpoena directed at the Company’s International Flag Product Carrier, the Uranus, and the Company’s handling of waste oils and maintenance of books and records related thereto. The U.S. Department of Justice has subsequently served related subpoenas requesting documents concerning the Uranus and other vessels in the Company’s fleet and a number of witnesses have appeared before grand juries. In 2004 and the first quarter of 2005, the Company made a total provision of $10 million (including $4 million in the first quarter of 2005) for anticipated fines and contributions to environmental protection programs associated with a possible settlement of the investigation. The Company has been cooperating with the investigation, including self-reporting to the government beginning in the second half of 2005 of possible additional violations of applicable environmental laws. Currently, management cannot reasonably estimate a range of such fines and contributions, which fines and contributions could be higher than the amount accrued. Negotiations with the U.S. Department of Justice are continuing but there can be no assurance that a satisfactory settlement can be achieved.

The Company is a party, as plaintiff or defendant, to various suits in the ordinary course of business for monetary relief arising principally from personal injuries, collision or other casualty and to claims arising under charter parties. All such personal injury, collision and casualty claims against the Company are fully covered by insurance (subject to deductibles not material in amount). Each of the 

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claims involves an amount which, in the opinion of management, is not material to the Company’s financial position, results of operations and cash flows.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Executive Officers of the Registrant

Name	Age	Position Held	Has Served as Such Since
Morten Arntzen	50	President and Chief Executive Officer	January 2004
Myles R. Itkin	58	Senior Vice President, Chief Financial	June 1995
		Officer and Treasurer
Robert E. Johnston	58	Senior Vice President and	October 1998
		Head of Shipping Operations	September 2005
Mats H. Berglund	43	Senior Vice President and	September 2005
		Head of Crude Transportation
		Strategic Business Unit
Ian T. Blackley	51	Managing Director and	September 2005
		Chief Operating Officer,
		OSG Ship Management (UK) Ltd.
Angus Campbell	50	Head of LNG Strategic	November 2004
		Business Unit
George Dienis	53	Managing Director and	January 2005
		Chief Operating Officer,
		OSG Ship Management (GR) Ltd.
James I. Edelson	49	General Counsel and	January 2005
		Secretary	March 2005
Robert R. Mozdean	52	Head of Worldwide Human	August 2005
Lois K. Zabrocky	36	Head of International Product	September 2005
		Carrier Strategic Business Unit

The term of office of each executive officer continues until the first meeting of the Board of Directors of the Company immediately following the next annual meeting of its shareholders, to be held on June 9, 2006, and until the election and qualification of his successor. There is no family relationship between the executive officers.

Mr. Arntzen was employed by American Marine Advisors, Inc., a U.S.-based merchant banking firm specializing in the maritime industry, as Chief Executive Officer for at least four years prior to January 2004. Mr. Johnston served as Chief Commercial Officer of the Company for at least five years prior to becoming Head of Shipping Operations. Mr. Berglund was an officer of Stena Rederi AB of Sweden, a company which supports and coordinates the shipping activities of Stena AB, one of the largest privately-held shipping companies in the world, serving as President from January 2003 to August 2005 and Vice President from August 2000 to December 2002. Mr. Blackley was employed by the Company in numerous positions, including Assistant Treasurer and Vice President, Treasury for at least five years prior to becoming Chief Operating Officer of OSG Ship Management (UK) Ltd. Mr. Campbell served as Operations Director of OSG Ship Management (UK) Ltd. for at least four years

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prior to becoming Head of the Company’s LNG Strategic Business Unit. Mr. Dienis worked for Stelmar Shipping Ltd., a publicly traded shipping company that the Company acquired in January 2005, in several management capacities including Chief Operating Officer for at least five years prior to becoming Managing Director and Chief Operating Officer of OSG Ship Management (GR) Ltd. Prior to becoming General Counsel of the Company, Mr. Edelson was employed as Associate General Counsel of the Company from January 2000 until January 2005 and as Executive Vice President of Overseas Discount Corporation, a private company engaged in finance and investment from January 2000 until December 2002.  For at least five years prior to becoming Head of Worldwide Human Resourses for the Company, Mr. Mozdean served as Vice President of Human Resources and Legal Affairs at the Dannon Company, Inc., a leading producer of yogurt products in the United States. Ms. Zabrocky worked for the Company in various management capacities relating to chartering and other commercial functions for at least five years prior to becoming Head of the Company’s International Product Carrier Strategic Business Unit in September 2005.

PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS   AND ISSUER PURCHASES OF EQUITY SECURITIES

(a)The Company’s common stock is listed for trading on the New York Stock Exchange and the Pacific Exchange, Inc. under the trading symbol OSG. The range of high and low closing sales prices of the Company’s common stock as reported on the New York Stock Exchange for each of the quarters during the last two years are set forth below.

2005	High	Low
	(In dollars)
First Quarter	65.12	51.02
Second Quarter	64.89	55.25
Third Quarter	67.60	57.64
Fourth Quarter	57.20	46.60

2004	High	Low
First Quarter	38.38	32.82
Second Quarter	44.13	32.23
Third Quarter	50.27	41.01
Fourth Quarter	65.69	51.27

(b)On February 24, 2006, there were 663 shareholders of record of the Company’s common stock.

(c)The Company paid four regular quarterly dividends in each of 2004 and 2005 of 17.5¢ per share of common stock. The payment of cash dividends in the future will depend upon the Company’s operating results, cash flow, working capital requirements and other factors deemed pertinent by the Company’s Board of Directors.

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ITEM 6. SELECTED FINANCIAL DATA

The following unaudited selected consolidated financial data for the years ended December 31, 2005, 2004 and 2003, and at December 31, 2005 and 2004, are derived from the audited consolidated financial statements of the Company set forth in Item 8, which have been audited by Ernst & Young LLP, independent registered public accounting firm. The unaudited selected consolidated financial data for the years ended December 31, 2002 and 2001, and at December 31, 2003, 2002 and 2001, are derived from audited consolidated financial statements of the Company not appearing in this Annual Report, which have also been audited by Ernst & Young LLP. Certain amounts for 2004, 2003, 2002 and 2001 have been reclassified to conform to the 2005 presentation.

In thousands, except per share amounts	2005			2004			2003			2002			2001
Shipping revenues	$	1,000,303		$	810,835		$	454,120		$	297,283		$	469,333
Time charter equivalent revenues (a)	961,662			789,581			431,136			266,725			381,018
Income from vessel operations (b)	432,034			463,780			191,107			44,888			130,686
Income/(loss) before federal income taxes	463,719			481,014			168,153			(20,864		)	154,445
Net income/(loss) (c)	464,829			401,236			121,309			(17,620		)	101,441
Depreciation and amortization	152,311			100,088			90,010			80,379			71,671
EBITDA (d)	705,519			655,248			320,287			112,208			271,151
Net cash provided by operating activities (e)	452,046			396,825			230,750			33,318			201,816
Total vessels, deferred drydock and other  property,at net book amount (e)	2,344,553			1,489,512			1,384,524			1,442,197			1,364,196
Total assets	3,348,680			2,680,798			2,000,686			2,034,842			1,964,275
Debt—long-term debt and capital lease obligations (exclusive of short-term debt and current portions) (f)	965,655			906,183			787,588			985,035			854,929
Reserve for deferred federal income taxes— noncurrent	113,255			105,424			151,304			134,204			132,170
Shareholders’ equity	$	1,876,028		$	1,426,372		$	917,075		$	784,149		$	813,426
Debt/total capitalization	34.0		%	38.8		%	46.2		%	55.7		%	51.2		%
Per share amounts:
Basic net income/(loss)	$	11.78		$	10.26		$	3.49		$	(0.51	)	$	2.97
Diluted net income/(loss)	$	11.77		$	10.24		$	3.47		$	(0.51	)	$	2.92
Shareholders’ equity	$	47.56		$	36.20		$	25.54		$	22.76		$	23.73
Cash dividends paid	$	0.70		$	0.70		$	0.65		$	0.60		$	0.60
Average shares outstanding for basic earnings per share	39,444			39,113			34,725			34,395			34,169
Average shares outstanding for diluted earnings per share	39,506			39,176			34,977			34,395			34,697

(a)Represents shipping revenues less voyage expenses.

(b)Results for 2001 reflect a restructuring charge of $10,439 to cover costs associated with the reduction of staff at the New York headquarters and the       transfer of ship management and administrative functions to the Company’s subsidiary in Newcastle, U.K.

(c)Results for 2004 reflect a $77,423 reduction in deferred tax liabilities recorded on enactment of the American Jobs Creation Act of 2004. (d) EBITDA represents operating earnings, which is before interest expense and income taxes plus other income and depreciation and amortization       expense. EBITDA should not be considered a substitute for net income, cash flow from operating activities and other operations or cash flow      statement data prepared in accordance with accounting principles generally accepted in The United States or as a measure of profitability or       liquidity. EBITDA is presented  to provide additional information with respect to the Company’s ability to satisfy debt service, capital expenditure       and working capital requirements. While EBITDA is frequently used as a measure of operating results and the ability to meet debt service       requirements, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.

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The following table reconciles net income/(loss), as reflected in the consolidated statements of operations, to EBITDA:

	2005			2004		2003		2002			2001
Net income/(loss)	$	464,829		$	401,236	$	121,309	$	(17,620	)	$	101,441
Provision/(credit) for federal income taxes	(1,110		)	79,778		46,844		(3,244		)	53,004
Interest expense	89,489			74,146		62,124		52,693			45,035
Depreciation and amortization	152,311			100,088		90,010		80,379			71,671
EBITDA	$	705,519		$	655,248	$	320,287	$	112,208		$	271,151

(e)Includes vessel held for sale of $9,744 in 2004.

(f)Amounts do not include debt of joint ventures in which the Company participates.

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The Company is one of the largest independent bulk shipping companies in the world. The Company’s operating fleet consists of 89 vessels aggregating 11.4 million dwt, including three vessels that have been chartered-in under capital leases, and 36 vessels that have been chartered-in under operating leases. In addition to its operating fleet of 89 vessels, charters-in for ten U.S. Flag Product Carriers are scheduled to commence upon delivery of the vessels between 2006 and 2010 and charters-in for four International Flag Product Carriers are scheduled to commence upon delivery of the vessels between 2006 and 2007. Four LNG Carriers are scheduled to be delivered in late 2007 and early 2008 to a joint venture in which the Company has a 49.9% interest, bringing the total operating and newbuild fleet to 107 vessels.

Acquisition of Stelmar Shipping Ltd.

On January 20, 2005, the Company acquired Stelmar Shipping Ltd. (“Stelmar”), a leading provider of petroleum product and crude oil transportation services. The operating results of Stelmar have been included in the Company’s financial statements commencing January 21, 2005. Holders of Stelmar’s common stock received $48.00 per share in cash for an aggregate consideration of approximately $844 million. Taking into account the assumption of Stelmar’s outstanding debt, the total purchase price was approximately $1.35 billion. The Company funded the acquisition of Stelmar and the refinancing of its debt with $675 million of borrowings under new credit facilities and $675 million of cash and borrowings under long-term credit facilities in existence as of December 31, 2004. Stelmar’s 40 vessel fleet consisted of 24 Handysize, 13 Panamax and three Aframax tankers. Stelmar’s fleet included two chartered-in Aframax and nine chartered-in Handysize vessels.

Sale of Seven Tankers to Double Hull Tankers

In October 2005, OSG sold seven tankers (three VLCCs and four Aframaxes) to Double Hull Tankers, Inc. (“DHT”) in connection with DHT’s initial public offering. In consideration, OSG received $412,580,000 in cash and 14,000,000 shares in DHT, representing a 46.7% equity stake in the new tanker concern. The total consideration to OSG values the transaction at $580,580,000. In November 2005, the Company sold 648,500 shares of DHT pursuant to the exercise of the over-allotment option granted to the underwriters of DHT’s initial public offering, and received net cash proceeds of $7,315,000. Such sale reduced the Company’s interest in DHT to 44.5%. OSG time chartered the vessels back from DHT for initial periods of five to six and one-half years with various renewal options up to an additional five to eight years, depending on the vessel. The charters provide for the payment of additional hire, on a quarterly basis, by the Company when the aggregate revenue

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earned, or deemed earned, by these vessels for the Company exceeds the sum of the basic hire paid during the quarter by the Company. Under related agreements, a subsidiary of the Company technically manages these vessels for DHT for amounts that have been fixed (except for vessel insurance premiums) over the term of the agreements. Such agreements are cancelable by DHT upon 90 days notice.

OSG recorded a deferred gain on the sale and charter back of these vessels of $232,159,000 in the fourth quarter of 2005. The gain was deferred for accounting purposes and will be recognized as a reduction of time charter hire expense over the initial charter periods. The cash proceeds from the sale were used to reduce debt and for general corporate purposes.

The sale of the vessels underscores OSG’s strategy of actively managing the balance between owned and chartered-in vessels in its fleet. The transaction helped OSG achieve its stated goal of returning to leverage ratios and liquidity levels that existed prior to the early-2005 acquisition of Stelmar.

Operations

The Company’s revenues are highly sensitive to patterns of supply and demand for vessels of the size and design configurations owned and operated by the Company and the trades in which those vessels operate. Rates for the transportation of crude oil and refined petroleum products from which the Company earns a substantial majority of its revenue are determined by market forces such as the supply and demand for oil, the distance that cargoes must be transported, and the number of vessels expected to be available at the time such cargoes need to be transported. The demand for oil shipments is significantly affected by the state of the global economy and level of OPEC’s exports. The number of vessels is affected by newbuilding deliveries and by the removal of existing vessels from service, principally because of scrapping. The Company’s revenues are also affected by the mix of charters between spot (Voyage Charter) and long-term (Time Charter). Because shipping revenues and voyage expenses are significantly affected by the mix between voyage charters and time charters, the Company manages its vessels based on time charter equivalent (“TCE”) revenues. Management makes economic decisions based on anticipated TCE rates and evaluates financial performance based on TCE rates achieved.

Overview

Similar to 2004, the year 2005 was characterized by significant volatility in shipping markets. Hurricanes in the Gulf of Mexico changed shipping trade flows and caused bottlenecks, while collisions, groundings and the weather caused shipping delays in the Bosporus Straits and the Dardanelles. The ongoing insurgency in Iraq reduced oil production and pipeline shipments to the Mediterranean and caused loading delays in the Arabian Gulf. Civil unrest in Nigeria continued to hamper oil production and exports, while tension between Venezuela and the U.S. increased.

World oil demand grew by a relatively modest 1.3%, or 1.1 million barrels per day (“b/d”), in 2005. The lower growth rate in 2005 resulted primarily from growth slowdowns in the U.S. and China. In the U.S., the slower growth was caused by the effects of the hurricanes during the last half of the year while high oil prices and the inability of refiners in China to recover these costs in the marketplace restrained Chinese demand.

After record growth in 2004, a year in which oil demand increased by 3.0 million b/d, further increases in demand during 2005 put additional pressure on the oil infrastructure. Middle East OPEC supplied most of the incremental barrels as net increases in non-OPEC crude oil production were immaterial. This caused a significant reduction in OPEC’s spare producing capacity. At the same time worldwide refining capacity was also constrained.

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Both developments were positive for shipping, as they increased tonne-mile demand for both crude oil and petroleum products. As a result, although tanker rates in 2005 were highly volatile, they remained well above historical averages despite a significant increase in the world tanker fleet. The supply of new vessels entering the marketplace in 2005, however, exerted downward pressure on rates. The world tanker fleet increased to 307.9 million dwt at the end of the year, 6.2% higher than the 289.9 million dwt at the beginning of 2005. A significant number of new tankers were delivered throughout the year, while vessel removals were limited. Continued high earnings and a generally favorable market outlook reduced the scrapping of older, single hull tonnage that had been predicted to occur by the April 5, 2005 IMO deadline.

Extreme weather had a significant impact on the tanker market in 2005. In particular, two major hurricanes in the Gulf of Mexico disrupted crude oil production, refinery operations and shipping logistics in the third and fourth quarters of 2005. The effects of hurricanes Katrina and Rita will continue to be felt well into 2006.  The hurricanes affected both the crude oil and refined product markets. During October 2005, over one million b/d, or 69% of crude oil production in the Gulf of Mexico, was disrupted. Additional volumes of West African crude oil were transported to the U.S. to replace lost Gulf of Mexico production. Incremental deliveries of West African crude oil are expected to continue until Gulf of Mexico production is fully restored. Initially, the direct impact on crude oil movements as a result of the lost production in the Gulf of Mexico was limited because the significant damage to U.S. Gulf Coast refineries reduced crude oil demand. At one point over four million b/d of refining capacity was affected. The refining downtime in the U.S. resulted in counter-seasonal declines in crude oil imports into the largest oil-consuming nation in the world but necessitated additional product imports to the U.S. The hurricanes also impacted seaborne trades outside the U.S. as well, enhancing overall tonne-mile demand.

The tables below show the daily TCE rates that prevailed in markets in which the Company’s vessels operated for the periods indicated. It is important to note that the spot market is quoted in Worldscale rates. The conversion of Worldscale rates to the following TCE rates required the Company to make certain assumptions as to brokerage commissions, port time, port costs, speed and fuel consumption, all of which will vary in actual usage. In each case, the rates may differ from the actual TCE rates achieved by the Company in the period indicated because of the timing and length of the voyages and the portion of revenue generated from long-term charters.

International Flag VLCCs

	Spot Market TCE Rates VLCCs in the Arabian Gulf
	Q1-2005		Q2-2005		Q3-2005		Q4-2005		2005		2004		2003
Average	$	61,500	$	32,200	$	37,600	$	85,800	$	53,600	$	92,900	$	47,900
High	$	109,500	$	54,600	$	58,800	$	135,000	$	135,000	$	230,700	$	96,100
Low	$	28,700	$	13,100	$	17,400	$	43,800	$	13,100	$	39,000	$	9,200

Rates for VLCCs trading out of the Arabian Gulf in 2005 averaged $53,600 per day, a decline of 42% from the 2004 average but 12% higher than the 2003 average. The 2005 average is still one of the best annual average rates in the history of the tanker industry.  Fleet expansion in excess of oil demand growth exerted downward pressure on VLCC rates throughout the year. The impact of lower oil demand growth on the VLCC market was moderated because almost all the incremental crude oil was sourced from long-haul OPEC producers. OPEC crude oil production increased by 600,000 b/d to 29.2 million b/d, the highest level since 1979.

Freight rates in the first quarter of 2005 declined from the extraordinary levels of the previous quarter, reflecting the slowing growth rate in world oil demand, particularly in China. China’s demand growth in the first quarter of 2005 was only 4%, a significant decline from the unsustainable 18%

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growth rate in the same period of 2004. The drop in apparent Chinese demand reflects a large discrepancy between higher international oil prices and lower government controlled domestic prices, resulting in lower refining throughput and product imports as the higher international prices could not be recovered in the domestic market. A mild winter in the Northern Hemisphere, which lowered heating oil requirements, also moderated growth in oil demand.

In the second quarter of 2005, the VLCC market in particular was negatively affected by lower seasonal demand and a shift in trade flows. A decline in Iraqi exports (most of which move westward) combined with field maintenance in other Middle Eastern producers and extended refinery downtime in the U.S. contributed to a reduction in long-haul voyages from the Arabian Gulf.

Rates picked up in the third quarter, benefiting from the typical seasonal increase in global oil demand met by increased production in a number of Middle East OPEC countries returning from second quarter field maintenance. Rates increased toward the end of the quarter, spurred by the hurricanes in the Gulf of Mexico, which had an impact on crude oil and refined product trade flows worldwide. Lower rates relative to the comparable year ago quarter were largely a result of significantly lower demand growth in China.

In the aftermath of the hurricanes that struck the U.S. Gulf Coast, rates rose to their highest 2005 level in the fourth quarter. Additional volumes of long-haul crudes were processed in Europe and in the Pacific Basin for export to the U.S. to compensate for the refining downtime caused by the hurricanes, which reduced domestic product availability. The arrival of much colder temperatures in Japan and Korea in November stimulated increased consumption of kerosene used for heating. This came on top of a dry spell in the fall, which caused a sharp decline in Japan’s hydroelectric power output. The combined result was a near doubling of oil consumption by Japan’s electric power generating plants in November relative to the year ago period.  A drop off in rates in December, in part, reflected the anticipation of larger than usual U.S. refinery maintenance scheduled for the first quarter of 2006.

The world VLCC fleet expanded to 477 vessels (139.4 million dwt) at December 31, 2005 from 456 vessels (132.7 million dwt) at the beginning of the year as newbuilding deliveries well exceeded the number of vessels deleted from the fleet. In 2005, a total of 37 newbuilding orders were placed (11.2 million dwt). This is a reduction compared with 2004 (43 vessels, 13.0 million dwt) and 2003 (51 vessels, 15.5 million dwt). The declining trend in orders was caused by high contract prices and long delivery lead times due to heavy ordering in other bulk shipping sectors. As of December 31, 2005, the VLCC orderbook totaled 92 vessels (27.9 million dwt), equivalent to 20.0% of the existing VLCC fleet, based on deadweight tons.

International Flag Aframaxes

	Spot Market TCE Rates Aframaxes in the Caribbean
	Q1-2005		Q2-2005		Q3-2005		Q4-2005		2005		2004		2003
Average	$	37,000	$	28,400	$	21,700	$	46,600	$	33,100	$	43,000	$	31,100
High	$	65,000	$	49,000	$	35,000	$	63,000	$	65,000	$	85,000	$	70,000
Low	$	20,000	$	17,000	$	8,000	$	24,800	$	8,000	$	14,000	$	11,000

Rates for Aframaxes operating in the Caribbean during 2005 averaged $33,100 per day, a decrease of 23% from the 2004 average but 6% above the 2003 average. Rates in 2005 were adversely impacted by declines in North Sea crude oil production of 460,000 b/d, as well as stagnating production in Venezuela, two key Aframax loading areas. Production in the Former Soviet Union (“FSU”), which has become an increasingly important source of Aframax employment in recent

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years, rose by 3.7% in 2005 to 11.6 million b/d. Similarly to VLCCs, fleet expansion in excess of oil demand growth exerted downward pressure on Aframax rates throughout the year.

The decline in rates that began in the fourth quarter of 2004 steepened in the first quarter of 2005 resulting in an average rates declining from the first quarter of 2004. The decrease in rates reflects a substantial reduction in weather delays in the Bosporus Straits in the first quarter of 2005 relative to the comparable 2004 quarter when sustained delays for tankers reduced the availability of suitable tonnage in the Mediterranean.

Average rates in the second quarter of 2005 were slightly higher than in the year ago period, due, at least in part, to increased lightering activity in the U.S. Gulf, a collision between two tankers in the Dardanelles and a vessel grounding in the Bosporus. Additionally FSU seaborne exports increased during the quarter as shippers accelerated their second quarter liftings to avoid a significant increase in crude oil export duties effective on June 1.

Rates in the third quarter of 2005 declined relative to the third quarter of 2004 as production declined in the North Sea and Latin America, and pipeline maintenance limited crude oil exports at the Black Sea port of Novorossiysk.

Aframax rates rose in the fourth quarter, with long transit delays in the Bosporus a key supporting factor. Although FSU oil production increased to 11.9 million b/d, 3.5% higher than the 11.5 million b/d produced in the fourth quarter of 2004, FSU crude seaborne exports were 2.7% lower for the same period. This continued the slide that started late in the second quarter of 2005, when crude oil export duties were raised.

The world Aframax fleet expanded significantly to 673 vessels (67.9 million dwt) as of December 31, 2005 from 627 vessels (62.5 million dwt) at December 31, 2004, as vessel deliveries far outweighed scrap sales. Rising newbuilding prices further slowed the pace of Aframax ordering to 47 vessels (5.1 million dwt) in 2005 from 66 vessels (7.3 million dwt) in 2004 and the record level of 96 vessels (10.3 million dwt) in 2003. The Aframax orderbook contracted to 153 vessels (16.7 million dwt) at December 31, 2005, equivalent to 24.6% of the existing Aframax fleet, based on deadweight tons.

International Flag Panamaxes

	Spot Market TCE Rates Panamaxes—Crude and Residual Oils
	Q1-2005		Q2-2005		Q3-2005		Q4-2005		2005		2004		2003
Panamax Average	$	40,300	$	32,700	$	28,800	$	50,400	$	37,800	$	39,400	$	26,500
Panamax High	$	62,200	$	39,600	$	40,600	$	61,000	$	62,200	$	65,600	$	50,300
Panamax Low	$	31,800	$	23,100	$	22,200	$	37,900	$	22,200	$	25,500	$	13,500

Rates for Panamaxes averaged $37,800 per day, 4% lower than the average in 2004 but 43% above the 2003 average. In 2005, fuel oil demand in the U.S. was largely driven by high natural gas prices that resulted in end users seeking lower cost alternatives to meet their energy requirements. The increase in fuel oil demand boosted the requirements for Panamaxes in the Caribbean, particularly for double hull tonnage, given the more stringent IMO regulations and a preference by the oil majors.

Rates in the first quarter of 2005 for Panamaxes transporting crude and residual oils were less than the corresponding quarter in 2004, but still close to historic highs. Largely because of the strong incentive to substitute fuel oil for natural gas, U.S. crude and residual fuel oil imports increased sharply over the comparable year ago period. Strong fuel oil demand in Europe in the first quarter precluded transatlantic arbitrage trades, increasing U.S. energy users’ dependence on fuel oil supplies from the Caribbean.  A 5.5% increase in the size of the Panamax fleet, however, constrained rates.

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In the second quarter of 2005, average rates were higher than in the second quarter of 2004, bolstered by continued robust fuel oil imports relative to year ago levels as utilities substituted fuel oil imports for high-priced natural gas. The large freight premium paid for double hull relative to single hull Panamaxes operating in the Atlantic Basin resulted in the migration of some single hull vessels to the intra-Asian trade, reducing availability of suitable tonnage.

Despite the large number of newbuilding deliveries and a drop-off in production in Latin America, average freight rates in the third quarter were comparable to the third quarter of 2004. Substitution demand for fuel oil over natural gas remained strong, especially following the steep increase in the price of natural gas during the summer and in the aftermath of the U.S. Gulf hurricanes. Panamax rates were also supported as some vessel owners moved their vessels from the crude and residual fuel oil trade to the clean products trade, which benefited from the disruptions caused by the hurricanes.

Natural gas attained its highest average price for the year in the fourth quarter of 2005, which encouraged further substitution of fuel oil for natural gas by power utilities. This contributed to another substantial increase in U.S. fuel oil imports, which increased 6% from the third quarter and more than 25% from the fourth quarter of 2004. Consequently, average freight rates increased 75% above the third quarter but remained somewhat below the exceptionally high levels achieved in the fourth quarter of 2004. A sharp decline in natural gas prices starting in mid-December coupled with a firming trend in oil prices could be expected to reverse some of the fuel substitution, negatively impacting Panamax rates.

The world Panamax Product Carrier fleet at December 31, 2005 increased to 326 vessels (21.6 million dwt) from 290 vessels (19.1 million dwt) as of December 31, 2004. The orderbook for Panamax tankers remains significant. At December 31, 2005, 186 vessels (12.2 million dwt), equivalent to 56.2% of the existing Panamax fleet, based on deadweight tons, were on order.

International Flag Handysize Product Carriers

	Spot Market TCE Rates Handysize Product Carriers in the Caribbean
	Q1-2005		Q2-2005		Q3-2005		Q4-2005		2005		2004		2003
Handysize Average	$	27,300	$	20,300	$	20,900	$	21,900	$	22,600	$	24,400	$	16,000
Handysize High	$	32,500	$	30,000	$	39,000	$	29,000	$	39,000	$	35,000	$	24,900
Handysize Low	$	19,000	$	13,500	$	9,000	$	13,000	$	9,000	$	14,500	$	10,000

Rates for Handysize Product Carriers operating in the Caribbean averaged $22,600 per day in 2005, 7% lower than the 2004 average but 41% above the 2003 average.

Freight rates in the first quarter of 2005 were less than the corresponding quarter in 2004 as continued fleet expansion exerted downward pressure on rates, despite a 5% increase in refined product imports into the U.S. Quality tonnage trading in the Caribbean benefited from backhaul movements of distillates to Europe as refinery turnarounds and much colder temperatures increased demand for imported distillates.

In the seasonally weak second quarter, high gasoline prices in the U.S. provided an arbitrage opportunity, resulting in higher gasoline imports relative to the first quarter as well as to the comparable year ago period. At the same time, Europe continued to source part of its distillate requirements from the Caribbean, benefiting Handysize Product Carrier employment. These developments supported rates for Handysize Product Carriers, which were slightly above the average rates in the corresponding quarter of 2004.

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After hurricanes Katrina and Rita knocked out significant refining capacity along the U.S. Gulf Coast, oil companies and traders sought to secure tonnage to deliver additional volumes of refined products (gasoline, diesel, and jet fuel) from Europe, Asia and the Caribbean to the U.S. As a result, freight rates for Handysize Product Carriers reached their highest level of the year towards the end of the third quarter of 2005.

Average fourth quarter 2005 rates exceeded the prior quarter as refined product imports into the U.S. increased. Rates in the fourth quarter were lower than last year’s fourth quarter rates, reflecting, in part, inventory levels in OECD countries that were either at or above the five year averages.

The world Handysize fleet showed little change in 2005, expanding to 527 vessels (21.8 million dwt) at December 31, 2005 from 524 vessels (21.5 million dwt) at December 31, 2004. At December 31, 2005, the newbuilding orderbook for Handysize Product Carriers reached 200 vessels (9.1 million dwt), equivalent to 41.9% of the existing Handysize fleet, based on deadweight tons.

U.S. Flag Jones Act Product Carriers

Rates in the U.S. coastwise trades that equate to OSG’s existing Jones Act Handysize Product Carriers averaged $41,200 in 2005, 23% higher than the rate in 2004. Robust demand for gasoline blended components on the U.S. east and west coasts, hurricane related dislocations and a decline in the number of available vessels as a result of OPA 90 regulations contributed to the strength in rates.

The U.S. coastwise trade in products in the fourth quarter of 2005 continued to be impacted by the hurricane related dislocations that significantly reduced refining capacity along the U.S. Gulf Coast. The Jones Act, which limits the carriage of shipments in coastwise trades to qualifying U.S. Flag vessels, was temporarily waived from September 1 through September 19 and again from September 27 to October 24. This permitted International Flag tankers to transport oil between U.S. ports ostensibly to ensure sufficient supplies of petroleum products. The effect of the temporary waivers on the market was limited.

The total Jones Act Product Carrier fleet consisted of 43 vessels (1.8 million dwt) as of December 31, 2005. Approximately 60% of this fleet is not double hull and will be phased out over the next ten years as a result of OPA 90 regulations. Additional scrapping of some of the remaining 17 vessels could also occur prior to 2015 based on the age profile of these vessels.

Outlook

The International Energy Agency forecasts global oil demand to rise by 2.1% to 85.1 million b/d in 2006 from 83.3 million b/d in 2005. This is a higher growth rate than the 1.3% increase in 2005 relative to 2004.  While the demand growth for 2006 is primarily expected to occur in the U.S. and China, production growth is expected to come predominantly from non-OPEC sources such as West Africa and the FSU. The projected increases in demand and the location of incremental production in 2006 is expected to increase tonne-mile demand in 2006. On the refined product side, increases in worldwide demand are forecast to exceed increases in refining capacity in 2006. This is expected to result in additional product movements.

The world tanker fleet in 2006 is projected to increase by 4.5% compared with a 6.2% growth in 2005 and a 5.1% increase in 2004, as the sizable number of newbuilding deliveries is expected to be only partially offset by rising deletions, many of which are mandated under IMO phase out regulations.

Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Company to make estimates in the application of its accounting policies based on the best assumptions, judgments, and opinions of management. Following is a discussion of the accounting policies that involve a higher degree of judgment and the methods of their application. For a description of all of the Company’s material

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accounting policies, see Note A to the Company’s consolidated financial statements set forth in Item 8.

Revenue Recognition

The Company generates a majority of its revenue from voyage charters. Within the shipping industry, there are two methods used to account for voyage charter revenue and expenses: (1) ratably over the estimated length of each voyage and (2) completed voyage. The recognition of voyage revenues and expenses ratably over the estimated length of each voyage is the most prevalent method of accounting for voyage revenues and expenses and the method used by OSG. Under each method, voyages may be calculated on either a load-to-load or discharge-to-discharge basis. In applying its revenue recognition method, management believes that the discharge-to-discharge basis of calculating voyages more accurately estimates voyage results than the load-to-load basis. Since, at the time of discharge, management generally knows the next load port and expected discharge port, the discharge-to-discharge calculation of voyage revenues and expenses can be estimated with a greater degree of accuracy. OSG does not begin recognizing voyage revenue until a Charter has been agreed to by both the Company and the customer, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next voyage.

Vessel Lives and Impairment

The carrying value of each of the Company’s vessels represents its original cost at the time it was delivered or purchased less depreciation calculated using an estimated useful life of 25 years from the date such vessel was originally delivered from the shipyard. In the shipping industry, use of a 25-year life has become the standard. The actual life of a vessel may be different. The Company has evaluated the impact of the revisions to MARPOL Regulation 13G that became effective April 5, 2005 and the new EU regulations that went into force on October 21, 2003 on the economic lives assigned to the tankers in the Company’s International Flag fleet. Because the OSG International Flag tanker fleet comprises mainly modern, double hull vessels, the revised regulations will not require any double sided International Flag tankers to be removed from service prior to attaining 25 years of age. The revised IMO Regulation G allows the flag state to permit the continued operation of the Company’s double sided tankers beyond 2010. Because such regulations do not explicitly permit double sided tankers to continue trading beyond 2010, their operation beyond 2010 is not assured. OSG considered the need to reduce the estimated remaining useful lives of its double sided International Flag tankers because of the EU regulations and the revised and accelerated phase-out schedule agreed to by IMO in December 2003. These new regulations will not prevent any of these vessels from trading prior to reaching 25 years of age. Accordingly, it was not deemed necessary to reduce the estimated remaining useful lives of any of OSG’s double sided International Flag tankers. If the economic lives assigned to the tankers prove to be too long because of new regulations or other future events, higher depreciation expense and impairment losses could result in future periods related to a reduction in the useful lives of any affected vessels.

The carrying values of the Company’s vessels may not represent their fair market value at any point in time since the market prices of second-hand vessels tend to fluctuate with changes in charter rates and the cost of newbuildings. Historically, both charter rates and vessel values tend to be cyclical. The Company records impairment losses only when events occur that cause the Company to believe that future cash flows for any individual vessel will be less than its carrying value. The carrying amounts of vessels held and used by the Company are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular vessel may not be fully recoverable. In such instances, an impairment charge would be recognized if the estimate of the undiscounted future cash flows expected to result from the use of the vessel and its eventual disposition is less than the vessel’s carrying amount. This assessment is made at the individual vessel level since separately identifiable cash flow information for each vessel is available.

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In developing estimates of future cash flows, the Company must make assumptions about future charter rates, ship operating expenses, and the estimated remaining useful lives of the vessels. These assumptions are based on historical trends as well as future expectations. Although management believes that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are highly subjective.

OSG performed an impairment test for its single hull and double sided International Flag tankers, including vessels held in joint ventures, in December 2003, because of the new EU regulations that became effective in October 2003 and the revised and accelerated phase-out schedule agreed to by the IMO in December 2003. For purposes of this analysis, the Company assumed that the single hull tankers would stop trading in 2015 and the double sided tankers would continue trading until age 25, in accordance with the revised and accelerated phase-out schedule adopted by the IMO. OSG also assumed that these vessels would achieve lower TCE rates than comparable double hull tankers over their remaining useful lives. Because voyage charter rates are volatile and vessel values vary over time, a probability-weighted approach based on historically-observed TCE rates was used to estimate future cash flows. In all cases, the carrying values of the Company’s single hull and double sided International Flag tankers as of December 31, 2003 were less than the sum of the undiscounted cash flows for the respective vessels. Accordingly, no impairment loss was recorded.

There have been no impairment indicators since 2003.

Market Value of Marketable Securities

In accordance with Statement of Financial Accounting Standards No. 115 (“FAS 115”), the Company’s holdings in marketable securities are classified as available for sale and, therefore, are carried on the balance sheet at fair value (determined using period-end sales prices on U.S. or foreign stock exchanges) with changes in carrying value being recorded in accumulated other comprehensive income until the investments are sold. Accordingly, these changes in value are not reflected in the Company’s statements of operations. If, however, the Company determines that a material decline in fair value below the Company’s cost basis is other than temporary, the Company records a noncash impairment loss in the statement of operations in the period in which that determination is made. As a matter of policy, the Company evaluates all material declines in fair value for impairment whenever the fair value of a stock has been below its cost basis for six consecutive months. In the period in which a material decline in fair value is determined to be other than temporary, the carrying value of that security is written down to its fair value at the end of such period, thereby establishing a new cost basis. Based on a number of factors, including the magnitude of the drop in market values below the Company’s cost bases and the length of time that the declines had been sustained, management concluded that the declines in fair value of securities with aggregate cost bases of $16,187,000 in 2003 were other than temporary. Accordingly, the Company recorded pre-tax impairment losses of $4,756,000 in 2003 related to such securities. These impairment losses are reflected in the accompanying consolidated statement of operations.

As of December 31, 2005, the Capital Construction Fund held a diversified portfolio of marketable equity securities with an aggregate cost basis of $60,873,000  and an aggregate fair value of $87,478,000. The gross unrealized losses on equity securities held in the Capital Construction Fund as of December 31, 2005 were $990,000. None of the securities with unrealized losses as of December 31, 2005 had a fair value that had been materially below its carrying value for more than six months. See Note G to the consolidated financial statements set forth in Item 8 for additional information on other pre-tax unrealized losses as of December 31, 2005.

Drydocking

Within the shipping industry, there are three methods that are used to account for drydockings:   (1) capitalize drydocking costs as incurred (deferral method) and amortize such costs over the period

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to the next scheduled drydocking, (2) accrue the estimated cost of the next scheduled drydocking over the period preceding such drydocking, and (3) expense drydocking costs as incurred. Since drydocking cycles typically extend over two and a half years or longer, management believes that the deferral method provides a better matching of revenues and expenses than the expense-as-incurred method. The Company further believes that the deferral method is preferable to the accrual method because estimates of drydocking costs can differ greatly from actual costs and, in fact, anticipated drydockings may not be performed if management decides to dispose of the vessels before their scheduled drydock dates.

Deferred Tax Assets and Valuation Allowance

The carrying value of the Company’s deferred tax assets is based on the assumption that the Company will generate sufficient taxable income in the future to permit the Company to take deductions and use tax-credit carryforwards. During 2002, the Company recorded a valuation allowance of $3,640,000 related to capital losses arising from the write-down of certain marketable securities. The valuation allowance was established because the Company believed that a portion of the capital losses might expire unused because the generation of future taxable capital gains was not certain. During 2004 and 2003, the Company reduced the valuation allowance by $934,000 and $2,706,000, respectively, reflecting capital gains recognized in 2004 and increases in the fair value of securities previously written down and the effect of securities sold in 2003. The valuation allowance had been reduced to zero as of December 31, 2004. Each quarter, management evaluates the realizability of the deferred tax assets and assesses the need for a valuation allowance. Any increase in the valuation allowance against deferred tax assets will result in additional income tax expense in the Company’s statement of operations.

Pension Benefits

The Company has recorded pension benefit costs based on complex valuations developed by its actuarial consultants. These valuations are based on key estimates and assumptions, including those related to the discount rates used and the rates expected to be earned on investments of plan assets. OSG is required to consider market conditions in selecting a discount rate that is representative of the rates of return currently available on high-quality fixed income investments. A higher discount rate would result in a lower benefit obligation and a lower rate would result in a higher benefit obligation. The expected rate of return on plan assets is management’s best estimate of expected returns. A decrease in the expected rate of return will increase net periodic benefit costs and an increase in the expected rate of return will decrease benefit costs. With respect to the Company’s domestic qualified defined benefit pension plan, as of December 31, 2005, management reduced the discount rate to 4.7% from 6.2% (following a reduction to 6.2% from 6.7% as of December 31, 2004) and maintained unchanged the expected rate of return on plan assets at 8.75%. In October 2005, the Company’s Board of Directors approved the termination, effective December 31, 2005 of (i) the qualified defined benefit pension plan covering its domestic shore-based employees, and (ii) the unfunded, nonqualified supplemental defined benefit pension plan covering certain active senior level employees. Accordingly, the selection of a discount rate for the qualified defined benefit pension plan as of December 31, 2005, was based on the assumption that the remaining active participants will elect and receive lump sum distributions when all necessary approvals are obtained. The Company expects such final settlement to occur in late 2006 or early 2007. In determining the discount rate at December 31, 2005, management, therefore, deemed the use of a current rate applicable to lump sum distributions to be more appropriate than the use of a long-term discount rate based on high-quality fixed income investments. Concurrently, the Company amended its existing 401(k) employee savings plan and adopted a supplemental nonqualified savings plan to provide for increased levels of employer contributions, or hypothetical contributions to the unqualified plan, commencing in 2006.

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Certain of the Company’s foreign subsidiaries have pension plans that, in the aggregate, are not significant to the Company’s financial position.

Special Purpose Entity (“SPE”)

In 1999, the Company facilitated the creation of an SPE that purchased from and bareboat chartered back to the Company five U.S. Flag Crude Tankers that the Company in turn bareboat chartered to Alaska Tanker Company for the transportation of Alaskan crude oil for BP. The purchase price of $170 million was financed by a term loan from a commercial lender and a substantive equity capital investment by the owner of the SPE. The Company did not guarantee the vessels’ residual values or guarantee the SPE’s debt. On July 1, 2003, the Company consolidated this SPE in accordance with Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities,” (“FIN 46”). Under the provisions of FIN 46, the Company is considered to be the primary beneficiary of the SPE. For additional information, see Note B to the consolidated financial statements set forth in Item 8.

Income from Vessel Operations

During 2005, TCE revenues increased by $172,081,000, or 22%, to $961,662,000 from $789,581,000 in 2004, principally because of a 13,068 day increase in revenue days, partially offset by decreases in average daily TCE rates for VLCCs and Aframaxes in the spot market. During 2005, approximately 69% of the Company’s TCE revenues were derived in the spot market, including vessels in pools that predominantly have performed voyage charters, compared with 85% in 2004 and 79% in 2003. In 2005, approximately 31% of TCE revenues were generated from time or bareboat charters (“term”) compared with 15% in 2004 and 21% in 2003. During 2004, TCE revenues increased by $358,445,000 to $789,581,000 from $431,136,000 in 2003, resulting from an increase in average daily TCE rates for vessels operating in the spot market and a 2,322 day increase in revenue days. The increase in percentage contribution from term charters during 2005 compared with 2004 reflects the time charter focus of the former Stelmar fleet.

Reliance on the spot market contributes to fluctuations in the Company’s revenue, cash flow, and net income, but affords the Company greater opportunity to increase income from vessel operations when rates rise. On the other hand, time and bareboat charters provide the Company with a predictable level of revenues.

During 2005, income from vessel operations decreased by $31,746,000 or 7%, to $432,034,000 from $463,780,000 in 2004. During 2004, income from vessel operations increased by $272,673,000 to $463,780,000 from $191,107,000 in 2003. See Note D to the consolidated financial statements set forth in Item 8 for additional information on the Company’s segments, including equity in income of joint ventures. Information with respect to the Company’s proportionate share of revenue days for vessels operating in joint ventures is shown below in the discussion of “Equity in Income of Joint Ventures.”

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International Flag Crude Tankers (dollars in thousands):

	2005			2004			2003
TCE revenues	$	683,551		$	665,645		$	315,179
Vessel expenses	(92,013		)	(66,637		)	(55,057		)
Time and bareboat charter hire expenses	(83,838		)	(50,168		)	(11,385		)
Depreciation and amortization	(96,863		)	(74,642		)	(63,554		)
Income from vessel operations(a)	$	410,837		$	474,198		$	185,183
Average daily TCE rate	$	40,030		$	55,517		$	31,836
Average number of vessels(b)	38.3			30.2			26.4
Average number of vessels chartered in under operating leases	9.3			3.7			1.2
Number of revenue days:(c)	17,076			11,990			9,900
Number of ship-operating days:(d)
Owned vessels	13,988			11,067			9,636
Vessels bareboat chartered-in under operating leases	1,020			—			—
Vessels time chartered-in under operating leases	2,369			1,351			438

(a)Income from vessel operations by segment is before general and administrative expenses.

(b)The average is calculated to reflect the addition and disposal of vessels during the year.

(c)Revenue days represent ship-operating days less days that vessels were not available for employment due to repairs, drydock or lay-up. Revenue days are weighted to reflect the Company’s interest in chartered in vessels.

(d)Ship-operating days represent calendar days.

Daily TCE rates earned by certain classes of vessels operating in the International Flag Crude Tankers segment for each of the three years ended December 31, 2005 were as follows:

	2005		2004		2003
VLCCs	$	57,904	$	75,436	$	40,725
Aframaxes(a)	$	33,157	$	38,848	$	26,389
Panamaxes	$	25,066	$	18,792	$	18,143

(a)Excluding impact of long-term charters assumed in connection with the acquisition of Stelmar, the average daily TCE rate was $35,224 for 2005.

Revenue days for the above classes of vessels for each of the three years ended December 31, 2005 were as follows:

	2005	2004	2003
VLCCs	6,314	6,088	4,651
Aframaxes	6,048	4,872	4,007
Panamaxes	4,546	690	877

During 2005, TCE revenues for the International Flag Crude Tankers segment increased by $17,906,000, or 3%, to $683,551,000 from $665,645,000 in 2004. This improvement in TCE revenues resulted principally from an increase in the number of revenue days, partially offset by decreases in the average rates earned by VLCCs and Aframaxes. TCE revenues for 2005 reflect a loss of $170,000 generated by forward freight agreements compared with a loss of $3,126,000 in 2004. Although the Company entered into these forward freight agreements to convert a portion of its variable revenue stream to a fixed rate, certain of such forward freight agreements did not qualify as effective cash flow hedges under FAS 133. TCE revenues for 2005 also include profit sharing of $2,996,000 on two

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Panamaxes, which is determined annually and recognized on the anniversary of the delivery of the vessels onto the charters. Revenue days increased by 5,086 principally for the following reasons and a reduction of 127 drydock and repair days during which vessels were out of service, partially offset a reduction of 1,275 days attributable to the sale of two VLCCs (Olympia and Dundee), one Suezmax (Eclipse), one Aframax (Bravery) and two Panamaxes (Diane and Mary Ann) in 2004 and 2005 and the expiry of charters-in on one VLCC and one Aframax in the third quarter of 2005:

·the acquisition of Stelmar adding three Aframaxes (two of which are bareboat chartered-in) and 13 Panamaxes (two of which were subsequently sold in July 2005 and chartered back for 50 month terms);

·the purchase of OSG’s partner’s 50.1% interest in a company that owned four V-Pluses and the subsequent sale of two of such vessels to the former joint venture partner;

·the participation in the charter-in of seven VLCCs, which charters commenced between February 2004 and May 2005; and

·the participation in the charter-in of three Aframaxes, which charters commenced between March and September 2004.

Vessel expenses increased by $25,376,000 to $92,013,000 in 2005 from $66,637,000 in the prior year principally as a result of the vessel additions discussed above. Average daily vessel expenses increased by $110 per day in 2005 compared with 2004 principally attributable to increases in repair expenses. Time and bareboat charter hire expenses increased by $33,670,000 to $83,838,000 in 2005 from $50,168,000 in 2004 principally as a result of the inclusion of 14 additional chartered-in vessels (as described above). Four of the above chartered-in VLCCs provide for profit sharing with the vessels owners when TCE rates exceed the base rates in the charters. In addition, in October 2005, OSG sold seven tankers (three VLCCs and four Aframaxes) to DHT in connection with DHT’s initial public offering. OSG time chartered the vessels back from DHT for initial periods of five to six and one-half years with various renewal options up to an additional five to eight years, depending on the vessel. The gain on the transaction of $232,159,000 was deferred and is being amortized over the initial charter periods as a reduction in time charter hire expense. OSG expects to recognize additional time charter hire expense of  approximately $7,800,000 per quarter (which is net of amortization of the deferred gain of $9,800,000 per quarter) in 2006. Depreciation and amortization increased by $22,221,000 to $96,863,000 from $74,642,000 in 2004 as a result of the vessel additions discussed above.

During 2004, TCE revenues for the International Flag Crude Tankers segment increased by $350,466,000, or 111%, to $665,645,000 from $315,179,000 in 2003. This improvement in TCE revenues resulted from increases in the average daily TCE rate earned by VLCCs and Aframaxes and an increase in the number of revenue days. TCE revenues for 2004 reflect a loss of $3,126,000 generated by forward freight agreements compared with a loss of $3,229,000 in 2003. Revenue days increased by 2,090 principally for the following reasons, partially offset by an increase of 254 drydock and repair days and a reduction of 222 days attributable to the 2004 sales of two single hull vessels, the Olympia and Dundee:

·the purchase of the 1997-built double hull Meridian Lion, previously held by a 50% owned joint venture, in April 2003;

·the participation in the charter-in of six VLCCs and three Aframaxes, which charters commenced during 2004;

·the 2004 exchange of joint venture interests (see Note F to the consolidated financial statements set forth in Item 8), which resulted in the Company owning 100% of the Dundee, Sakura I and Tanabe and the inclusion of such vessels in the International Flag Crude Tankers segment from the effective date of the transaction; and

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·the delivery of one newbuilding VLCC in February 2003 and two newbuilding Aframaxes (one in October 2003 and one in January 2004).

The redemption of the other partner’s joint venture interest in the Equatorial Lion and Meridian Lion (as described in Note F) and the simultaneous acquisition of the Meridian Lion from the other partner resulted in the inclusion of both vessels in the International Flag Crude Tanker segment from the mid-April 2003 effective date of the transaction. The Equatorial Lion, which had, prior to the completion of this transaction, been time chartered-in from the joint venture is now owned by a subsidiary of the Company.

Vessel expenses increased by $11,580,000 to $66,637,000 in 2004 from $55,057,000 in the prior year principally as a result of the vessel additions discussed above. Average daily vessel expenses increased by $307 per day in 2004 compared with 2003, principally attributable to the timing of delivery of stores, spares and lubricating oils. Time and bareboat charter hire expenses increased by $38,783,000 to $50,168,000 in 2004 from $11,385,000 in 2003 as a result of the participation in the charters-in of six VLCCs and three Aframaxes which charters commenced during 2004, partially offset by the termination of the charter-in of the Equatorial Lion from a joint venture. In addition, in late-June 2003, the Company entered into a sale-leaseback agreement for one of its VLCCs, the Meridian Lion, which lease is classified as an operating lease. The gain on the sale was deferred and is being amortized over the eight-year term of the lease as a reduction of time charter hire expenses. Depreciation and amortization increased by $11,088,000 to $74,642,000 from $63,554,000 in 2003 as a result of the vessel additions discussed above.

International Flag Handysize Product Carriers (dollars in thousands):

	2005			2004			2003
TCE revenues	$	171,100		$	25,159		$	19,213
Vessel expenses	(51,019		)	(8,488		)	(8,109		)
Time and bareboat charter hire expenses	(22,144		)	—			—
Depreciation and amortization	(32,552		)	(5,029		)	(4,184		)
Income from vessel operations	$	65,385		$	11,642		$	6,920
Average daily TCE rate	$	17,843		$	18,192		$	14,055
Average number of vessels	15.3			4.0			4.0
Average number of vessels chartered in under operating leases	11.4			—			—
Number of revenue days	9,589			1,383			1,367
Number of ship-operating days:
Owned vessels	5,596			1,464			1,460
Vessels bareboat chartered-in under operating leases	4,144			—			—

During 2005, TCE revenues for the International Flag Handysize Product Carrier segment increased by $145,941,000, or 580%, to $171,100,000 from $25,159,000 in 2004. This increase in TCE revenues resulted principally from an increase of 8,206 revenue days.  TCE revenues for 2005 reflect a gain of $561,000 generated by forward freight agreements. Although the Company entered into these forward freight agreements to convert a portion of its variable revenue stream to a fixed rate, such forward freight agreements did not qualify as effective cash flow hedges under FAS 133. The increase in revenue days was attributable to the Stelmar acquisition, which added 24 Handysize Product Carriers (nine of which are bareboat chartered-in) to the Company’s fleet. Vessel expenses, time and bareboat charter hire expenses and depreciation and amortization increased in 2005 compared with 2004 as a result of the vessel additions discussed above. In addition, in November 2004, the Company entered into sale-leaseback agreements, which closed in January 2005, for four of its double-sided Handysize Product Carriers. The leases are classified as operating leases. The sale-

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leaseback transactions increased bareboat charter expenses by approximately $1,200,000 per quarter, with a corresponding decrease in depreciation of approximately $800,000 per quarter.

The Company has reflagged three (the Overseas Ambermar and Overseas Maremar in September 2005 and the Overseas Luxmar in early October) Handysize Product Carriers, acquired from Stelmar, under the U.S. Flag and entered them in the U.S. Maritime Security Program (the “Program”). Under the Program, the Company will receive approximately $2.6 million per year for each of these vessels commencing in mid-October 2005. Such subsidy will substantially offset the increased cost incurred by such vessels because of operating under the U.S. Flag. Since these vessels trade primarily in the international market, they continue to be reflected in the International Flag Handysize Product Carrier segment.

During 2004, TCE revenues for the International Flag Handysize Product Carrier segment increased by $5,946,000, or 31%, to $25,159,000 from $19,213,000 in 2003. This improvement in TCE revenues resulted from an increase of $4,137 per day in the average daily TCE rate earned. Vessel expenses increased by $379,000 to $8,488,000 in 2004 from $8,109,000 in the prior year. Average daily vessel expenses increased by $243 per day in 2004 compared with 2003, principally attributable to increases in repair costs and the timing of delivery of stores. Depreciation and amortization increased by $845,000 to $5,029,000 from $4,184,000 in 2003 attributable to increased drydock amortization.

Other International Flag (dollars in thousands):

	2005			2004			2003
TCE revenues(a)	$	25,902		$	25,014		$	21,888
Vessel expenses	(5,148		)	(7,554		)	(3,324		)
Time and bareboat charter hire expenses	(12,247		)	(13,353		)	(1,616		)
Depreciation and amortization	(3,582		)	(2,055		)	(5,570		)
Income from vessel operations	$	4,925		$	2,052		$	11,378
Average daily TCE rate	$	27,357		$	32,029		$	27,882
Average number of vessels	—			—			1.9
Average number of vessels chartered in under operating leases	2.1			2.1			0.3
Number of revenue days	733			781			785
Number of ship-operating days:
Owned vessels	—			—			696
Vessels time chartered-in under operating leases	758			781			112

(a)TCE revenues include inter-segment commercial management fees of $5,849 in 2005. Such amounts have been excluded in the calculation of the average daily TCE rate.

As of December 31, 2005, the Company operated two International Flag Dry Bulk Carriers. The two Dry Bulk Carriers commenced three-year time charters in early 2004, at which time they were withdrawn from the pool of Capesize vessels in which they had participated since 2000. TCE revenues for 2005 were stable compared with 2004 because the two Bulk Carriers operated on time charters which commenced in early 2004.

Vessel expenses in 2005 decreased marginally compared with the prior year, excluding a $4,000,000 increase in the reserve for the U.S. Department of Justice investigation to $10,000,000, and a $1,269,000 increase in the reserve for the settlement of certain crew benefits (principally related to years prior to 2004).

TCE revenues increased by $3,126,000, or 14%, to $25,014,000 in 2004 from $21,888,000 in 2003 principally because of an increase of $4,147 per day in the average daily TCE rate earned.

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Vessel expenses, excluding a $6,000,000 reserve for the U.S. Department of Justice investigations and a $1,060,000 reserve for the settlement of certain crew benefits, and depreciation and amortization decreased and time and bareboat charter hire expenses increased in 2004 compared with 2003 principally because of the December 2003 sale and leaseback agreement of the two Dry Bulk Carriers.

U.S. Flag Segment (dollars in thousands):

	2005			2004			2003
TCE revenues	$	81,109		$	73,763		$	74,856
Vessel expenses	(29,168		)	(25,491		)	(23,389		)
Time and bareboat charter hire expenses	(2,073		)	(2,029		)	(7,471		)
Depreciation and amortization	(19,314		)	(18,362		)	(16,702		)
Income from vessel operations	$	30,554		$	27,881		$	27,294
Average daily TCE rate	$	24,980		$	21,549		$	23,161
Average number of vessels	7.1			7.5			6.7
Average number of vessels chartered in under operating leases	2.0			2.0			2.3
Number of revenue days	3,247			3,423			3,232
Number of ship-operating days:
Owned vessels	2,604			2,739			2,439
Vessels bareboat chartered-in under operating leases	730			732			846

As of December 31, 2005, the U.S. Flag segment consisted of the following:

·four Product Carriers, which are on time or bareboat charter;

·one Pure Car Carrier, which is on time charter; and

·two Bulk Carriers that transport U.S. foreign aid grain cargoes on voyage charters.

TCE revenues increased by $7,346,000, or 10%, to $81,109,000 in 2005 from $73,763,000 in 2004 because of an increase of $3,431 per day in the average daily TCE rate (in part due to the conversion of the charter on the Puget Sound discussed below), partially offset by a decrease in revenue days. Revenue days decreased due to the sale of one of the Crude Tankers in February 2004 and the three remaining Crude Tankers in 2005 upon their redelivery from long-term charters, offset by the purchase of two Product Carriers, the Puget Sound and Galena Bay, in April 2004. The Puget Sound and Galena Bay were, at the time of their acquisition, operating on bareboat charters that extended to December 2009.

In October 2004, the Company entered into an agreement with the charterer of the Puget Sound to convert the bareboat charter to a time charter for the balance of the charter period. This increased TCE revenues and vessel expenses by approximately $4,635,000 in 2005 compared with 2004. The agreement, which was terminated in December 2005, also provided for profit sharing with the charterer when rates earned on third party voyages exceeded the base rate, as defined in the agreement.

Vessel expenses increased by $3,677,000 to $29,168,000 in 2005 from $25,491,000 in 2004 as a result of the conversion of the bareboat charter on the Puget Sound to a time charter in October 2004, partially offset by the impact of the sale of the Crude Tankers. Average daily expenses increased by $1,405 per day in 2005 compared with 2004, principally attributable to increases in crew costs.

TCE revenues decreased by $1,093,000, or 1%, to $73,763,000 in 2004 from $74,856,000 in 2003 because of a decrease of $1,612 per day in the average daily TCE rate earned, partially offset by an increase in revenue days. Revenue days increased due to the purchase of two Product Carriers in April 2004, offset by the sale of the Crude Tanker, Overseas Boston, in February 2004. Vessel

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expenses increased by $2,102,000 to $25,491,000 in 2004 from $23,389,000 in 2003. Average daily expenses increased by $224 per day in 2004 compared with 2003, principally due to increases in crew costs. On July 1, 2003, in accordance with the provisions of FIN 46, the Company consolidated the special purpose entity that owned the Crude Tankers. The consolidation of the special purpose entity eliminated time and bareboat charter hire expenses, which were net of amortization of the deferred gain on the 1999 sale-leaseback transaction, and increased depreciation and amortization because those vessels were now included in the consolidated balance sheet. In addition, time and bareboat charter hire expense increased because of the charter extensions of the two Bulk Carriers, Overseas Harriette and Overseas Marilyn, that commenced in the fourth quarter of 2003 at the expiry of 25-year capital leases. Depreciation and amortization increased by $1,660,000 to $18,362,000 in 2004 from $16,702,000 in 2003 because of the purchase of the two Product Carriers, partially offset by decreases attributable to the sale of the Overseas Boston and the expiry of capital leases and the related charter extensions on the two Bulk Carriers.

Since December 1996, the U.S. Flag Pure Car Carrier has received payments under the U.S. Maritime Security Program on the basis of $2,100,000 per year through September 2005 and $2,600,000 per year thereafter.

General and Administrative Expenses

During 2005, general and administrative expenses increased by $27,674,000 to $79,667,000 from $51,993,000 in 2004 as a result of:

·expenses of the Athens operations aggregating $11,077,000, which include integration costs of $1,462,000;

·an increase of $1,524,000 in incentive compensation paid to shore-based staff;

·costs of $5,021,000 incurred during 2005, compared with $1,759,000 incurred during 2004, in connection with the investigations by the U.S. Department of Justice (see Note R to the consolidated financial statements set forth in Item 8);

·an increase in compensation related to stock options and restricted stock of $1,659,000;

·severance related payments aggregating $2,000,000 recognized in connection with the retirement of senior officers in January and August 2005;

·an increase of $2,824,000 in curtailment, termination and settlement losses recognized in connection with the payment of unfunded, nonqualified pension plan obligations and the termination of the defined benefit pension plans covering its domestic shore-based employees effective December 31, 2005. See Note O to the consolidated financial statements set forth in Item 8; and

·an increase in rent expense of $2,835,000 primarily related to office moves in New York and Newcastle.

During 2004, general and administrative expenses increased by $12,325,000 to $51,993,000 from $39,668,000 in 2003 as a result of:

·an increase of $4,756,000 in incentive compensation paid to shore-based staff;

·consulting fees in connection with special projects aggregating $2,820,000;

·a settlement loss of $4,077,000 recognized in connection with the payment of the former chief executive officer’s unfunded, nonqualified pension plan obligation;

·consultation services aggregating $733,000, performed by the former chief executive officer in accordance with an agreement dated June 23, 2003 (see Note Q to the consolidated financial statements set forth in Item 8); and

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·costs of $1,759,000 incurred in 2004 (an increase of $897,000 compared with 2003) in connection with certain investigations by the Department of Transport of the Government of Canada and the U.S. Department of Justice (see Note R to the consolidated financial statements set forth in Item 8).

These increases were partially offset by:

·2003 bonus payments aggregating $1,940,000, in recognition of the substantial completion of the Company’s five-year cost reduction program;

·severance related payments aggregating approximately $2,008,000, recognized in 2003 in connection with the January 2003 resignation of a senior vice president and the retirement of the Company’s former CEO; and

·a reserve for an expected loss of $544,000 on the sublease of overseas office space.

Equity in Income of Joint Ventures

During 2005, equity in income of joint ventures decreased by $1,792,000 to $43,807,000 from $45,599,000 in 2004, due to a decrease in average daily TCE rates earned by the joint venture vessels operating in the spot market.

Revenue days for 2005 for the joint venture vessels reflect the following:

·the Company’s acquisition of its partner’s 50.1% interest in the joint venture that owned the four V-Pluses (see Note F to the consolidated financial statements set forth in Item 8) on June 1, 2005. Two of the four V-Pluses are now included in the International Flag Crude Tankers segment;

·the sale of the Compass I, an Aframax tanker, by a joint venture in which the Company held a 50% interest;

·the sale of the Front Tobago, a VLCC, by a joint venture in which the Company held a 30% interest; and

·OSG’s sale of seven tankers (three VLCCs and four Aframaxes) to DHT in connection with DHT’s initial public offering in October 2005. In consideration, the Company received cash and a 46.7% equity stake in the new tanker concern. The equity stake was subsequently reduced to 44.5% in November pursuant to the exercise of the over-allotment option granted to the underwriters. OSG time chartered the vessels back from DHT for periods of five to six and one-half years with various renewal options of up to an additional five to eight years depending on the vessel. The charters provide for the payment of additional hire on a quarterly basis by the Company when the aggregate revenue earned, or deemed earned, by these vessels for the Company exceeds the sum of the basic hire paid during the quarter by the Company.

During 2004, equity in income of joint ventures increased by $11,634,000 to $45,599,000 from $33,965,000 in 2003, due to an increase in average daily TCE rates earned by the joint venture vessels operating in the spot market, partially offset by a reduction in revenue days. The reduction in revenue days was attributable to the termination of joint ventures covering six vessels in the first quarter of 2004, partially offset by the delivery of the four V-Pluses in July 2004 to a joint venture in which the Company has a 49.9% interest. Equity in income of joint ventures for 2003 reflects the Company’s share ($2,566,000) of a loss on disposal recognized in connection with the redemption of an oil company’s 50% interest in a joint venture in exchange for 100% of the stock of one of the venture’s two vessel-owning subsidiaries (see Note F to the consolidated financial statements set forth in Item 8).

The following table is a summary of the Company’s interest in its joint ventures, excluding ATC (see discussion below), and OSG’s proportionate share of the revenue days for the respective

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vessels. Revenue days are adjusted for OSG’s percentage ownership in order to state the revenue days on a basis comparable to that of a wholly-owned vessel. The ownership percentages reflected below are averages as of December 31 of each year. The Company’s actual ownership percentages for these joint ventures ranged from 30% to 50%:

	2005					2004					2003
	Revenue Days		% of Ownership			Revenue Days		% of Ownership			Revenue Days		% of Ownership
V-Pluses operating in the spot market		301		0.0	%		320		49.9	%		—		0.0	%
VLCCs operating in the spot market		106		0.0	%		130		30.0	%		1,137		47.1	%
VLCCs operating on long-term charters		99		44.5	%		—		0.0	%		104		0.0	%
Aframax operating in the spot market		53		0.0	%		181		50.0	%		181		50.0	%
Aframaxes operating on long-term charters		133		44.5	%		—		0.0	%		—		0.0	%
Total		692		44.5	%		631		46.6	%		1,422		47.4	%

In April 2005, the joint venture that owned the Aframax, Compass I, sold its vessel and recognized a gain of $11,349,000. In December 2005, the joint venture that owned the VLCC, Front Tobago, sold its vessel and recognized a gain of $9,446,000.

Additionally, the Company has a 37.5% interest in ATC, a company that operates U.S. Flag tankers to transport Alaskan crude oil for BP. ATC earns additional income (in the form of incentive hire paid by BP) based on meeting certain predetermined performance standards. Such income is included in the U.S. Flag segment.

Interest Expense

The components of interest expense are as follows:

In thousands for the year ended December 31,	2005			2004			2003
Interest before impact of swaps and capitalized interest	$	86,379		$	58,379		$	51,791
Impact of swaps	6,995			15,968			14,320
Capitalized interest	(3,885		)	(201		)	(3,987		)
Interest expense	$	89,489		$	74,146		$	62,124

Interest expense increased by $15,343,000 to $89,489,000 in 2005 from $74,146,000 in 2004 as a result of increases in (a) the average amount of debt outstanding of $470,149,000, which is attributable to the Stelmar acquisition offset by the application of the proceeds arising from vessel sales during 2005, including the sale of the seven tankers to DHT in October, to repay amounts outstanding under floating-rate credit facilities, and (b) the average rate paid on floating rate debt of 130 basis points to 3.9% from 2.6% in 2004. The impact of floating-to-fixed interest rate swaps increased interest expense by $6,995,000 2005 compared with an increase of $15,968,000 in 2004. Interest expense for 2005 includes the write-off of $1,607,000 of deferred debt expense related to debt assumed in connection with the acquisition of OSG’s partner’s interest in the joint venture that owned the four V-Pluses. Such debt was repaid during June 2005. Interest capitalized in 2005 relates to amounts advanced by the Company to a 49.9% owned joint venture constructing four LNG Carriers.

Interest expense increased by $12,022,000 to $74,146,000 in 2004 from $62,124,000 in 2003 as a result of (a) an increase of $35,216,000 in the average amount of debt outstanding, (b) an increase in average interest rates because of the impact of the issuance of $200,000,000 of ten-year notes with a

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coupon of 8.25% in March 2003 offset by the application of the resulting proceeds to repay amounts outstanding under floating-rate credit facilities, and (c) a decrease of $3,786,000  in interest capitalized in connection with vessel construction. The average paid on floating-rate debt in 2004 was relatively unchanged from the 2003 average rate of 2.6%. The impact of floating-to-fixed interest rate swaps that qualify as cash flow hedges increased interest expense by $15,968,000 in 2004 compared with an increase of $14,320,000 in 2003.

Provision/(Credit) for Federal Income Taxes

The credit for income tax for 2005 is based on the pre-tax results of the Company’s U.S. subsidiaries, adjusted to include non shipping income of the Company’s foreign subsidiaries. The income tax provisions for 2004 and 2003 are based on consolidated pre-tax results, adjusted to reflect items that are not subject to tax.

On October 22, 2004, the President of the U.S. signed into law the American Jobs Creation Act of 2004. The Jobs Creation Act reinstates tax deferral for OSG’s foreign shipping income for years beginning after December 31, 2004. Effective January 1, 2005, the earnings from shipping operations of the Company’s foreign subsidiaries are not subject to U.S. income taxation as long as such earnings are not repatriated to the U.S. Because the Company intends to permanently reinvest these earnings in foreign operations, no provision for U.S. income taxes on such earnings of its foreign shipping subsidiaries is required after December 31, 2004. Because the shipping income of its foreign shipping subsidiaries constitutes substantially all of income before federal income taxes, the Company expects that its effective tax rate will be significantly reduced for periods commencing January 1, 2005.

The effective tax rate (provision for income taxes divided by income before federal income taxes) for 2004, before consideration of the impact of the reduction of deferred tax liabilities discussed below, was 32.7%. The increase in the effective tax rate for 2004 compared with 2003 reflects a reduction in the relative contribution to pre-tax income of income not subject to U.S. income taxes. The provisions for income taxes for 2004 and 2003 reflect reductions in the valuation allowance of $3,640,000 that was established in 2002 against the deferred tax asset resulting from the write-down of certain marketable securities. The reductions in the valuation allowance reflect capital gains recognized in 2004 and increases in fair values of securities previously written down and the effect of securities sold in 2003. The valuation allowance was established because the Company was not certain that the full amount of the deferred tax asset could be realized through the generation of capital gains in the future. The reductions in the valuation allowance were $934,000 in 2004 and $2,706,000 in 2003.

As of December 31, 2004, the Company had $77,423,000 of net deferred tax liabilities attributable to expected future U.S. income taxes on the shipping income of its foreign shipping subsidiaries. Because of the enactment of the Jobs Creation Act and because foreign earnings will be permanently reinvested, the Company no longer expects that these deferred tax liabilities will be paid. In accordance with the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” the Company reduced its deferred tax liabilities by $77,423,000 with a corresponding reduction in income tax expense in the fourth quarter of 2004.

Effects of Inflation

The Company does not believe that inflation has had or is likely, in the foreseeable future, to have a significant impact on vessel operating expenses, drydocking expenses and general and administrative expenses.

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Liquidity and Sources of Capital

Working capital at December 31, 2005 was approximately $253,000,000 compared with $445,000,000 at December 31, 2004 and $40,000,000 at December 31, 2003. Current assets are highly liquid, consisting principally of cash, interest-bearing deposits and receivables. Unbilled voyage receivables at December 31, 2005 was $139,792,000 compared with $135,967,000 at December 31, 2004. As of December 31, 2005, such balance included the Company’s share of unremitted pool earnings of $92,608,000 ($95,509,000 at December 31, 2004) due from Tankers International, $34,690,000 ($34,623,000 at December 31, 2004) due from Aframax International and $6,008,000 due from Panamax International. The decrease in the amount due from Tankers International results from a decrease in TCE rates earned by the VLCCs in the fourth quarter of 2005 ($68,619 per day) compared with the fourth quarter of 2004 ($109,578 per day) partially offset by an increase in the number of vessels participating in the pool. The amount due from Aframax International remained consistent with 2004 even though rates earned by Aframaxes participating the pool decreased in the fourth quarter of 2005 ($39,850 per day) compared with the comparable quarter of 2004 ($57,579 per day) principally due to the timing of payments received from the pool. In addition, the Company maintains a Capital Construction Fund with a market value of approximately $296,000,000 at December 31, 2005. Net cash provided by operating activities approximated $452,000,000 in 2005 compared with $397,000,000 in 2004 and $231,000,000 in 2003. Net cash provided by operating activities in 2005 reflects $91,100,000 of payments with respect to 2004 federal income taxes compared with $11,040,000 in 2004 made with respect to 2003 federal income taxes. Current financial resources, together with cash anticipated to be generated from operations, are expected to be adequate to meet requirements in the next year. The Company’s reliance on the spot market contributes to fluctuations in cash flows from operating activities. Any decrease in the average TCE rates earned by the Company’s vessels in periods subsequent to December 31, 2005, compared with the actual TCE rates achieved during 2005, will have a negative comparative impact on the amount of cash provided by operating activities.

In order to increase liquidity, the Company periodically evaluates transactions which may result in either the sale or the sale and leaseback of certain vessels in its fleet.

In January 2005, the Company concluded two new debt agreements aggregating $675,000,000. The proceeds from these borrowings were used to fund the acquisition of Stelmar and refinance its debt. One of the agreements is a $500,000,000 seven-year unsecured revolving credit agreement. Borrowings under this facility bear interest at a rate based on LIBOR, and the terms, conditions and financial covenants contained therein are comparable to those contained in the Company’s existing long-term facilities. The other agreement is a $175,000,000 term loan secured by five of Stelmar’s Handysize Product Carriers. The secured loan has a term of 12 years and bears interest at a rate based on LIBOR.

In July 2005, the Company repaid an outstanding secured term loan of $87,000,000, with funds obtained under its long-term unsecured revolving credit facilities.

In October 2005, OSG sold seven tankers to DHT in connection with DHT’s initial public offering. In consideration, the Company received $412,580,000 in cash and 14,000,000 shares in DHT. In November 2005, the Company sold 648,500 shares of common stock of DHT pursuant to the exercise of the over-allotment option granted to the underwriters of DHT’s initial public offering, and received net cash proceeds of $7,315,000. The cash proceeds from these sales were used to reduce amounts outstanding under long-term credit facilities and for general corporate purposes.

In January 2004, pursuant to a Form S-3 shelf registration filed on January 13, 2004, the Company sold 3,200,000 shares of its common stock at a price of $36.13 per share, thereby generating proceeds of $115,513,000, after deducting expenses. In February 2004, pursuant to the existing shelf registration, the Company issued $150,000,000 principal amount of senior unsecured notes. The notes, which are due in February 2024 and may not be redeemed prior to maturity, have a

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coupon of 7.5%. The Company received proceeds of approximately $146,605,000, after deducting expenses. The proceeds from these offerings were used for general corporate purposes.

The indentures pursuant to which the Company’s senior unsecured notes were issued require the Company to secure the senior unsecured notes equally and comparably with any other unsecured indebtedness in the event OSG is required to secure such debt.

In July and November 2004, the Company concluded two seven-year unsecured revolving credit facilities aggregating $255,000,000. Borrowings under both of the facilities bear interest at a rate based on LIBOR plus a margin. In December 2004, the Company reduced the amount available under the facility maturing in December 2006 to $200,000,000 from $350,000,000.

In August 2004, the Company amended one of its floating rate secured term loans. The amendment to the secured loan extended its maturity date by two years to 2016, reduced the required principal payments by approximately $390,000 per annum, and added a $20,000,000 short-term credit facility.

At December 31, 2005, OSG had $1,285,000,000 of long-term unsecured credit availability, of which $1,086,000,000 was unused. The Company’s six long-term revolving credit facilities mature in 2006 ($200,000,000), 2008 ($30,000,000), 2009 ($150,000,000), 2010 ($150,000,000), 2011 ($255,000,000) and 2012 ($500,000,000). In addition, the Company also had two short-term credit facilities aggregating $65,000,000, all of which was unused at December 31, 2005.

In February 2006, the Company entered into a $1.5 billion seven-year unsecured revolving credit agreement (except that after five years the maximum amount the Company may borrow under the credit agreement is reduced by $150 million and after six years such amount is further reduced by an additional $150 million) with a group of banks. Borrowings under this facility bear interest at a rate based on LIBOR. The terms, conditions and financial covenants contained therein are generally more favorable than those contained in the Company’s existing long-term facilities. In connection with entering into this agreement, the Company agreed to terminate all of its unsecured revolving credit facilities (long-term of $1,285,000,000 and short-term of $45,000,000). As a result, the Company will record an expense of approximately $4,800,000 in the first quarter of 2006 attributable to the write off of the unamortized balance of deferred finance charges for the terminated credit facilities.

The Company was in compliance with all of the financial covenants contained in the Company’s debt agreements as of December 31, 2005. The financing agreements impose operating restrictions and establish minimum financial covenants. Failure to comply with any of the covenants in the financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the debt under these agreements and to foreclose upon any collateral securing that debt. Under those circumstances, the Company might not have sufficient funds or other resources to satisfy its obligations.

Because a portion of OSG’s debt is secured and because of limitations imposed by financing agreements on the ability to secure additional debt and to take other actions, the Company’s ability to obtain other financing might be impaired.

Off-Balance Sheet Arrangements

As of December 31, 2005, the joint ventures in which OSG participates had total bank debt outstanding of $281,403,000. The joint venture debt is nonrecourse to the Company.

In November 2004, the Company formed a joint venture whereby companies in which OSG holds a 49.9% interest ordered four 216,000 cbm LNG Carriers. Upon delivery in 2007 and 2008, these vessels will commence 25-year time charters to Qatar Liquefied Gas Company Limited (II). The aggregate construction cost for such newbuildings of $908,100,000 will be financed by the joint venture through long-term bank financing and partner contributions. OSG has advanced $90,635,000 to such joint venture as of December 31, 2005, representing its share of working capital ($10,000) and

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the first installment under the construction contracts ($90,625,000, or approximately 49.9% of $181,600,000). The aggregate unpaid contract costs of $726,500,000 will be funded through bank financing that will be nonrecourse to the partners. The joint venture has entered into forward start floating-to-fixed interest rate swaps with a group of major financial institutions that are being accounted for as cash flow hedges. The interest rate swaps cover notional amounts aggregating approximately $826,926,000, pursuant to which it will pay fixed rates of 4.91% and 4.93% and receive a floating rate based on LIBOR. These agreements have forward start dates ranging from July to October 2008 and maturity dates ranging from July to October 2022.

Aggregate Contractual Obligations

A summary of the Company’s long-term contractual obligations as of December 31, 2005 follows:

(In thousands)	2006		2007		2008		2009		2010		Beyond 2010		Total
Long-term debt(1)	$	82,460	$	81,347	$	80,096	$	78,223	$	77,706	$	1,115,741	$	1,515,573
Obligations under capital leases(1)	11,882		11,882		11,888		10,808		9,692		7,295		63,447
Operating lease obligations (chartered-in vessels)(2)	173,890		194,821		212,309		208,125		206,655		503,358		1,499,158
Operating lease obligations (office space)	3,776		3,816		3,826		3,837		3,867		35,407		54,529
Total	$	272,008	$	291,866	$	308,119	$	300,993	$	297,920	$	1,661,801	$	3,132,707

(1)Amounts shown include contractual interest obligations. The interest obligations for floating rate debt ($467,902 as of December 31, 2005) have been estimated based on the fixed rates stated in related floating-to-fixed interest rate swaps, where applicable, or the LIBOR rate at December 31, 2005 of 4.5%. The Company is a party to floating-to-fixed interest rate swaps covering notional amounts aggregating approximately $273,788 at December 31, 2005 that effectively convert the Company’s interest rate exposure from a floating rate based on LIBOR to an average fixed rate of 6.2%.

(2)As of December 31, 2005, the Company had charter-in commitments for 51 vessels on leases that are, or will be, accounted for as operating leases. Certain of these leases provide the Company with various renewal and purchase options.

In addition to the above long-term contractual obligations the Company has certain obligations for its domestic shore-based employees as of December 31, 2005, related to an unfunded supplemental pension plan and an unfunded postretirement health care plan as follows:

(In thousands)	2006		2007		2008		2009		2010
Supplemental pension plan obligations(1)	$	71	$	71	$	71	$	71	$	70
Postretirement health care plan obligations(2)	181		188		195		203		208

(1)Obligations are included herein only if the retirement of a covered individual is known as of December 31, 2005. Amounts shown herein exclude obligations payable by the Company’s defined benefit plan for domestic shore-based employees, which was overfunded as of December 31, 2005.

(2)Amounts are estimated based on the 2005 cost taking the assumed health care cost trend rate for 2006 to 2010 into consideration. See Note O to the consolidated financial statements set forth in Item 8. Because of the subjective nature of the assumptions made, actual premiums paid in future years may differ significantly from the estimated amounts.

OSG has used interest rate swaps to convert a portion of its debt from a floating rate to a fixed rate based on management’s interest-rate outlook at various times. These agreements contain no leverage features and have various final maturity dates from July 2006 to August 2014.

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OSG expects to finance any vessel commitments from working capital, cash anticipated to be generated from operations, existing long-term credit facilities, and additional long-term debt, as required. The amounts of working capital and cash generated from operations that may, in the future, be utilized to finance vessel commitments are dependent on the rates at which the Company can charter its vessels. Such charter rates are volatile.

EBITDA

EBITDA represents operating earnings, which is before interest expense and income taxes, plus other income and depreciation and amortization expense. EBITDA should not be considered a substitute for net income, cash flow from operating activities and other operations or cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity. EBITDA is presented to provide additional information with respect to the Company’s ability to satisfy debt service, capital expenditure and working capital requirements. While EBITDA is frequently used as a measure of operating results and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. The following table reconciles net income, as reflected in the consolidated statements of operations set forth in Item 8, to EBITDA:

In thousands for the year ended December 31,	2005			2004		2003
Net income	$	464,829		$	401,236	$	121,309
Provision/(credit) for federal income taxes	(1,110		)	79,778		46,844
Interest expense	89,489			74,146		62,124
Depreciation and amortization	152,311			100,088		90,010
EBITDA	$	705,519		$	655,248	$	320,287

Ratios of Earnings to Fixed Charges

The ratios of earnings to fixed charges for 2005, 2004 and 2003 were 4.9x, 6.6x and 2.9x, respectively. The ratio of earnings to fixed charges has been computed by dividing the sum of (a) pretax income for continuing operations, (b) fixed charges (reduced by the amount of interest capitalized during the period) and (c) amortization expense related to capitalized interest, by fixed charges. Fixed charges consist of all interest (both expensed and capitalized), including amortization of debt issuance costs, and the interest portion of time and bareboat charter hire expenses.

Earnings per Share Adjusted for Gain on Vessel Sales and Securities Transactions

The following table presents comparative per share amounts for net income, adjusted for the effects of vessel sales and securities transactions, including write-downs in the carrying value of certain securities pursuant to FAS 115:

For the year ended December 31,	2005			2004			2003
Diluted net income per share	$	11.77		$	10.24		$	3.47
(Gain)/loss on sale of vessels(1)	(1.02		)	(0.48		)	0.13
Gain on securities transactions(2)	(0.38		)	(0.14		)	(0.18		)
	$	10.37		$	9.62		$	3.42

(1)Based on amounts reported in Note P to the consolidated financial statements set forth in Item 8, reduced, in 2005 only with respect to the sale of U.S. Flag vessels and in 2004 and 2003 for all vessel sales, by federal income taxes calculated at 35%.

(2)Represents the sum of realized gain on sale of securities and, in 2003, write-down of marketable securities (as reported in Note P), reduced by federal income taxes calculated at 35%, as adjusted in 2004 and 2003 by the change in the valuation allowance.

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Net income adjusted for the effect of vessel sales and securities transactions is presented to provide additional information with respect to the Company’s ability to compare from period to period vessel operating revenues and expenses and general and administrative expenses without gains and losses from disposals of assets and investments. While net income adjusted for the effect of vessel sales and securities transactions is frequently used by management as a measure of the vessels operating performance in a particular period it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. Net income adjusted for the effect of vessel sales and securities transactions should not be considered an alternative to net income or other measurements prepared in accordance with accounting principles generally accepted in the United States.

Risk Management

The Company is exposed to market risk from changes in interest rates, which could impact its results of operations and financial condition. The Company manages this exposure to market risk through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company manages its ratio of fixed to floating rate debt with the objective of achieving a mix that reflects management’s interest rate outlook at various times. To manage this mix in a cost-effective manner, the Company, from time-to-time, enters into interest rate swap agreements, in which it agrees to exchange various combinations of fixed and variable interest rates based on agreed upon notional amounts. The Company uses such derivative financial instruments as risk management tools and not for speculative or trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order to manage exposure to nonperformance on such instruments by the counterparties.

The Company uses forward freight agreements to reduce its exposure to changes in spot market rates earned by some of its vessels. Forward freight agreements involve contracts to provide a fixed number of theoretical voyages at fixed rates. As of December 31, 2005, OSG was committed to forward freight agreements totaling 195,000 metric tons with notional principal amounts aggregating $4,775,000, which expire between January and June 2006. The fair value of forward freight agreements is the estimated amount that the Company would receive or pay to terminate the agreements at the reporting date. The fair value of these agreements was not significant at December 31, 2005.

The shipping industry’s functional currency is the U.S. dollar. All of the Company’s revenues and most of its operating costs are in U.S. dollars.

The following tables provide information about the Company’s derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. For investment securities and debt obligations, the tables present principal cash flows and related weighted average interest rates by expected maturity dates. Additionally, the Company has assumed that its fixed income securities are similar enough to aggregate those securities for presentation purposes. For interest rate swaps, the tables present notional amounts and weighted average interest rates by contractual maturity dates. Notional amounts are used to calculate the contractual cash flows to be exchanged under the contracts.

66

Interest Rate Sensitivity

Principal (Notional) Amount (dollars in millions) by Expected Maturity and Average Interest (Swap) Rate

																Beyond						Fair Value at
At December 31, 2005	2006			2007			2008			2009			2010			2010				Total		Dec. 31, 2005
Assets
Fixed income securities	$	27.1		$	18.1		$	17.7		$	8.0		$	15.1			$	39.5		$	125.5		$	125.5
Average interest rate	4.8		%	4.8		%	4.7		%	5.4		%	5.0		%		5.0		%
Liabilities
Long-term debt and capital lease obligations, including current portion:
Fixed rate	$	10.5		$	11.2		$	12.0		$	11.8		$	11.6			$	467.7		$	524.8		$	542.8
Average interest rate	7.9		%	7.9		%	8.0		%	8.4		%	8.8		%		8.4		%
Variable rate	$	17.0		$	17.0		$	17.0		$	17.0		$	17.0			$	382.9		$	467.9		$	467.9
Average spread over LIBOR	0.7		%	0.7		%	0.7		%	0.7		%	0.7		%		0.7		%
Interest Rate Swaps
Pay fixed/receive variable*	$	207.8		$	8.8		$	46.8		$	1.0		$	1.0			$	8.4		$	273.8		$	(1.7	)
Average pay rate	5.4		%	5.3		%	5.4		%	4.7		%	4.7		%		4.7		%

																Beyond						Fair Value at
At December 31, 2004	2005			2006			2007			2008			2009			2009				Total		Dec. 31, 2004
Assets
Fixed income securities	$	20.7		$	7.5		$	3.4		$	2.6		$	9.4			$	53.8		$	97.4		$	97.4
Average interest rate	2.3		%	3.8		%	3.1		%	4.3		%	4.1		%		5.4		%
Liabilities
Long-term debt and capital lease obligations, including current portion:
Fixed rate	$	7.7		$	8.7		$	9.3		$	10.0		$	10.7			$	479.8		$	526.2		$	543.9
Average interest rate	8.2		%	8.4		%	8.5		%	8.6		%	8.7		%		8.4		%
Variable rate	$	22.0		$	16.8		$	11.6		$	11.6		$	111.6			$	236.1		$	409.7		$	409.7
Average spread over LIBOR	1.1		%	0.7		%	0.8		%	0.8		%	0.9		%		0.5		%
Interest Rate Swaps
Pay fixed/receive variable*	$	33.1		$	218.1		$	14.0		$	52.0		$	6.2			$	73.0		$	396.4		$	(12.3	)
Average pay rate	6.1		%	5.4		%	5.1		%	5.3		%	4.6		%		4.6		%

*LIBOR

As of December 31, 2005, the Company had one long-term revolving credit facility under which borrowings bore interest at LIBOR plus a margin, where the margin was dependent on the Company’s leverage. As of December 31, 2005, there was no balance outstanding under such facility.

67

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

See Item 7.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TABLE OF CONTENTS

Years ended December 31, 2005, 2004 and 2003	Page
Consolidated Balance Sheets at December 31, 2005 and 2004		69
Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003		70
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003		71
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2005, 2004 and 2003		72
Notes to Consolidated Financial Statements		73
Report of Independent Registered Public Accounting Firm		106
Report of Independent Registered Public Accounting Firm on Internal Controls		107

68

Overseas Shipholding Group, Inc. and Subsidiaries
Consolidated Balance Sheets

Dollars in thousands at December 31,	2005		2004
Assets
Current Assets:
Cash and cash equivalents	$	188,588	$	479,181
Voyage receivables, including unbilled of $139,792 and $135,967	157,334		144,237
Other receivables	22,202		12,815
Inventories	1,855		1,132
Prepaid expenses	14,908		8,252
Total Current Assets	384,887		645,617
Capital Construction Fund	296,126		268,414
Vessels and other property, less accumulated depreciation	2,288,481		1,419,761
Vessels under capital leases, less accumulated amortization	36,267		34,668
Vessel held for sale	—		9,744
Deferred drydock expenditures, net	19,805		25,339
Total Vessels, Deferred Drydock and Other Property	2,344,553		1,489,512
Investments in Joint Ventures	269,657		227,701
Other Assets	53,457		49,554
Total Assets	$	3,348,680	$	2,680,798
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable, sundry liabilities and accrued expenses	$	105,173	$	80,047
Federal income taxes	—		90,943
Short-term debt and current installments of long-term debt	20,066		25,024
Current obligations under capital leases	6,968		4,729
Total Current Liabilities	132,207		200,743
Long-term Debt	923,612		863,466
Obligations under Capital Leases	42,043		42,717
Deferred Gain on Sale and Leaseback of Vessels	233,456		3,573
Deferred Federal Income Taxes ($113,255 and $105,424) and Other Liabilities	141,334		143,927
Shareholders’ Equity:
Common stock ($1 par value; 60,000,000 shares authorized; 40,790,759 shares issued)	40,791		40,791
Paid-in additional capital	199,570		199,054
Retained earnings	1,640,742		1,203,528
Unearned compensation, restricted stock	—		(1,360		)
	1,881,103		1,442,013
Cost of treasury stock (1,341,718 and 1,391,280 shares)	17,019		17,579
	1,864,084		1,424,434
Accumulated other comprehensive income	11,944		1,938
Total Shareholders’ Equity	1,876,028		1,426,372
Total Liabilities and Shareholders’ Equity	$	3,348,680	$	2,680,798

See notes to consolidated financial statements.

69

Overseas Shipholding Group, Inc. and Subsidiaries
Consolidated Statements of Operations

Dollars in thousands, except per share amounts,
for the year ended December 31,	2005			2004			2003
Shipping Revenues:
Pool revenues, including $57,562 in 2005 received from a 50% owned joint venture	$	607,035		$	640,449		$	305,490
Time and bareboat charter revenues, including $16,488, $19,803 and $28,052 received from a 37.5% owned joint venture	309,471			116,957			90,764
Voyage charter revenues	83,797			53,429			57,866
	1,000,303			810,835			454,120
Voyage Expenses	(38,641		)	(21,254		)	(22,984		)
Time Charter Equivalent Revenues	961,662			789,581			431,136
Ship Operating Expenses:
Vessel expenses	177,349			108,170			89,877
Time and bareboat charter hire expenses, including $20,241 in 2005 paid to a 44.5% owned joint venture and $1,757 in 2003 paid to a 50% owned joint venture	120,301			65,550			20,474
Depreciation and amortization	152,311			100,088			90,010
General and administrative	79,667			51,993			39,668
Total Ship Operating Expenses	529,628			325,801			240,029
Income from Vessel Operations	432,034			463,780			191,107
Equity in Income of Joint Ventures	43,807			45,599			33,965
Operating Income	475,841			509,379			225,072
Other Income	77,367			45,781			5,205
	553,208			555,160			230,277
Interest Expense	89,489			74,146			62,124
Income before Federal Income Taxes	463,719			481,014			168,153
Provision/(Credit) for Federal Income Taxes	(1,110		)	79,778			46,844
Net Income	$	464,829		$	401,236		$	121,309
Weighted Average Number of Common SharesOutstanding:
Basic	39,444,059			39,113,040			34,725,247
Diluted	39,506,332			39,176,253			34,976,793
Per Share Amounts:
Basic net income	$	11.78		$	10.26		$	3.49
Diluted net income	$	11.77		$	10.24		$	3.47
Cash dividends declared and paid	$	0.70		$	0.70		$	0.65

See notes to consolidated financial statements.

70

Overseas Shipholding Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

In thousands for the year ended December 31,	2005			2004			2003
Cash Flows from Operating Activities:
Net income	$	464,829		$	401,236		$	121,309
Items included in net income not affecting cash flows:
Depreciation and amortization	152,311			100,088			90,010
Amortization of deferred gain on sale and leasebacks	(9,897		)	(550		)	(6,888		)
Deferred compensation relating to restricted stock	1,364			425			—
Deferred compensation relating to stock option grants	720			—			226
Unrealized loss on write-down of marketable securities	—			—			4,756
Provision/(credit) for deferred federal income taxes	675			(53,619		)	11,351
Undistributed earnings of joint ventures	(9,307		)	(28,754		)	(17,999		)
Other—net	(10,856		)	3,838			(7,853		)
Items included in net income related to investing and financing   activities:
Gain on sale of securities—net	(23,186		)	(7,204		)	(10,439		)
(Gain)/loss on disposal of vessels	(42,905		)	(29,222		)	6,809
Changes in operating assets and liabilities:
Decrease/(increase) in receivables	45,319			(84,471		)	(4,534		)
Increase/(decrease) in Federal income taxes payable	(96,435		)	76,165			13,172
Net change in prepaid items and accounts payable, sundry liabilities and accrued expenses	(20,586		)	18,893			30,830
Net cash provided by operating activities	452,046			396,825			230,750
Cash Flows from Investing Activities:
Proceeds from sales of marketable securities	—			—			34,674
Expenditures for vessels, including $9,339 in 2004 and $29,167 in 2003 related to vessels under construction	(5,166		)	(59,439		)	(87,007		)
Payments for drydockings	(16,899		)	(22,354		)	(5,971		)
Proceeds from disposal of vessels	858,142			99,082			151,143
Acquisitions of interests in joint ventures that own VLCCs	—			(2,292		)	(10,362		)
Acquisition of interest in joint venture that owned four V-Pluses	(69,047		)	—			—
Acquisition of Stelmar Shipping Ltd., net of cash acquired of $107,911	(742,433		)	—			—
Expenditures for other property	(12,257		)	(2,349		)	(1,579		)
Investments in and advances to joint ventures	(9,495		)	(214,403		)	(60,090		)
Distributions from joint ventures	20,853			1,988			6,612
Purchases of other investments	(847		)	(669		)	(919		)
Proceeds from dispositions of other investments	23,271			10,042			27,581
Other—net	(863		)	(781		)	(1,744		)
Net cash provided by/(used in) investing activities	45,259			(191,175		)	52,338
Cash Flows from Financing Activities:
Issuance of common stock, net of issuance costs	—			115,513			—
Issuance of debt, net of issuance costs	781,268			158,730			194,849
Payments on debt and obligations under capital leases	(1,541,293		)	(49,026		)	(435,164		)
Cash dividends paid	(27,615		)	(27,532		)	(22,686		)
Issuance of common stock upon exercise of stock options	218			3,716			20,259
Other—net	(476		)	(1,873		)	(3,287		)
Net cash provided by/(used in) financing activities	(787,898		)	199,528			(246,029		)
Net (decrease)/increase in cash and cash equivalents	(290,593		)	405,178			37,059
Cash and cash equivalents at beginning of year	479,181			74,003			36,944
Cash and cash equivalents at end of year	$	188,588		$	479,181		$	74,003

See notes to consolidated financial statements.

71

Overseas Shipholding Group, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity

											Unearned									Accumulated
				Paid-in							Compensation									Other
	Common			Additional				Retained			Restricted				Treasury Stock					Comprehensive
Dollars in thousands	Stock			Capital				Earnings			Stock				Share		Amount			Income				Total
Balance at December 31, 2002		$	39,591		$	106,154		$	731,201			$	—		5,139,684		$	(70,270	)		$	(22,527	)	$	784,149
Net Income								121,309																121,309
Cumulative Effect of Change in Accounting Principle, net of tax benefit of $902																					(1,674		)	(1,674		)
Other Comprehensive Income/(Loss), net of tax:
Net unrealized holding gains onavailable-for-sale securities*																					6,242			6,242
Effect of derivative instruments																					5,334			5,334
Minimum pension liability																					190			190
Comprehensive Income																								131,401
Cash Dividends Declared and Paid								(22,686		)														(22,686		)
Deferred Compensation Related to Options Granted					226																			226
Options Exercised and Employee Stock Purchase Plan					(1,557		)								(1,454,358	)	21,816							20,259
Tax Benefit Related to Options Exercised					3,726																			3,726
Balance at December 31, 2003		39,591			108,549			829,824				—			3,685,326		(48,454		)		(12,435		)	917,075
Net Income								401,236																401,236
Other Comprehensive Income/(Loss), net of tax:
Net unrealized holding gains onavailable-for-sale securities*																					7,335			7,335
Effect of derivative instruments																					8,447			8,447
Minimum pension liability																					(1,409		)	(1,409		)
Comprehensive Income																								415,609
Cash Dividends Declared and Paid								(27,532		)														(27,532		)
Issuance of Common Stock		1,200			87,299										(2,000,000	)	27,014							115,513
Issuance of Restricted Stock Award					1,148							(1,785		)	(50,000	)	637							—
Amortization of Restricted Stock Award												425												425
Options Exercised and Employee Stock Purchase Plan					492										(244,046	)	3,224							3,716
Tax Benefit Related to Options Exercised					1,566																			1,566
Balance at December 31, 2004		40,791			199,054			1,203,528				(1,360		)	1,391,280		(17,579		)		1,938			1,426,372
Reclassification upon adoption of FAS 123(R)					(1,360		)					1,360												—
Net Income								464,829																464,829
Other Comprehensive Income/(Loss), net of tax:
Net unrealized holding gains onavailable-for-sale securities*																					2,329			2,329
Effect of derivative instruments																					6,352			6,352
Minimum pension liability																					1,325			1,325
Comprehensive Income																								474,835
Cash Dividends Declared and Paid								(27,615		)														(27,615		)
Deferred Compensation Related to Options Granted					720																			720
Issuance of Restricted Stock Awards					(487		)								(43,766	)	487							—
Amortization of Restricted Stock Awards					1,364																			1,364
Options Exercised and Employee Stock Purchase Plan					145										(5,796	)	73							218
Tax Benefit Related to Options Exercised					134																			134
Balance at December 31, 2005		$	40,791		$	199,570		$	1,640,742			$	—		1,341,718		$	(17,019	)		$	11,944		$	1,876,028

*For 2003, net of write-down of marketable securities of $385 and realized gains of $6,624 that were included in net income; for 2004, net of realized gains included in net income of $3,907; and for 2005, net of realized gains included in net income of $11,219.

See notes to consolidated financial statements.

72

Overseas Shipholding Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note A—Summary of Significant Accounting Policies:

1.Basis of presentation and description of business—The consolidated financial statements include the accounts of Overseas Shipholding Group, Inc., a Delaware corporation, and its majority-owned subsidiaries (the “Company” or “OSG”). For the three years ended December 31, 2005, all subsidiaries were wholly owned. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in 50% or less owned joint ventures, in which the Company exercises significant influence, are accounted for by the equity method.

The Company owns and operates a fleet of oceangoing vessels engaged in the transportation of liquid and dry bulk cargoes in the international market and the U.S. Flag trades.

The consolidated balance sheet for 2004 and the consolidated statements of cash flows for 2004 and 2003 have been reclassified to conform to the 2005 presentation of certain items.

2.Cash and cash equivalents—Interest-bearing deposits that are highly liquid investments and have a maturity of three months or less when purchased are included in cash and cash equivalents.

3.Marketable securities—The Company’s investments in marketable securities are classified as available for sale and are carried at fair value. Net unrealized gains or losses are reported as a component of accumulated other comprehensive income within shareholders’ equity.

The Company accounts for investments in marketable securities in accordance with the provisions of Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities” and Staff Accounting Bulletin No. 59, “Noncurrent Marketable Equity Securities.”  Accordingly, if a material decline in the fair value below the Company’s cost basis is determined to be other than temporary, a noncash impairment loss is recorded as a charge in the statement of operations in the period in which that determination is made. As a matter of policy, the Company evaluates all material declines in fair value for impairment whenever the fair value of a stock has been below its cost basis for more than six consecutive months. In the period in which a decline in fair value is determined to be other than temporary, the carrying value of that security is written down to its fair value at the end of such period, thereby establishing a new cost basis.

4.Inventories—Inventories, which consist of fuel, are stated at cost determined on a first-in, first-out basis.

5.Vessels, deferred drydocking expenditures and other property—Vessels are recorded at cost and are depreciated to their estimated salvage value on the straight-line basis, using a vessel life of 25 years. Each vessel’s salvage value is equal to the product of its lightweight tonnage and an estimated scrap rate. Accumulated depreciation was $374,389,000 and $462,661,000 at December 31, 2005 and 2004, respectively.

Other property, including leasehold improvements, are recorded at cost and amortized substantially on the straight-line basis over the shorter of the terms of the leases or the estimated useful lives of the assets, which range from three to seven years.

Interest costs are capitalized to vessels during the period that vessels are under construction. Interest capitalized aggregated $3,885,000 in 2005, $201,000 in 2004 and $3,987,000 in 2003.

Expenditures incurred during a drydocking are deferred and amortized on the straight-line basis over the period until the next scheduled drydocking, generally two and a half to five years. Expenditures for maintenance and repairs are expensed when incurred. Amortization of

73

capitalized drydock expenditures, which is included in depreciation and amortization in the consolidated statements of operations, amounted to $11,735,000 in 2005, $9,899,000 in 2004 and $10,810,000 in 2003.

6.Vessels under capital leases—The Company charters in one International Flag Handysize Product Carrier and two U.S. Flag vessels that it accounts for as capital leases. Amortization of capital leases is computed by the straight-line method over five years for the Handysize Product Carrier and 22 years for the U.S. Flag vessels (25 years with respect to the charters-in of two other U.S. Flag vessels that terminated in 2003), representing the terms of the leases (see Note N1). Accumulated amortization was $71,242,000 and $64,441,000 at December 31, 2005 and 2004, respectively.

7.Impairment of long-lived assets—The carrying amounts of long-lived assets held and used by the Company are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular asset may not be fully recoverable. In such instances, an impairment charge would be recognized if the estimate of the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than the asset’s carrying amount. This assessment is made at the individual vessel level since separately identifiable cash flow information for each vessel is available. The amount of an impairment charge, if any, would be determined using discounted cash flows.

8.Deferred finance charges—Finance charges incurred in the arrangement of debt are deferred and amortized to interest expense on the straight-line basis over the life of the related debt. Deferred finance charges of $13,429,000 and $13,203,000 are included in other assets at December 31, 2005 and 2004, respectively. Amortization amounted to $4,498,000 in 2005, $2,757,000 in 2004 and $2,865,000 in 2003.

9.Revenue and expense recognition—Revenues from time charters and bareboat charters are accounted for as operating leases and are thus recognized ratably over the rental periods of such charters, as service is performed. Voyage revenues and expenses are recognized ratably over the estimated length of each voyage and, therefore, are allocated between reporting periods based on the relative transit time in each period. OSG does not begin recognizing voyage revenue until a Charter has been agreed to by both the Company and the customer, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next voyage.

Under voyage charters, expenses such as fuel, port charges, canal tolls, cargo handling operations and brokerage commissions are paid by the Company whereas, under time and bareboat charters, such voyage costs are paid by the Company’s customers. For voyage charters, time charter equivalent revenues represent shipping revenues less voyage expenses. For time and bareboat charters, time charter equivalent revenues represent shipping revenues less brokerage commissions, if applicable, which are included in voyage expenses.

For the Company’s vessels operating in the Tankers International LLC (“Tankers International”) pool, the Aframax International pool, Panamax International Ltd. and formerly, in the Dry Bulk Carrier pool, revenues and voyage expenses are pooled and allocated to each pool’s participants on a time charter equivalent basis in accordance with an agreed-upon formula.

Ship operating expenses exclude voyage expenses. Vessel expenses include crew costs, vessel stores and supplies, lubricating oils, maintenance and repairs, insurance and communication costs.

10.Derivatives—Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”) requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not effective hedges must be adjusted to fair value through income. If the derivative is an effective hedge, depending on the

74

nature of the hedge, a change in the fair value of the derivative is either offset against the change in fair value of the hedged item (fair value hedge), or recognized in other comprehensive income/(loss) until the hedged item is reflected in earnings (cash flow hedge). The ineffective portion (that is, the change in fair value of the derivative that does not offset the change in fair value of the hedged item) of an effective hedge and the full amount of an ineffective hedge will be immediately recognized in earnings.

The Company uses derivatives to reduce market risks associated with its operations. The Company uses interest rate swaps for the management of interest rate risk exposure. The interest rate swaps effectively convert a portion of the Company’s debt from a floating to a fixed rate and are designated and qualify as cash flow hedges. The Company also uses forward freight agreements from time-to-time in order to reduce its exposure to the spot charter market for specified trade routes by creating synthetic time charters for the terms of the agreements. The forward freight agreements involve contracts to provide a fixed number of theoretical voyages at fixed rates. Forward freight agreements that meet the 80% effectiveness threshold required by FAS 133 are accounted for as effective cash flow hedges. For interest rate swaps, the Company assumes no ineffectiveness since each interest rate swap either meets the conditions required under FAS 133 to apply the short-cut method or the critical terms method in the case of prepayable debt such as borrowings under the Company’s long-term revolving credit facilities. Accordingly, no gains or losses have been recorded in income relative to the Company’s interest rate swaps that qualify as hedges. Any gain or loss realized upon the early termination of an interest rate swap is recognized as an adjustment of interest expense over the shorter of the remaining term of the swap or the hedged debt.

11.Use of estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Note B—Changes in Accounting Principle:

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). This interpretation requires the consolidation of special purpose entities by the company that is deemed to be the primary beneficiary of such entities. This represents a significant change from the prior rules, which required consolidation by the entity with voting control; and, according to which OSG accounted for its 1999 sale-leaseback transaction of U.S. Flag Crude Tankers as an off-balance-sheet financing. On July 1, 2003, the Company consolidated the special purpose entity (“Alaskan Equity Trust”) that owned these vessels and held the associated bank debt used to purchase them because, under the provisions of FIN 46, the Company is considered to be the primary beneficiary of Alaskan Equity Trust. The vessels were recorded in the consolidated balance sheet based on their carryover bases, that is, as if FIN 46 had been effective at the time of the 1999 sale-leaseback. OSG did not issue any repayment or residual-value guaranties. Therefore, OSG was not exposed to any loss as a result of its involvement with Alaskan Equity Trust. The cumulative effect of this change in accounting principle on the Company’s consolidated balance sheet as of July 1, 2003 was to increase total assets by $25,079,000 (principally to reflect the reconsolidation of the vessels), to increase liabilities by $26,753,000 (principally to reflect debt of Alaskan Equity Trust of $45,034,000 partially offset by the elimination of the unamortized balance of the deferred gain on the 1999 sale-leaseback of $21,141,000) and to reduce shareholders’ equity by $1,674,000 (to reflect the fair value of Alaskan Equity Trust’s floating-to-fixed interest rate swaps included in accumulated other comprehensive income). The cumulative effect of such accounting change on net income was insignificant.

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As of December 31, 2005, the Company had three stock-based compensation plans under which options have been granted. The Company’s stock-based compensation plans are more fully described in Note L.  On December 16, 2004, the Financial Accounting Standards Board issued Statement No. 123(R) (“FAS 123(R)”), “Share-Based Payment,” amending Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“FAS 123”) and requiring that all share-based payments to employees be recognized in the financial statements at fair value.

Prior to January 1, 2005, the Company accounted for those plans under the recognition and measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”) and related Interpretations, as permitted by FAS 123. Generally, no stock-based employee compensation cost was recognized in the consolidated statements of operations because options granted under those plans had an exercise price equal to the market value of the stock on the date of grant. Effective January 1, 2005, the Company adopted the fair value recognition provisions of FAS 123(R) using the modified-prospective transition method. Under that transition method, compensation cost recognized in 2005 includes compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of FAS 123, and compensation cost for all share-based payments granted subsequent to January 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of FAS 123(R). Results for prior periods have not been restated.

The following table presents the effects on net income and net income per share as if the Company had not applied the fair value recognition provisions of FAS 123(R) and continued to account for stock-based compensation under APB 25 for 2005.

In thousands, except per share amounts, for the year ended December 31, 2005
Net income, as reported	$	464,829
Add: Total stock-based compensation expense recognized under fair value
based method for all awards, net of tax of $250	465
Pro forma net income	$	465,294
Per share amounts:
Basic—as reported	$	11.78
Basic—pro forma	$	11.80
Diluted—as reported	$	11.77
Diluted—pro forma	$	11.78

The following table presents the effects on net income and net income per share as if the Company had applied the fair value recognition provisions of FAS 123 to stock-based compensation for 2004 and 2003.

In thousands, except per share amounts for the year ended, December 31,	2004			2003
Net income, as reported	$	401,236		$	121,309
Deduct: Total stock-based compensation expense determined under
fair value based method for all awards, net of tax	(354		)	(158		)
Pro forma net income	$	400,882		$	121,151
Per share amounts:
Basic—as reported	$	10.26		$	3.49
Basic—pro forma	$	10.25		$	3.49
Diluted—as reported	$	10.24		$	3.47
Diluted—pro forma	$	10.23		$	3.46

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Note C—Acquisition of Stelmar Shipping Ltd.:

On January 20, 2005, the Company acquired 100% of the common stock of Stelmar Shipping Ltd. (“Stelmar”), a leading provider of petroleum product and crude oil transportation services. The operating results of Stelmar have been included in the Company’s financial statements commencing January 21, 2005. Holders of Stelmar’s common stock received $48.00 per share in cash for an aggregate consideration of approximately $844 million. Taking into account the assumption of Stelmar’s outstanding debt, the total purchase price was approximately $1.35 billion. The Company funded the acquisition of Stelmar and the refinancing of its debt with $675 million of borrowings under new credit facilities and $675 million of cash and borrowings under long-term credit facilities in existence as of December 31, 2004.

The following table summarizes the fair value of Stelmar’s assets and liabilities at the date of the acquisition (in thousands):

Assets:
Current assets, including receivables	$	159,045
Vessels	1,257,573
Vessels under capital leases	8,280
Other assets	2,627
Total assets acquired	1,427,525
Liabilities:
Current liabilities, including current installments of long-term debt	101,625
Long-term debt	467,604
Obligations under capital lease	6,662
Other liabilities	1,290
Total liabilities assumed	577,181
Net assets acquired (cash consideration)	$	850,344

The following pro forma financial information reflects the results for 2005 and 2004, of the Stelmar acquisition as if it had occurred on January 1, 2004, after giving effect to purchase accounting adjustments:

In thousands, except per share amounts, for the year ended December 31,	2005		2004
Pro forma time charter equivalent revenues	$	979,737	$	1,032,275
Pro forma net income	472,079		453,805
Pro forma per share amounts:
Basic	$	11.97	$	11.60
Diluted	$	11.95	$	11.58

The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what operating results would have been had the acquisition actually taken place on January 1, 2004. These results do not reflect any synergies that might be achieved from the combined operations.

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Note D—Business and Segment Reporting:

The Company is engaged primarily in the ocean transportation of crude oil and petroleum products in both the international market and the U.S. Flag trades through the ownership and operation of a diversified fleet of bulk cargo vessels. The bulk shipping industry has many distinct market segments based, in large part, on the size and design configuration of vessels required and, in some cases, on the flag of registry. Rates in each market segment are determined by a variety of factors affecting the supply and demand for vessels to move cargoes in the trades for which they are suited. Bulk vessels are not bound to specific ports or schedules and therefore can respond to market opportunities by moving between trades and geographical areas. The Company charters its vessels to commercial shippers and U.S. and foreign governments and governmental agencies primarily on voyage charters and on time and bareboat charters, which are longer term (see Note N2).

Following the acquisition of Stelmar, the Company revised its reportable segments. The Company now has three reportable segments: International Flag Crude Tankers, International Handysize Product Carriers, and U.S. Flag vessels.  Segment information as of December 31, 2004 and 2003 and for the years then ended have been reclassified to conform to the current presentation. Segment results are evaluated based on income from vessel operations before general and administrative expenses. The Company uses time charter equivalent revenues to make decisions regarding the deployment and use of its vessels. The accounting policies followed by the reportable segments are the same as those followed in the preparation of the Company’s consolidated financial statements.

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Information about the Company’s reportable segments as of and for the three years ended December 31, 2005 follows:

	International Flag
In thousands	Crude Tankers			Product  Carriers		Other			U.S. Flag		Totals
2005
Shipping revenues	$	693,490		$	193,895	$	21,061		$	91,857	$	1,000,303
Time charter equivalent revenues	683,551			171,100		25,902			81,109		961,662
Depreciation and amortization	96,863			32,552		3,582			19,314		152,311
Income from vessel operations	410,837			65,385		4,925			30,554		511,701		*
Equity in income of joint ventures	36,010			—		(269		)	8,066		43,807
Gain on disposal of vessels	35,447			—		—			7,458		42,905
Investments in joint ventures at December 31, 2005	167,498			—		94,290			7,869		269,657
Total assets at December 31, 2005	1,964,986			646,332		95,527			89,042		2,795,887
Expenditures for vessels	2,142			175		—			2,849		5,166
Payments for drydockings	7,701			7,184		—			2,014		16,899
2004
Shipping revenues	670,353			30,523		25,998			83,961		810,835
Time charter equivalent revenues	665,645			25,159		25,014			73,763		789,581
Depreciation and amortization	74,642			5,029		2,055			18,362		100,088
Income from vessel operations	474,198			11,642		2,052			27,881		515,773		*
Equity in income of joint ventures	38,487			—		15			7,097		45,599
Gain on disposal of vessels	26,357			—		(36		)	2,901		29,222
Investments in joint ventures at December 31, 2004	130,018			—		90,652			7,031		227,701
Total assets at December 31, 2004	1,616,988			44,555		92,209			110,515		1,864,267
Expenditures for vessels	16,182			245		—			43,012		59,439
Payments for drydockings	17,832			1,783		—			2,739		22,354
2003
Shipping revenues	324,496			23,123		21,985			84,516		454,120
Time charter equivalent revenues	315,179			19,213		21,888			74,856		431,136
Depreciation and amortization	63,554			4,184		5,570			16,702		90,010
Income from vessel operations	185,183			6,920		11,378			27,294		230,775		*
Equity in income of joint ventures	26,318			—		63			7,584		33,965
Loss on disposal of vessels	(854		)	—		(5,964		)	9		(6,809		)
Investments in joint ventures at December 31, 2003	175,958			—		436			7,437		183,831
Total assets at December 31, 2003	1,490,291			42,540		3,832			85,044		1,621,707
Expenditures for vessels	86,292			606		—			109		87,007
Payments for drydockings	1,103			2,634		—			2,234		5,971

*Segment totals for income from vessel operations are before general and administrative expenses.

For vessels operating in pools or on time or bareboat charters, shipping revenues are substantially the same as time charter equivalent revenues.

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The three Handysize Product Carriers that were reflagged under the U.S. Flag in late 2005 have been included in the International Flag Handysize Product Carriers segment since these vessels continue to trade primarily in the international market.

The International Flag Crude Tankers segment includes two Panamaxes in 2004 and four in 2003. The joint venture that is constructing four LNG Carriers is included in the Other International Flag segment along with two Capesize Dry Bulk Carriers.

Reconciliations of total assets of the segments to amounts included in the consolidated balance sheets follow:

In thousands at December 31,	2005		2004		2003
Total assets of all segments	$	2,795,887	$	1,864,267	$	1,621,707
Corporate cash and securities,
including Capital Construction Fund	484,714		747,595		321,436
Other unallocated amounts	68,079		68,936		57,543
Consolidated total assets	$	3,348,680	$	2,680,798	$	2,000,686

Certain additional information about the Company’s operations for the three years ended December 31, 2005 follows:

In thousands	Consolidated			International Flag*				U.S. Flag
2005
Shipping revenues		$	1,000,303		$	908,446		$	91,857
Total vessels, deferred drydock and other property
at December 31, 2005		2,344,553			2,144,261		**	200,292
2004
Shipping revenues		810,835			726,874			83,961
Total vessels, deferred drydock and other property
at December 31, 2004		1,489,512			1,385,612		**	103,900
2003
Shipping revenues		454,120			369,604			84,516
Total vessels, deferred drydock and other property
at December 31, 2003		1,384,524			1,305,214		**	79,310

*Principally Marshall Islands as of December 31, 2005.

**Includes three Handysize Product Carriers that were reflagged under the U.S. Flag of $109,830 (2005), vessel held for sale of $9,744 (2004) and vessels under construction of $36,202 (2003).

See Note K for information relating to taxation of income and undistributed earnings of foreign subsidiaries and unconsolidated affiliates.

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Note E—Vessels and Other Property:

Vessels and other property consist of the following:

In thousands at December 31,	2005			2004
Vessels, at cost	$	2,643,114		$	1,874,614
Other property, at cost	29,254			15,040
	2,672,368			1,889,654
Accumulated depreciation and amortization	(383,887		)	(469,893		)
	$	2,288,481		$	1,419,761

Note F—Joint Ventures, Equity Method Investments and Pooling Arrangements:

As of December 31, 2005, the Company is a partner in one joint venture that owns seven International Flag vessels (three VLCCs and four Aframaxes) and one joint venture that has four LNG Carriers under construction. In addition, the Company is a partner in Panamax International Ltd. (see discussion below), a commercial management arrangement, which is structured as a joint venture.

Alaska Tanker Company

In the first quarter of 1999, OSG, BP, and Keystone Shipping Company formed Alaska Tanker Company, LLC (“ATC”) to manage the vessels carrying Alaskan crude oil for BP. ATC, which is owned 37.5% by OSG, 37.5% by Keystone and 25% by BP, provides marine transportation services in the environmentally sensitive Alaskan crude oil trade. Each member in ATC is entitled to receive its respective share of any incentive charter hire payable, if certain conditions are met, by BP to ATC. In the second quarter of 1999, the charters for five of the Company’s U.S. Flag Crude Tankers (all of which have subsequently been sold by the owner), which were previously time chartered to BP, were converted to bareboat charters to ATC, with guaranties from BP, to employ the vessels through their OPA 90 retirement dates. In August 1999, the Company sold these five vessels and leased them back as part of an off-balance-sheet financing. The cost of leasing back these vessels from Alaskan Equity Trust was included in time and bareboat charter hire expense. The gain on the sale-leaseback transaction was deferred and, until June 30, 2003, was being amortized over the leaseback period as a reduction in time and bareboat charter hire expense in the consolidated statements of operations. The unamortized balance of such deferred gain as of June 30, 2003 was eliminated in connection with the consolidation of Alaskan Equity Trust (see Note B). Alaskan Equity Trust was dissolved after the sale of the last of the Company’s U.S. Flag Crude Tankers in the fourth quarter of 2005.

Revenue from the bareboat charters of these vessels to ATC was included in time and bareboat charter revenue. The Company accounts for its 37.5% interest in ATC according to the equity method.

Tankers International Pool (“Tankers International”)

In December 1999, the Company and other leading tanker companies established Tankers International to pool their VLCC fleets. Tankers, which commenced operations in February 2000, commercially managed a fleet of 47 modern VLCCs and V-Pluses as of December 31, 2005. Tankers was formed to meet the global transportation requirements of international oil companies and other major customers. As of December 31, 2005, all of the Company’s VLCCs and V-Pluses, including six chartered-in VLCCs in which the Company has an average participation interest of 38%, participate in the Tankers pool.

Aframax International Pool (“Aframax International”)

Since 1996, the Company and PDV Marina S.A., the marine transportation subsidiary of the Venezuelan state-owned oil company, have pooled the Commercial Management of their Aframax

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fleets. The pool commercially managed a fleet of 36 modern Aframaxes as of December 31, 2005, which generally trade in the Atlantic Basin, North Sea and the Mediterranean. As of December 31, 2005, all but one of the Company’s Aframaxes, including two chartered-in Aframaxes in which the Company has a 50% participation interest, trade in this pool. The one Aframax not currently trading in Aframax International is expected to join the pool in early 2006, upon the expiration of its time charter.

Panamax International Ltd. (“Panamax International”)

Panamax International (formerly Stelcape Limited), in which the Company has a 50% interest, was formed in April 2004 to commercially manage the Panamax fleets of its two partners. As of December 31, 2005, Panamax International managed a fleet of 13 modern Panamaxes. Nine of the Company’s Panamaxes, including four that are on time charter to the Company’s partner, participate in Panamax International.

The Company accounts for Panamax International in a manner similar to the pools in which OSG participates. Distributions from Panamax International represent allocations of its time charter equivalent revenues and are included in pool revenues. Amounts due from Panamax International represent the Company’s share of Panamax International’s net receivables and are included in unbilled voyage receivables. Accordingly, Panamax International has not been included in the condensed summaries of assets and liabilities, and of operations of the equity method investments presented below.

Capesize Bulk Carrier Pool

During the first quarter of 2000, the Company and other major vessel owners agreed to pool their Capesize Dry Bulk Carriers. The Company’s two International Flag Dry Bulk Carriers were withdrawn from such pool in early 2004 upon commencement of three-year time charters.

Double Hull Tankers, Inc.

In October 2005, OSG sold seven tankers (three VLCCs and four Aframaxes) to Double Hull Tankers, Inc. (“DHT”) in connection with DHT’s initial public offering. In consideration, the Company received $412,580,000 in cash and 14,000,000 shares in DHT, representing a 46.7% equity stake in the new tanker concern. In November 2005, the Company sold 648,500 shares of DHT, pursuant to the exercise of the over-allotment option granted to the underwriters of DHT’s initial public offering, and received net cash proceeds of $7,315,000. Such sale reduced the Company’s interest in DHT to 44.5%. As of December 31, 2005, the carrying amount of the investment in DHT was $164,530,000 (market value—$175,839,000). OSG time chartered the vessels back from DHT for initial periods of five to six and one-half years with various renewal options of up to an additional five to eight years, depending on the vessel. The charters provide for profit sharing with DHT when the aggregate TCE revenues earned by the vessels exceed the aggregate basic charter hire defined in the agreement (see Note N1). Under related agreements, a subsidiary of the Company technically manages these vessels for DHT for amounts that have been fixed (except for vessel insurance premiums) over the term of the agreements. Such management agreements are cancelable by DHT upon 90 days notice.

The technical management fees earned by the Company, as well as the costs incurred in performing the required services under the management agreements, are included in vessel expenses. A summary of amounts recognized in 2005 follows (in thousands):

Technical management fees earned	$	2,807
Costs incurred in performing the required services	(2,132		)
	$	675

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OSG booked a gain on the sale and charter back of these vessels of $232,159,000 in the fourth quarter of 2005. The gain was deferred for accounting purposes and will be recognized as a reduction of time charter hire expense over the initial charter periods.

VLCC Joint Ventures

In 2000, the Company acquired a 30% interest in a joint venture that purchased the Front Tobago, a 1993-built VLCC, for approximately $37 million, which immediately began participating in the Tankers International pool. The vessel’s acquisition was financed by the joint venture through long-term bank financing and subordinated partner loans. The outstanding balance of the long-term bank financing was repaid in December 2004. The joint venture sold the Front Tobago in December 2005 and recognized a gain of $9,446,000.

In 2001, the Company formed joint ventures that entered into an agreement whereby companies in which OSG held a 49.9% interest acquired two 1993-built VLCCs (Dundee and Edinburgh) for approximately $103 million. Such acquisitions were financed by the joint ventures through long-term bank financing and subordinated partner loans. The outstanding balance of the long-term bank financing was repaid in December 2003 using funds received from the partners.

In June 2001, the Company agreed to acquire a 33.33% interest in joint ventures formed to purchase six new VLCCs. The number of vessels to be purchased was reduced to five in August 2001. Three vessels were delivered to the joint ventures in the third quarter of 2001. The remaining two were delivered to the joint ventures upon completion of their construction in February and July 2002. The total purchase price for the vessels of $399 million and the joint ventures’ then remaining commitments under the construction contracts for two of those vessels were financed by the joint ventures through long-term bank financing and subordinated partner loans. In 2003, the Company completed transactions with its partners to restructure the relative ownership interests in the five joint-venture companies. These transactions, which increased OSG’s overall joint-venture interest by the equivalent of one third of a vessel, were effective as of July 1, 2003. In one transaction, the Company, jointly with one partner, acquired the remaining partner’s 33.33% interest in the joint venture companies owning the Ariake and Sakura I for cash of approximately $20,000,000, thereby increasing the Company’s share in such joint ventures to 49.889%. In a second transaction, the Company exchanged its 33.33% interest in the Ichiban with one partner for a portion of that partner’s interest in the Tanabe and Hakata, thereby increasing the Company’s interest in these joint ventures to 49.889%. The outstanding balance of the long-term bank financing for the Tanabe and Hakata was repaid in December 2003 using funds received from the partners.

In February 2004, the Company completed a transaction covering six joint-venture companies (including the vessel companies in the above paragraph), each of which owned a VLCC. This transaction provided for an exchange of joint-venture interests and cash of approximately $2,300,000 paid by the Company resulting in the Company owning 100% of the Dundee, Sakura I and Tanabe, and the joint venture partner owning 100% of the Edinburgh, Ariake and Hakata. The results of the Dundee, Sakura I and Tanabe are included in the International Flag Crude Tankers segment from the effective date of the transaction. In connection with the transaction, the Company advanced $34,447,000, representing its share of the amounts required to repay the combined bank debt of such joint ventures.

Through April 2003, the Company had a 50% interest in a joint venture with a major oil company that owned two VLCCs that were operating on long-term charters, one to OSG (which vessel has been time chartered to the major oil company) and one to such major oil company. In April 2003, OSG acquired its partner’s 50% interest in the joint venture, resulting in such vessels becoming 100% owned. Accordingly, the results of these two vessels are included in the consolidated statements of operations from the effective date of the transaction. The acquisition was accomplished through the

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joint venture’s redemption of the Company’s partner’s shares in exchange for one of the venture’s two vessel owning subsidiaries, followed by OSG’s purchase from the partner of such vessel for $56,500,000. In accordance with the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the joint venture recognized a loss on disposal of $5,132,000 based on the excess of the carrying amount of the vessel transferred to OSG’s former partner over its fair value.

V-Plus Joint Venture

In April 2004, the Company formed a joint venture with a Tankers International pool partner to acquire four 442,000 dwt V-Pluses, three built in 2002 and one built in 2003, which were delivered in July 2004. OSG had a 49.9% interest in this joint venture. The total purchase price for these vessels of $448,000,000 was financed by the joint venture through a long-term bank loan of $290,000,000 and subordinated partner loans and capital contributions. On June 1, 2005, a subsidiary of OSG acquired its partner’s 50.1% interest in this joint venture for cash of approximately $69,000,000, then sold two of the four V-Pluses to the former joint venture partner, recognizing a gain of $3,808,000, in exchange for cash of approximately $168,548,000, which is net of the repayment of subordinated partner loans. Accordingly, the results of the two remaining V-Pluses are included in the consolidated statements of operations from the effective date of the transaction.

Aframax Joint Venture

In May 2000, the Company invested $1,500,000 for a 50% interest in a joint venture that bareboat chartered in the Compass I, a 1992-built Aframax, which was accounted for as a capital lease by the joint venture. In May 2002, such joint venture exercised a purchase option and acquired the vessel. The purchase price of approximately $13,000,000 was financed through capital contributions from the partners. In January 2003, the joint venture borrowed $15,375,000, the proceeds of which were used to repay the capital contributions received from the shareholders. In April 2005, this joint venture sold the Compass I and recognized a gain of $11,349,000.

LNG Joint Venture

In November 2004, the Company formed a joint venture with Qatar Gas Transport Company Limited (Nakilat) whereby companies in which OSG holds a 49.9% interest ordered four 216,000 cbm LNG Carriers. Upon delivery in 2007 and 2008, these vessels will commence 25-year time charters to Qatar Liquefied Gas Company Limited (II). The aggregate construction cost for such newbuildings of $908,100,000 will be financed by the joint venture through long-term bank financing and partner contributions. OSG has advanced $90,635,000 to such joint venture as of December 31, 2005, representing its share of working capital ($10,000)  and the first installment under the construction contracts ($90,625,000, or approximately 49.9% of $181,600,000). The aggregate unpaid costs of $726,500,000 will be funded through bank financing that will be nonrecourse to the partners. The joint venture has entered into forward start floating-to-fixed interest rate swaps with a group of major financial institutions that are being accounted for as cash flow hedges. The interest rate swaps cover notional amounts aggregating approximately $826,926,000, pursuant to which it will pay fixed rates of 4.91% and 4.93% and receive a floating rate based on LIBOR. These agreements have forward start dates ranging from July to October 2008 and maturity dates ranging from July to October 2022. As of December 31, 2005, the joint venture has recorded an asset of $44,000 for the fair value of these swaps.

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A condensed summary of the combined assets and liabilities of the equity method investments, excluding Panamax International, follows: 

In thousands at December 31,	2005		2004
Current assets	$	96,195	$	130,690
Vessels, net	523,045		662,924
Other assets	12,523		3,958
Total assets	$	631,763	$	797,572
Current installments of long-term debt	$	—	$	17,207
Other current liabilities	47,469		47,798
Total current liabilities	47,469		65,005
Long-term debt	281,403		279,862
Subordinated loans due to the joint venture partners	¾		170,324
Equity*	302,891		282,381
Total liabilities and equity	$	631,763	$	797,572

*Includes undistributed earnings of $12,046 (2005) and $95,147 (2004).

As of December 31, 2005, the joint ventures in which the Company participate had total bank debt outstanding of $281,403,000, all of which was non recourse to the Company. The Company’s percentage interest in the joint ventures with bank debt ranged from 44.5% to 49.9%.

A condensed summary of the results of operations of the equity method investments, excluding Panamax International, follows:

In thousands for the year ended December 31,	2005			2004			2003
Time charter equivalent revenues	$	252,127		$	271,387		$	294,130
Ship operating expenses	(167,443		)	(162,257		)	(196,275		)
Gain/(loss) on vessel disposals	20,795			—			(5,132		)
Income from vessel operations	105,479			109,130			92,723
Other income	546			401			250
Interest expense*	(9,496		)	(8,132		)	(18,111		)
Net income	$	96,529		$	101,399		$	74,862

*Includes interest on subordinated loans payable to the joint venture partners of $2,725 (2005), $3,427 (2004) and $9,840 (2003). The Company’s share of such interest is eliminated in recording the results of the joint ventures by the equity method.

Note G—Investments in Marketable Securities and Capital Construction Fund:

Based on a number of factors, including the magnitude of the drop in market values below the Company’s cost bases and length of time that the declines had been sustained, management concluded that declines in fair value of certain securities with an aggregate cost basis of $16,187,000 in 2003, were other than temporary. Accordingly, during 2003, the Company recorded an impairment loss aggregating $4,756,000 in the accompanying consolidated statement of operations.

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Certain information concerning the Company’s marketable securities, all of which are accounted for as available-for-sale securities, follows:

									Approximate
									market value
				Gross unrealized					and carrying
In thousands at December 31,	Cost			Gains		Losses			amount
2005
Capital Construction Fund:
U.S. Treasury securities and obligations of U.S. government agencies	$	28,602		$	724		$	37		$	29,289
Mortgage-backed securities	40,973			93			171			40,895
Other debt securities	55,423			262			357			55,328
Total debt securities	124,998			1,079			565			125,512
Equity securities	60,873			27,595			990			87,478
Mutual funds	91,598			1,061			3,196			89,463
Cash and cash equivalents	2,004			—			—			2,004
Accrued payables, net—principally unsettled purchases	(8,331		)	—			—			(8,331		)
Total Capital Construction Fund	$	271,142		$	29,735		$	4,751		$	296,126

At February 23, 2006 the aggregate market value of the above marketable securities was approximately $304,709,000 compared with a market value of $302,453,000 as of December 31, 2005.

								Approximate
			Gross unrealized					market value and
In thousands at December 31,	Cost		Gains		Losses			carrying amount
2004
Capital Construction Fund:
U.S. Treasury securities and obligations of U.S. government agencies	$	47,414	$	689		$	71		$	48,032
Mortgage-backed securities	24,185		183			18			24,350
Other debt securities	24,475		667			131			25,011
Total debt securities	96,074		1,539			220			97,393
Equity securities	44,298		20,080			—			64,378
Cash and cash equivalents	106,643		—			—			106,643
Total Capital Construction Fund	$	247,015	$	21,619		$	220		$	268,414

The cost and approximate market value of debt securities held by the Company as of December 31, 2005, by contractual maturity (except for mortgage-backed securities, which do not have a single maturity date), follow:

In thousands	Cost		Approximate  market value
Due in one year or less	$	17,123		$	17,047
Due after one year through five years	28,543			28,381
Due after five years through ten years	16,511			16,581
Due after ten years	21,848			22,608
	84,025			84,617
Mortgage-backed securities	40,973			40,895
	$	124,998		$	125,512

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The following table shows the Capital Construction Fund’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous loss position, as of December 31, 2005.

	Less than 12 months					More than 12 months						Total
In thousands	Market  value		Unrealized losses			Market value			Unrealized losses			Market  value		Unrealized losses
U.S. Treasury securities and obligations of U.S. government agencies	$	6,075		$	37		$	—		$	—	$	6,075		$	37
Mortgage-backed securities	24,937			171			—			—		24,937			171
Other debt securities	32,720			357			—			—		32,720			357
Total debt securities	63,732			565			—			—		63,732			565
Equity securities	18,292			990			—			—		18,292			990
Mutual Funds	53,659			3,196			—			—		53,659			3,196
Total temporarily impaired securities	$	135,683		$	4,751		$	—		$	—	$	135,683		$	4,751

Note H—Derivatives and Fair Value of Financial Instruments:

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents—The   carrying amounts reported in the consolidated balance sheet for interest-bearing deposits approximate their fair value.

Investment securities—The fair value for marketable securities is based on quoted market prices or dealer quotes.

Debt, including capital lease obligations—The carrying amounts of the borrowings under the revolving credit agreements and the other floating rate loans approximate their fair value. The fair values of the Company’s fixed rate debt are estimated using discounted cash flow analyses, based on the rates currently available for debt with similar terms and remaining maturities.

Interest rate swaps—The fair value of interest rate swaps is the estimated amount that the Company would receive or pay to terminate the swaps at the reporting date.

Forward freight agreements—The fair value of forward freight agreements is the estimated amount that the Company would receive or pay to terminate the agreements at the reporting date.

The estimated fair values of the Company’s financial instruments, other than derivatives, follow:

In thousands at December 31,	Carrying amount 2005			Fair value 2005			Carrying amount 2004			Fair value 2004
Financial assets (liabilities)
Cash and cash equivalents	$	188,588		$	188,588		$	479,181		$	479,181
Capital Construction Fund—See Note G	296,126			296,126			268,414			268,414
Debt, including capital lease obligations	(992,689		)	(1,010,696		)	(935,936		)	(953,639		)

During the third quarter of 2005, the Company terminated a floating-to-fixed interest rate swap with a notional amount of $87,000,000, in connection with the prepayment of the underlying debt. Accordingly, the Company recorded a loss in other income in the accompanying statement of operations of $1,471,000 related to such swap termination.

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During the third quarter of 2004, the Company transferred a loss of $339,000 from accumulated other comprehensive income to other income in the accompanying statement of operations for an interest rate swap maturing in July 2005 with a notional amount of $8,750,000 that no longer qualified as an effective cash flow hedge because the underlying debt was repaid.

As of December 31, 2005, the Company is a party to floating-to-fixed interest rate swaps, which are being accounted for as cash flow hedges, with various major financial institutions covering notional amounts aggregating approximately $273,788,000, pursuant to which it pays fixed rates ranging from 4.6% to 5.4% and receives floating rates based on the London interbank offered rate (“LIBOR”) (approximately 4.5% at December 31, 2005). These agreements contain no leverage features and have various final maturity dates ranging from July 2006 to August 2014. As of December 31, 2005, the Company has recorded a liability in other liabilities of $1,733,000 related to the fair values of all of these swaps.

Note I—Accounts Payable, Sundry Liabilities and Accrued Expenses:

Accounts payable, sundry liabilities and accrued expenses follows:

In thousands at December 31,	2005		2004
Accounts payable	$	1,429	$	3,960
Payroll and benefits	15,456		12,658
Interest	17,244		16,118
Due to owners on chartered in vessels	13,258		12,991
Estimated acquisition costs—Stelmar	—		6,300
Termination of vessel purchase options and amounts held in escrow	7,963		5,500
Reserve for settlement of Department of Justice investigation—Note R	10,000		6,000
Charter revenues received in advance	13,710		3,102
Insurance	1,460		1,203
Other	24,653		12,215
	$	105,173	$	80,047

Note J—Debt:

Debt consists of the following:

In thousands at December 31,	2005		2004
Unsecured revolving credit facilities	$	199,000	$	199,000
7.50% notes due 2024	150,000		150,000
8.75% debentures due 2013, net of unamortized discount of $108
and $122	84,867		84,853
8.25% notes due 2013	200,000		200,000
Floating rate secured term loans, due through 2017	268,902		205,599
5.29% secured term loan, due through 2014	40,909		43,939
Other	—		5,099
	943,678		888,490
Less current portion	20,066		25,024
Long-term portion	$	923,612	$	863,466

The weighted average effective interest rates for debt outstanding at December 31, 2005 and 2004 were 6.6% and 7.0%, respectively. Such rates take into consideration related interest rate swaps.

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In January 2005, the Company concluded two debt agreements aggregating $675,000,000. The proceeds from these borrowings were used to fund the acquisition of Stelmar and refinance its debt. One of the agreements is a $500,000,000 seven-year unsecured revolving credit agreement. Borrowings under this facility bear interest at a rate based on LIBOR, and the terms, conditions, and financial covenants contained therein are comparable to those contained in the Company’s existing long-term facilities. The other agreement is a $175,000,000 term loan secured by five of Stelmar’s Handysize Product Carriers. The secured loan has a term of twelve years and bears interest at a rate based on LIBOR. The principal is repayable in 23 equal semi-annual payments of $5,303,000 and a final balloon payment of $53,030,000 due January 2017.

In July 2005, the Company repaid an outstanding secured term loan of $87,000,000 with funds obtained under its long-term unsecured revolving credit facilities.

In February 2004, the Company issued $150,000,000 principal amount of senior unsecured notes pursuant to a Form S-3 shelf registration filed January 13, 2004. The notes, which are due in February 2024 and may not be redeemed prior to maturity, have a coupon of 7.5%. The Company received proceeds of $146,605,000, after deducting expenses.

In July and November 2004, the Company concluded two seven-year unsecured revolving credit facilities aggregating $255,000,000. Borrowings under both of the facilities bear interest at a rate based on LIBOR plus a margin. In December 2004, the Company reduced the amount available under the facility maturing in December 2006 to $200,000,000 from $350,000,000.

In August 2004, the Company amended one of its floating rate secured term loans. The amendment extended its maturity date by two years to 2016, reduced the required principal payments by approximately $390,000 per annum, and added a $20,000,000 short-term credit facility.

As of December 31, 2005, the Company had unsecured long-term credit facilities aggregating $1,285,000,000, of which $1,086,000,000 was unused. In addition, the Company had two short-term credit facilities aggregating $65,000,000, all of which was unused at December 31, 2005.

In February 2006, the Company entered into a $1.5 billion seven-year unsecured revolving credit agreement (except that after five years the maximum amount the Company may borrow under the credit agreement is reduced by $150 million and after six years such amount is further reduced by an additional $150 million) with a group of banks. Borrowings under this facility bear interest at a rate based on LIBOR. The terms, conditions and financial covenants contained therein are generally more favorable than those contained in the Company’s existing long-term facilities. In connection with entering into this agreement, the Company agreed to terminate all of its unsecured revolving credit facilities (long-term of $1,285,000,000 and short-term of $45,000,000).

Agreements related to long-term debt provide for prepayment privileges (in certain instances with penalties), limitations on the amount of total borrowings and secured debt, and acceleration of payment under certain circumstances, including failure to satisfy certain financial covenants.

As of December 31, 2005, approximately 18.7% of the net book amount of the Company’s vessels, representing ten International Flag tankers is pledged as collateral under certain debt agreements.

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The aggregate annual principal payments required to be made on debt are as follows:

In thousands at December 31, 2005
2006	$	20,066
2007	20,066
2008	20,066
2009	20,066
2010	20,066
Thereafter	843,348
	$	943,678

The February 2006 refinancing of the Company’s unsecured revolving credit facilities had no impact on the repayment of debt shown in above table.

Interest paid, excluding capitalized interest, amounted to $88,363,000 in 2005, $70,539,000 in 2004 and $57,271,000 in 2003.

Note K—Taxes:

From January 1, 1987 through December 31, 2004, earnings of the foreign shipping companies (exclusive of foreign joint ventures in which the Company has a less than 50% interest) have been subject to U.S. income taxation in the year earned and may therefore be distributed to the U.S. parent without further tax. Income of foreign shipping companies earned from January 1, 1976 through December 31, 1986 (“Deferred Income”) was excluded from U.S. income taxation to the extent that such income was reinvested in foreign shipping operations. Foreign shipping income earned before 1976 is not subject to tax unless distributed to the U.S. parent. A determination of the amount of qualified investments in foreign shipping operations, as defined, is made at the end of each year and such amount is compared with the corresponding amount at December 31, 1986. If, during any determination period, there is a reduction of qualified investments in foreign shipping operations, Deferred Income, limited to the amount of such reduction, would become subject to tax.

On October 22, 2004, the President of the U.S. signed into law the American Jobs Creation Act of 2004. The Jobs Creation Act reinstated tax deferral for OSG’s foreign shipping income for years beginning after December 31, 2004. Effective January 1, 2005, the earnings from shipping operations of the Company’s foreign subsidiaries are not subject to U.S. income taxation as long as such earnings are not repatriated to the U.S. The Company intends to permanently reinvest these earnings, as well as the undistributed income of its foreign companies accumulated through December 31, 1986, in foreign operations. Accordingly, no provision for U.S. income taxes on the shipping income of its foreign subsidiaries was required in 2005 and no provision for U.S. income taxes on the undistributed income of the foreign shipping companies accumulated through December 31, 1986 was required at December 31, 2005. Further, no provision for U.S. income taxes on the Company’s share of the undistributed earnings of the less than 50%-owned foreign shipping joint ventures was required as of December 31, 2005, because the Company intends to indefinitely reinvest such earnings ($80,161,000 at December 31, 2005). The unrecognized deferred U.S. income taxes attributable thereto approximated $28,100,000.

As of December 31, 2004, the Company had accumulated $77,423,000 of net deferred tax liabilities attributable to expected future U.S. income taxes on the shipping income of its foreign shipping subsidiaries. Because of the enactment of the Jobs Creation Act and because foreign shipping income will be permanently reinvested, the Company no longer expected that these deferred tax liabilities would be paid. In accordance with the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” the Company reduced its deferred tax liabilities by $77,423,000 with a corresponding reduction in income tax expense in the fourth quarter of 2004.

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As of December 31, 2005, undistributed earnings on which U.S. income taxes have not been provided aggregated approximately $1,160,000,000, including $119,000,000 earned prior to 1976; the unrecognized deferred U.S. income tax attributable to such undistributed earnings approximated $405,000,000.

As discussed above, earnings of OSG’s foreign shipping subsidiaries from January 1, 1987 through December 31, 2004, were subject to U.S. income taxes and, therefore, may be distributed to the U.S. parent without further tax. As of December 31, 2005, the Company had accumulated in excess of $800,000,000 of undistributed previously taxed earnings that can be repatriated without incurring any additional U.S. income taxes.

Pursuant to the Merchant Marine Act of 1936, as amended, the Company is a party to an agreement that permits annual deposits, related to taxable income of certain of its domestic subsidiaries, into a Capital Construction Fund. Payments of federal income taxes on such deposits and earnings thereon are deferred until, and if, such funds are withdrawn for nonqualified purposes or termination of the agreement; however, if withdrawn for qualified purposes (acquisition of U.S. Flag vessels or retirement of debt on U.S. Flag vessels), such funds remain tax-deferred and the federal income tax basis of any such vessel is reduced by the amount of such withdrawals. Under its agreement, the Company is expected to use the fund to acquire or construct U.S. Flag vessels. Monies can remain tax-deferred in the fund for a maximum of 25 years (commencing January 1, 1987 for deposits prior thereto).

The significant components of the Company’s deferred tax liabilities and assets follow:

In thousands at December 31,	2005		2004
Deferred tax liabilities:
Excess of tax over book depreciation—net	$	14,756	$	20,787
Tax benefits related to the Capital Construction Fund	93,215		83,708
Costs capitalized and amortized for book, expensed for tax	3,923		3,022
Other—net	1,824		4,453
Total deferred tax liabilities	113,718		111,970
Deferred tax assets:
Other comprehensive income—Note M	463		6,446
Total deferred tax assets	463		6,446
Net deferred tax liabilities	113,255		105,524
Current portion of net deferred tax liabilities	—		100
Long-term portion of net deferred tax liabilities	$	113,255	$	105,424

During 2002, the Company established a valuation allowance of $3,640,000 against the deferred tax asset resulting from the write-down of certain marketable securities. The valuation allowance was established because the Company could not be certain that the full amount of the deferred tax asset would be realized through the generation of capital gains in the future. During 2004 and 2003, the Company reduced the valuation allowance by $934,000 and $2,706,000, respectively, reflecting capital gains recognized in 2004 and increases in fair values of securities previously written down and the effect of securities sold in 2003. The reductions in the valuation allowance were recorded as reductions in the provisions for federal income taxes in the accompanying consolidated statements of operations for the years ended December 31, 2004 and 2003.

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The components of income before federal income taxes follow:

In thousands for the year ended December 31,	2005		2004			2003
Foreign	$	452,888	$	505,860		$	202,760
Domestic	10,831		(24,846		)	(34,607		)
	$	463,719	$	481,014		$	168,153

Substantially all of the above foreign income resulted from the operations of companies that were not subject to income taxes in their countries of incorporation.

The components of the provision for federal income taxes follow:

In thousands for the year ended December 31,	2005			2004			2003
Current	$	(1,785	)	$	133,397		$	35,493
Deferred	675			(53,619		)*	11,351
	$	(1,110	)	$	79,778		$	46,844

*Reflects a $77,423 reduction in deferred tax liabilities recorded on enactment of the Jobs Creation Act.

Actual income taxes paid amounted to $94,510,000 in 2005 (of which $91,100,000 related to 2004), $55,214,000 in 2004 (of which $11,040,000 related to 2003) and $18,377,000 in 2003 (all of which related to 2003). An income tax refund of $1,199,000, related to the carryback of capital losses arising in 2003, was received in 2004.

Reconciliations of the actual federal income tax rate attributable to pretax income and the U.S. statutory income tax rate follow:

For the year ended December 31,	2005		2004		2003
Actual federal income tax provision/(credit) rate	(0.3	%)	16.6	%	28.1	%
Adjustments due to:
Dividends received deduction	—		—		0.1	%
Income not subject to U.S. income taxes	35.0	%	2.1	%	4.9	%
Other	0.3	%	—		0.3	%
Reversal of deferred tax liabilities	—		16.1	%	—
Valuation allowance	—		0.2	%	1.6	%
U.S. statutory income tax provision rate	35.0	%	35.0	%	35.0	%

Note L—Capital Stock and Stock Compensation:

In the first quarter of 2005, the Company awarded a total of 41,746 shares of restricted common stock at no cost to certain of its employees, including senior officers. Restrictions limit the sale or transfer of these shares until they vest, which occurs ratably over a four-year period. During the restriction period, the shares will have voting rights and cash dividends will be paid if declared. At the dates of the awards, the fair market value of the Company’s stock ranged from $52.40 to $62.23 per share. Accordingly, $1,808,000 is being amortized to compensation expense over the vesting period of four years, using the straight-line method. In September 2005, the Company awarded 4,012 shares of restricted common stock at no cost to one of its senior officers. At the date of the award, the fair market value of the Company’s common stock was $62.32 per share. Accordingly, $250,000 is being amortized to compensation expense over the vesting period of four years, using the straight-line method.

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In January 2004, the Company awarded 50,000 shares of restricted common stock at no cost to its new chief executive officer. At the date of the award, the fair market value of the Company’s common stock was $35.70 per share. Accordingly, $1,785,000 is being amortized to compensation expense over the vesting period of four years, using the straight-line method. In addition, the Company granted the new chief executive officer stock options to purchase 100,000 shares of common stock at an exercise price of $35.70 per share (the market price at the date of the grant). Options granted vest and become exercisable over a three-year period and expire ten years from the date of the grant.

In the second quarter of 2005, the Company granted a total of 10,000 restricted stock units to certain of its non-employee directors. Each restricted stock unit represents a contingent right to receive one share of common stock upon the non-executive director’s termination of service as a board member. The restricted stock units vest upon the earlier of the first anniversary of the date of grant or the next annual meeting of the stockholders. The restricted stock units have no voting rights and may not be transferred or otherwise disposed of while the non-employee director is a director. The non-employee director is entitled to dividends in the form of additional restricted stock units at the same time dividends are paid on the Company’s common stock in an amount equal to the result obtained by dividing (i) the product of  (x) the amount of units owned by the non-employee director on the record date for the dividend times (y) the dividend per share by (ii) the closing price of a share of the Company’s common stock on the payment date, which restricted units vest immediately on the payment date for the dividend. At the date of the awards, the fair market value of the Company’s stock was $59.69 per share. Accordingly, $597,000 is being amortized to compensation expense over one year, using the straight-line method.

Activity with respect to restricted common stock and restricted stock units is summarized as follows:

Nonvested Shares Outstanding at December 31, 2003	—
Granted	50,000
Vested	—
Forfeited	—
Nonvested Shares Outstanding at December 31, 2004	50,000
Granted	55,758
Vested ($35.70 to $52.40 per share)	(13,717	)
Forfeited	(1,992	)
Nonvested Shares Outstanding at December 31, 2005	90,049

In January 2004, pursuant to a Form S-3 shelf registration filed on January 13, 2004, the Company sold 3,200,000 shares of its common stock at a price of $36.13 per share, after underwriting discounts and commissions of $0.47 per share, thereby generating proceeds of $115,513,000, after deducting expenses.

In April 2004, the Board of Directors approved the 2004 Stock Incentive Plan (the “2004 Plan”) subject to approval by the shareholders, which approval was received in June. The 2004 Plan enables the Company to grant stock-based awards, including stock options, stock appreciation rights, restricted stock and performance awards to employees, consultants and non-employee directors. Options covering 53,876 shares are outstanding with exercise prices ranging from $52.40 to $62.32 per share (the market prices at dates of grant). A total of 2,556,410 shares of the Company’s stock may be issued or used as the basis for awards under the 2004 Plan as of December 31, 2005. No further stock options may be granted under the Company’s 1998 stock option plan and the 1999 non-employee director stock option plan.

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Options covering 121,581 shares are outstanding under the 1998 stock option plan with exercise prices ranging from $13.81 to $35.70 per share (the market prices at dates of grant). Options granted under the 1998 stock option plan vest and become exercisable over a three-year period and expire ten years from the date of grant.

Options covering 78,000 shares are outstanding under the 1999 non-employee director stock option plan with exercise prices ranging from $13.31 to $59.69 per share (the market prices at dates of grant). The plan provided for the grant of an initial option for 7,500 shares and an annual option for 1,000 shares thereafter to each non-employee director at an exercise price equal to market value at the date of the grant. Initial options vest and become exercisable over a three-year period; annual options vest and become exercisable one year from the date of the grant. All options expire ten years from the date of grant.

Stock option activity under all plans is summarized as follows:

Options Outstanding at December 31, 2002	1,739,676
Granted	21,169
Forfeited	(4,569	)
Exercised ($12.50 to $19.50 per share)	(1,440,146	)
Options Outstanding at December 31, 2003	316,130
Granted	116,500
Forfeited	—
Exercised ($13.31 to $29.67 per share)	(239,049	)
Options Outstanding at December 31, 2004	193,581
Granted	61,896
Forfeited	(520	)
Exercised ($13.31 to $13.81 per share)	(1,500	)
Options Outstanding at December 31, 2005	253,457
Options Exercisable at December 31, 2005	119,648

The weighted average remaining contractual life of the outstanding stock options at December 31, 2005 was 7.4 years. The range of exercise prices of the stock options outstanding at December 31, 2005 was $13.31 to $62.32 per share. The weighted average exercise prices of the stock options outstanding at December 31, 2005 and 2004 were $36.04 and $29.84 per share, respectively. The aggregate intrinsic values of the options outstanding and exercisable at December 31, 2005 were $3,923,000 and $2,763,000, respectively.

Effective from January 1, 2005 the Company follows FAS 123(R) and related Interpretations in accounting for its stock options. Prior to January 1, 2005, the Company accounted for stock options under the recognition and measurement provisions of APB 25 and related Interpretations. The fair values of the options granted were estimated on the dates of grant using the Black-Scholes option pricing model with the following weighted average assumptions for 2005, 2004 and 2003: risk free interest rates of 4.3%, 3.9% and 3.1%, dividend yields of 1.3%, 1.9% and 3.4%, expected stock price volatility factors of .36, .39 and .39, and expected lives of 6.0 years. The weighted average grant-date fair values of options granted in 2005, 2004 and 2003 were $20.42, $13.25 and $5.59, respectively. The total intrinsic value of options exercised amounted to $73,000 in 2005, $4,595,000 in 2004 and $15,310,000 in 2003.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Since the Company’s stock options have characteristics significantly different from those of

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traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.

As of December 31, 2005, there was $3,888,000 of unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 2.3 years.

In October 1998, the Board of Directors adopted a Stockholder Rights Plan and declared a rights distribution under the plan of one common stock purchase right on each outstanding share of common stock of the Company. The rights plan is designed to guard against attempts to take over the Company for a price that does not reflect the Company’s full value or that are conducted in a manner or on terms not approved by the Board of Directors as being in the best interests of the Company and the stockholders. The rights are preventative in nature and were not distributed in response to any known attempt to acquire control of the Company.

Note M—Accumulated Other Comprehensive Income:

The components of accumulated other comprehensive income, net of related taxes, in the consolidated balance sheets follow:

In thousands at December 31,	2005			2004
Unrealized gains on available-for-sale securities	$	16,238		$	13,909
Unrealized losses on derivative instruments	(1,435		)	(7,787		)
Minimum pension liability	(2,859		)	(4,184		)
	$	11,944		$	1,938

At December 31, 2005, the Company expects that it will reclassify $907,000 of net losses on derivative instruments from accumulated other comprehensive income to earnings during the next twelve months due to the payment of variable rate interest associated with floating rate debt.

The components of the change in the accumulated unrealized loss on derivative instruments, net of related taxes follow:

In thousands for the year ended December 31,	2005		2004
Reclassification adjustments for (gains)/losses included in net
income, net:
Interest expense	$	5,357	$	10,552
Change in unrealized loss on derivative instruments	995		(2,105		)
	$	6,352	$	8,447

The income tax expense/(benefit) allocated to each component of other comprehensive income follows:

In thousands for the year ended December 31,	2005			2004			2003
Unrealized gains on available-for-sale securities	$	7,295		$	4,617		$	2,559
Unrealized losses on derivative instruments	2,354			(1,133		)	(3,179		)
Minimum pension liability	2,066			(759		)	414
Reclassification adjustments included in net income:
Write-down of marketable securities	—			934			4,371
Gains on sale of securities	(6,041		)	(1,601		)	(3,566		)
Losses on derivative instruments	1,563			5,682			5,149
	$	7,237		$	7,740		$	5,748

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Note N—Leases:

1.Charters-in:

As of December 31, 2005, the Company had commitments to charter-in 54 vessels. Fifty-one of such charter-ins are accounted for as operating leases, of which 28 are bareboat charters and 23 are time charters. The future minimum commitments and related number of operating days under these operating leases are as follows:

Bareboat Charters-in:

Dollars in thousands at December 31, 2005	Amount		Operating Days
2006	$	50,184		6,547
2007	62,219			6,790
2008	77,437			7,005
2009	82,716			5,242
2010	89,300			4,233
Thereafter	310,037			13,755
Net minimum lease payments	$	671,893		43,572

Time Charters-in:

Dollars in thousands at December 31, 2005	Amount		Operating Days
2006	$	123,706		4,886
2007	132,602			5,630
2008	134,872			5,810
2009	125,409			5,370
2010	117,355			4,977
Thereafter	193,321			10,441
Net minimum lease payments	$	827,265		37,114

The future minimum commitments for time charters-in have been reduced to reflect estimated days that the vessels will not be available for employment due to drydock.

The future minimum commitments under three bareboat charters-in that are classified as capital leases are as follows:

In thousands at December 31, 2005
2006	$	11,882
2007	11,882
2008	11,888
2009	10,808
2010	9,692
Thereafter	7,295
Net minimum lease payments	63,447
Less amount representing interest	(14,436		)
Present value of net minimum lease payments	$	49,011

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In November 2004, the Company entered into sale-leaseback agreements, which closed in January 2005, for four of its Handysize Product Carriers, which bareboat charters are classified as operating leases. The aggregate gain on the transaction of approximately $9,900,000, which is recorded in other liabilities, is being amortized over the term of each lease, ranging from 42 to 48 months, as a reduction of charter hire expenses. The lease agreements contain no renewal or purchase options.

In June 2005, OSG signed agreements for the bareboat charters of ten Jones Act Product Tankers to be constructed by Aker Philadelphia Shipyard, Inc. (“APSI”). Following construction, APSI will sell the vessels to leasing subsidiaries of American Shipping Corporation (“ASC”), an affiliate of APSI, which will bareboat charter the vessels to subsidiaries of OSG for initial terms of five and seven years, with OSG having extension options for the life of the vessels. The bareboat charterers of the vessels will, in turn, time charter the vessels to an entity owned jointly by a subsidiary of OSG and an affiliate of ASC. The vessels are scheduled to be delivered between 2006 and 2010. The bareboat charters will commence upon delivery of the vessels.

In July 2005, two Panamaxes (Overseas Polys and Overseas Cleliamar) were sold and chartered back for terms of 50 months. The bareboat charters are classified as operating leases.

In October 2005, OSG signed an agreement to time charter-in four 51,000 dwt International Flag Product Carriers, each for a period of ten years. The vessels, two of which are already under construction, are each scheduled for delivery to OSG between September 2006 and June 2007.

During 2004, the Company entered into the following charter-in arrangements in conjunction with other pool members covering ten vessels (seven VLCCs and three Aframaxes), which leases are classified as operating leases:

·a 40% participation interest in the five-year time charters of two newbuilding VLCCs, which commenced upon their delivery from shipyards in 2004 and 2005. These charters provide for profit sharing with the owners of the vessels when TCE rates exceed the base rates in the charters;

·a 50% participation interest in the three-year time charters of two VLCCs (one built in 1995 and the other in 1996). These charters provide for profit sharing with the owners of the vessels when TCE rates exceed the base rates in the charters;

·a 30% participation interest in the two-year time charter of a 2003-built VLCC;

·a 15% participation interest in the five-year time charter of a 2000-built VLCC;

·a 15% participation interest in the two-year time charter of a 1995-built VLCC;

·a 50% participation interest in the five-year time charters of two 1998 built Aframaxes; and

·a 75% participation interest in the one-year time charter of a 2003-built Aframax.

All but one of the above vessels are commercially managed by pools in which the Company participates.

In June 2003, the Company entered into a sale-leaseback agreement for one VLCC (Meridian Lion), which lease is classified as an operating lease. The gain on the sale was deferred and is being amortized over the eight-year term of the lease. The lease agreement contains no renewal or purchase options.

In December 2003, the Company entered into sale-leaseback agreements for its two International Flag Dry Bulk Carriers (Chrismir and Matilde), which leases are classified as operating  leases. The

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aggregate loss on the sales of $5,965,000 has been included in other income. The lease agreements have seven-year terms and contain certain renewal and purchase options.

The 25-year bareboat charter-ins, which were classified as capital leases, on the Company’s two U.S. Flag Dry Bulk Carriers (Overseas Marilyn and Overseas Harriette) expired in November 2003. Such charters were extended for three years for the Overseas Harriette and one year for the Overseas Marilyn. These charter extensions, which are classified as operating leases, provided for additional renewal options. In accordance therewith, the Company exercised a renewal option in 2004 extending the bareboat charter-in of the Overseas Marilyn for three additional years. Such charter now expires in November 2007.

The total rental expense for charters accounted for as operating leases amounted to $120,301,000 in 2005, $66,799,000 in 2004 and $21,550,000 in 2003.

2. Charters-out:

The future minimum revenues, before reduction for brokerage commissions, expected to be received on noncancelable time charters and bareboat charters and the related revenue days (revenue days represent calendar days, less days that vessels are not available for employment due to repairs, drydock or lay-up) are as follows:

Dollars in thousands at December 31, 2005	Amount		Revenue Days
2006	$	235,412		11,332
2007	138,583			7,275
2008	112,995			5,147
2009	86,690			3,249
2010	47,699			1,077
Thereafter	124,734			2,701
Net minimum lease payments	$	746,113		30,781

Future minimum revenues do not include the Company’s share of time charters entered into by the pools in which it participates. Revenues from a time charter are not generally received when a vessel is off-hire, including time required for normal periodic maintenance of the vessel. In arriving at the minimum future charter revenues, an estimated time off-hire to perform periodic maintenance on each vessel has been deducted, although there is no assurance that such estimate will be reflective of the actual off-hire in the future.

In April 2004, the Company acquired two U.S. Flag Product Carriers, built in 1982 and 1983, for cash of $40,500,000. Both vessels were operating on bareboat charters when acquired, which extended to December 2009 and provide options for early termination and extension. In October 2004, the Company entered into an agreement with the charterer of one of such vessels to convert the bareboat charter to a time charter for the balance of the charter period. The agreement also provided for profit sharing with the charterer when rates earned on third party voyages exceeded the base rate, as defined in the agreement. In December 2005, the Company agreed to pay $2,485,000 to acquire the charterer’s option to purchase this vessel, terminating the agreement. Such payment was capitalized as a vessel addition.

In November 2004, the Company entered into an agreement with the charterer of the Eclipse, the effect of which was to convert the bareboat charter to a time charter for the balance of the charter period with profit sharing between the Company and the charterer when rates earned on third-party voyages exceeded a base rate. Because the initial settlement period for calculating profit sharing did not end until March 2005, the Company did not recognize any revenues above the base rate in 2004. The Company also agreed to pay $5,500,000 to acquire the charterer’s option to purchase the vessel

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for $15,800,000 in June 2005, the end of the charter period. Such payment was capitalized as a vessel addition. The vessel was subsequently sold by the Company in 2005.

Charters on four vessels provide for profit sharing between the Company and the charterer when rates earned exceed a base rate defined in the agreements. Certain of such agreements provide that profit sharing be determined annually on the anniversary of delivery of the vessels onto the charters. Therefore, the Company’s share, if any, will not be recognized until the charter anniversary date. Agreements on two of the four vessels also provide the charterer with options to buy the vessels at the end of the charters in June 2009 at fixed prices, which will approximate their expected book values. As of December 31, 2005, the charterer has exercised its purchase option for one of the two vessels.

3. Office space:

The future minimum commitments under lease obligations for office space are as follows:

In thousands at December 31, 2005
2006	$	3,776
2007	3,816
2008	3,826
2009	3,837
2010	3,867
Thereafter	35,407
Net minimum lease payments	$	54,529

The rental expense for office space, which is included in general and administrative expenses in the consolidated statements of operations, amounted to $4,823,000 in 2005, $1,569,000 in 2004 and $2,023,000 in 2003.

Note O—Pension and Other Postretirement Benefit Plans:

The Company is the sponsor of a noncontributory defined benefit pension plan covering substantially all of its domestic shore-based employees hired prior to January 1, 2005. Retirement benefits are based primarily on years of service and compensation earned during the last years of employment. The Company’s policy is to fund pension costs as accrued, but not in excess of amounts allowable under income tax regulations. The Company has an unfunded, nonqualified supplemental pension plan covering certain employees, that provides for additional benefits, primarily those benefits that would otherwise have been payable to such employees under the Company’s pension plan in the absence of limitations imposed by income tax regulations.

In October 2005, the Company’s Board of Directors approved the termination, effective December 31, 2005, of (i) the qualified defined benefit pension plan covering its domestic shore-based employees, and (ii) the unfunded, nonqualified supplemental defined benefit pension plan with respect to members in active service. Concurrently, the Company amended its existing 401(k) employee savings plan and adopted an unfunded, nonqualified supplemental defined contribution plan to provide for increased levels of employer contributions, or hypothetical contributions with respect to the unqualified plan, commencing in 2006. In connection with the termination of these defined benefit plans, the Company recorded a charge to earnings of $4,706,000 in the fourth quarter of 2005 and expects to record an additional charge to earnings of approximately $2,000,000 at the time of the final settlement of the obligations under the above defined benefits plans in accordance with the provisions of Statement of Financial Accounting Standards No. 88, “Employers Accounting for Settlement and Curtailments of Defined Benefit Pension Plans and for Termination Benefits” (“FAS 88”). The Company expects such final settlement to occur in late 2006 or early 2007.

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The Company also provides certain postretirement health care and life insurance benefits to qualifying domestic retirees and their eligible dependents. The health care plan is contributory, and the life insurance plan is noncontributory. In general, postretirement medical coverage is provided to employees hired prior to January 1, 2005 who retire and have met minimum age and service requirements under a formula related to total years of service. The Company will no longer provide prescription drug coverage to its retirees or their beneficiaries, other than licensed deck officers, who are over age 65 after 2005. Generally, the resulting savings under the retiree medical plan will be shared equally by the Company and those employees and their beneficiaries currently over age 65 and will be shared in proportion to the current cost-sharing provisions for those employees and their beneficiaries not yet age 65. These changes have been reflected in the determination of the accumulated benefit obligation as of December 31, 2005 and 2004, and the net periodic postretirement benefit cost for 2005. The Company does not currently fund these benefit arrangements and has the right to amend or terminate the health care benefits at any time.

Certain of the Company’s foreign subsidiaries have pension plans that, in the aggregate, are not significant to the Company’s consolidated financial position.

Information with respect to the domestic plans, for which the Company uses a December 31 measurement date, follow:

	Pension benefits						Other benefits
In thousands	2005			2004			2005			2004
Change in benefit obligation:
Benefit obligation at beginning of year	$	37,184		$	43,679		$	4,670		$	4,493
Cost of benefits earned (service cost)	1,631			1,479			85			81
Interest cost on benefit obligation	2,114			2,015			214			294
Amendments	—			1,042			(999		)	—
Actuarial losses/(gains)	2,698			6,005			(563		)	75
Benefits paid	(2,594		)	(2,492		)	(235		)	(273		)
Terminations, curtailments, settlements and other similar events	(23,996		)	(14,544		)	—			—
Benefit obligation at year end	17,037			37,184			3,172			4,670
Change in plan assets:
Fair value of plan assets at beginning of year	29,954			26,898			—			—
Actual return on plan assets	6,077			5,472			—			—
Benefits paid	(15,142		)	(2,416		)	—			—
Fair value of plan assets at year end	20,889			29,954			—			—
Funded status at December 31 (unfunded)	3,852			(7,230		)	(3,172		)	(4,670		)
Unrecognized prior-service costs (benefit)	—			1,641			(1,708		)	(951		)
Unrecognized net actuarial loss	2,490			7,269			434			1,038
Unrecognized transition obligation	—			—			147			167
Additional minimum liability	(535		)	(5,275		)	—			—
Net asset/(liability) recognized at year end	$	5,807		$	(3,595	)	$	(4,299	)	$	(4,416	)

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The net asset/(liability) recognized in each of the balance sheets consist of the following:

	Pension benefits						Other benefits
In thousands at December 31,	2005			2004			2005			2004
Prepaid benefit costs	$	7,154		$	7,162		$	—		$	—
Accrued benefit costs	(812		)	(6,760		)	(4,299		)	(4,416		)
Intangible assets	—			1,278			—			—
Accumulated other comprehensive income/(loss)	(535		)	(5,275		)	—			—
Net asset/(liability) recognized	$	5,807		$	(3,595	)	$	(4,299	)	$	(4,416	)

The accumulated benefit obligation for the Company’s defined benefit pension plans covering domestic shore-based employees was $17,037,000 and $34,811,000 at December 31, 2005 and 2004, respectively.

Information for domestic pension plans with accumulated benefit obligations in excess of plan assets, which, for the Company, is its nonqualified supplemental pension plan follows:

In thousands at December 31,	2005		2004
Projected benefit obligation	$	1,347	$	11,831
Accumulated benefit obligation	1,347		10,757
Fair value of plan assets	—		—

In thousands for the year ended	Pension benefits									Other benefits
December 31,	2005			2004			2003			2005			2004			2003
Components of expense:
Cost of benefits earned	$	1,631		$	1,479		$	1,338		$	85		$	81		$	48
Interest cost on benefit obligation	2,114			2,015			3,029			214			294			237
Expected return on plan assets	(2,485		)	(2,205		)	(1,972		)	—			—			—
Amortization of prior-service costs	158			1,072			1,127			(242		)	(154		)	(154		)
Amortization of transition obligation	—			—			—			20			20			20
Recognized net actuarial loss	236			219			613			41			43			(1		)
Net periodic benefit cost	1,654			2,580			4,135			118			284			150
Loss on terminations, curtailments, settlements and other similar events	6,901			4,077			—			—			—			—
Net periodic benefit cost after terminations, curtailments, settlements and other similar events	$	8,555		$	6,657		$	4,135		$	118		$	284		$	150

The change in the minimum pension liability for the Company’s domestic plans included in other comprehensive income/(loss) amounted to decreases of $3,081,000 in 2005, $178,000 in 2004 and $190,000 in 2003.

The weighted-average assumptions used to determine benefit obligations follow:

	Pension benefits						Other benefits
At December 31,	2005			2004			2005			2004
Discount rate		4.7	%*		6.2	%		6.4	%		6.2	%
Rate of future compensation increases		3.9	%		3.9	%		—			—

*Applicable to members of the qualified pension plan in active service. The rate applicable to former employees is 6.4%.

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The weighted-average assumptions used to determine net periodic benefit cost follow:

	Pension benefits						Other benefits
For the year ended December 31,	2005		2004		2003		2005			2004			2003
Discount rate	6.2	%	6.7	%	7.4	%		6.2	%		6.7	%		7.4	%
Expected (long-term) return on plan assets	8.75	%	8.75	%	8.75	%		—			—			—
Rate of future compensation increases	3.9	%	3.9	%	3.9	%		—			—			—

The assumed health care cost trend rate for measuring the benefit obligation included in Other Benefits above is an increase of 11% for 2006, with the rate of increase declining steadily thereafter by 1% per annum to an ultimate trend rate of 5% per annum in 2012. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A 1% change in assumed health care cost trend rates would have the following effects:

In thousands	1% increase			1% decrease
Effect on total of service and interest cost components in 2005		$	34		$	(28	)
Effect on postretirement benefit obligation as of December 31, 2005		$	241		$	(209	)

Expected benefit payments are as follows:

In thousands	Pension benefits				Other benefits
2006		$	16,471	*		$	181
2007		71				188
2008		71				195
2009		71				203
2010		70				208
Years 2011—2015		316				1,144
		$	17,070			$	2,119

*Includes $16,400 related to the final benefit disbursement from the qualified plan. There is a possibility that such payment will not be made until 2007.

The expected (long-term) rate of return on plan assets was the weighted average of the returns, determined by category of plan assets, using the current and expected future allocation of plan assets, and assuming active asset management as opposed to investment in passive investment funds. The rate of return assumption for each category of plan assets was based on historical average returns achieved.

The Company’s pension plan weighted-average asset allocations at December 31, 2005 and 2004 by asset category, follow:

	2005			2004
Asset category:
Equity securities		85	%		83	%
Debt securities		14	%		16	%
Cash and cash equivalents		1	%		1	%
		100	%		100	%

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The Company’s investment strategy is to balance capital preservation and return through investment in a diversified portfolio of high-quality debt and equity securities. The Company has hired professional investment advisors to manage the portfolio in accordance with this strategy and our investment policy of maintaining a mix of between 75% and 80% equity securities and between 20% and 25% debt securities. The allocation is rebalanced quarterly after considering anticipated benefit payments.

There was no required contribution to the Company’s defined benefit pension plan for the 2005 plan year.

The Company also has a 401(k) employee savings plan covering all eligible employees. Contributions are limited to amounts allowable for income tax purposes. Commencing in 2006, employer contributions will include both employer contributions made regardless of employee contributions and  matching contributions to the plan. All contributions to the plan are at the discretion of the Company.

Certain subsidiaries make contributions jointly managed (Company and union) multi-employer pension plans covering seagoing personnel. The Employee Retirement Income Security Act of 1974 requires employers who are contributors to U.S. multi-employer plans to continue funding their allocable share of each plan’s unfunded vested benefits in the event of withdrawal from or termination of such plans. The Company has been advised by the trustees of such plans that it has no withdrawal liability as of December 31, 2005. Certain other seagoing personnel of U.S. Flag vessels are covered under a defined contribution plan, the cost of which is funded as accrued. The costs of these plans were not material during the three years ended December 31, 2005.

Note P—Other Income:

Other income consists of:

In thousands for the year ended December 31,	2005			2004			2003
Investment income:
Interest	$	11,221		$	9,686		$	5,134
Dividends	3,255			928			824
Gains on sale of securities and other investments (based on first-in, first-out method)	23,186			7,204			10,439
Write-down of marketable securities— See Note G	—			—			(4,756		)
	37,662			17,818			11,641
Gain/(loss) on disposal of vessels—net	42,905			29,222			(6,809		)
Loss on derivative transactions	(1,336		)	(340		)	—
Miscellaneous—net	(1,864		)	(919		)	373
	$	77,367		$	45,781		$	5,205

Gains on sale of securities and other investments are net of losses of $2,102,000 (2005), $2,674,000 (2004) and $1,895,000 (2003).

During the three years ended December 31, 2005, the Company sold seven vessels in 2005 (two Panamaxes, one Aframax, one Suezmax and three U.S. Flag Crude Tankers), three vessels in 2004 (two VLCCs and one U.S. Flag Crude Tanker) and four vessels in 2003 (two Panamaxes and two International Flag Dry Bulk Carriers). In addition, during 2005 and 2003 the Company sold and chartered back 13 vessels in 2005 (three VLCCs, four Aframaxes, two Panamaxes and four International Flag Handysize Product Carriers) and one VLCC in 2003 for which the results of the sales were deferred for accounting purposes.

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Note Q—Agreements with Executive Officers:

The Company entered into an agreement dated June 23, 2003 in connection with the retirement, effective December 31, 2003, of the Company’s former chief executive officer. The agreement provided, among other matters, for a payment of $1,200,000 to be made to the former chief executive officer in January 2004. Accordingly, the Company recognized this $1,200,000 expense in 2003. The agreement also provided for the payment of the former chief executive officer’s unfunded, nonqualified pension plan obligation in January 2004, at which time the Company recognized, as a charge to earnings, a settlement loss of $4,077,000 in accordance with the provisions of FAS 88.

OSG had severance protection agreements with four executive officers, which provided that if the named executive was terminated (other than for “cause,” as defined, or becoming “disabled”) in or prior to July 2005, such executive would continue to receive base salary and other benefits for a period of two years after the date of such termination. The Company entered into an agreement dated January 31, 2005 with one of its senior officers in connection with his retirement, effective January 31, 2005. The agreement provided for payments aggregating approximately $1,150,000 to be made to such senior officer in accordance with his severance protection agreement. Accordingly, the Company recognized this expense in the first quarter of 2005. The severance protection agreement also provided for the payment of the senior officer’s unfunded, nonqualified pension plan obligation in the first quarter of 2005. At the time such payment of approximately $3,098,000 was made, the Company recognized, as a charge to earnings, a settlement loss of $1,318,000.

The Company entered into an agreement effective August 30, 2005 with one of its senior officers in connection with his early retirement. The agreement provides for payments aggregating approximately $850,000 to be made to such senior officer. Accordingly, the Company recognized an expense of $850,000 in the third quarter of 2005. The agreement also provided for the payment of the senior officer’s unfunded, nonqualified pension plan obligation in the fourth quarter of 2005. At the time such payment of approximately $2,401,000 was made, the Company recognized as a charge to earnings, a settlement loss of $877,000.

Note R—Legal Matters:

On October 1, 2003, the U.S. Department of Justice served a grand jury subpoena directed at the Company’s International Flag Product Carrier, the Uranus, and the Company’s handling of waste oils and maintenance of books and records related thereto. The U.S. Department of Justice has subsequently served related subpoenas requesting documents concerning the Uranus and other vessels in the Company’s fleet and a number of witnesses have appeared before grand juries. In 2004 and the first quarter of 2005, the Company made a total provision of $10 million (including $4 million in the first quarter of 2005) for anticipated fines and contributions to environmental protection programs associated with a possible settlement of the investigation. The Company has been cooperating with the investigation, including self-reporting to the government beginning in the second half of 2005 of possible additional violations of applicable environmental laws. Currently, management cannot reasonably estimate a range of such fines and contributions, which fines and contributions could be higher than the amount accrued. Negotiations with the U.S. Department of Justice are continuing but there can be no assurance that a satisfactory settlement can be achieved.

The Company has incurred costs of approximately $5,021,000 in 2005, $1,759,000 in 2004 and $862,000 in 2003 in connection with the above investigation. Such costs have been included in general and administrative expenses in the accompanying consolidated statements of operations. In the opinion of management any liability as a result of the U.S. investigation will likely not be material to the Company’s business or financial condition.

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Note S—Supplemental Schedule of Noncash Investing Activities:

In 2005, the Company acquired in partner’s interest in one joint venture in exchange for cash of $69,047,000, as follows:

Fair value of assets received	$	168,029,000
Cost of investment in joint venture	(98,982,000		)
Cash paid	$	69,047,000

In 2004, the Company exchanged its interest in three joint ventures for its partner’s interest in three other joint ventures. In conjunction with the exchange, the Company paid cash of $2,292,000 to its partner, as follows:

Fair value of assets received	$	199,906,000
Cost of investments in joint ventures	(197,614,000		)
Cash paid	$	2,292,000

In 2003, the Company restructured its relative ownership interests in five joint ventures. In conjunction with the exchange, the Company paid cash of $10,362,000 to its partners, as follows:

Fair value of assets received	$	23,070,000
Cost of investments in joint ventures	(12,708,000		)
Cash paid	$	10,362,000

In 2003, the Company acquired its partner’s interest in one joint venture through the joint venture’s redemption of its partner’s shares in exchange for one of the venture’s two vessel owning subsidiaries, as follows:

Fair value of assets received	$	66,321,000
Cost of investments in joint ventures	(66,321,000		)

Note T—2005 and 2004 Quarterly Results of Operations (Unaudited):

Results of Operations for Quarter Ended (in thousands, except per share amounts)	March 31,		June 30,		Sept. 30,		Dec. 31,
2005
Shipping revenues	$	275,407	$	238,384	$	203,203	$	283,309
Income from vessel operations	145,206		102,698		72,001		112,129
Gain on disposal of vessels—net	12,902		13,174		10,869		5,960
Net income	$	164,919	$	114,161	$	72,065	$	113,684
Basic net income per share	$	4.18	$	2.89	$	1.83	$	2.88
Diluted net income per share	$	4.18	$	2.89	$	1.82	$	2.88
2004
Shipping revenues	$	194,131	$	164,221	$	171,953	$	280,530
Income from vessel operations	117,868		83,078		91,711		171,123
Gain on disposal of vessels—net	2,863		29		12,584		13,746
Net income	$	76,188	$	45,404	$	68,521	$	211,123	*
Basic net income per share	$	1.99	$	1.15	$	1.74	$	5.36
Diluted net income per share	$	1.98	$	1.15	$	1.74	$	5.35

*Reflects a $77,423 reduction in deferred tax liabilities recorded on enactment of the Jobs Creation Act.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders
Overseas Shipholding Group, Inc.

We have audited the accompanying consolidated balance sheets of Overseas Shipholding Group, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, cash flows, and changes in shareholders’ equity for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Overseas Shipholding Group, Inc. and subsidiaries at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

As discussed in Note B to the consolidated financial statements, the Company adopted Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities” on July 1, 2003 and Statement of Financial Accounting Standards No. 123 (R), “Share-Based Payment” on January 1, 2005.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of OSG’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2006, expressed an unqualified opinion thereon.

New York, New York
February 23, 2006

106

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROLS

To the Shareholders
Overseas Shipholding Group, Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Controls over Financial Reporting, that Overseas Shipholding Group, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Overseas Shipholding Group, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Overseas Shipholding Group, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also in our opinion, Overseas Shipholding Group, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Overseas Shipholding Group, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, cash flows, and changes in shareholders’ equity for each of the three years in the period ended December 31, 2005, and our report dated February 23, 2006 expressed an unqualified opinion.

New York, New York
February 23, 2006

107

MANAGEMENT’S REPORT ON INTERNAL CONTROLS
OVER FINANCIAL REPORTING

To the Shareholders
Overseas Shipholding Group, Inc.

In accordance with the Public Company Accounting Oversight Board’s Standard No. 2, the management of Overseas Shipholding Group, Inc. and its subsidiaries (the “Company”) is responsible for the establishment and maintenance of adequate internal controls over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Management has performed an assessment of the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2005 based on the provisions of  Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment, management determined that the Company’s internal controls over financial reporting was effective as of December 31, 2005 based on the criteria in Internal Control—Integrated Framework issued by COSO.

Ernst & Young LLP, the Company’s independent registered public accounting firm, who audited the financial statements included in the Annual Report, has audited and reported on management’s assessment of the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2005 as stated in their report which appears elsewhere in this Annual Report.

Date: February 23, 2006

OVERSEAS SHIPHOLDING GROUP, INC.
By	/s/ MORTEN ARNTZEN
	Morten Arntzen
	President,
	Chief Executive Officer
By	/s/ MYLES R. ITKIN
	Myles R. Itkin
	Senior Vice President,
	Chief Financial Officer and Treasurer

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ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.  CONTROLS AND PROCEDURES

(a)Evaluation of disclosure controls and procedures.

As of December 31, 2005, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s current disclosure controls and procedures were effective as of December 31, 2005 in timely providing them with material information relating to the Company required to be included in the reports the Company files or submits under the Exchange Act. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to December 31, 2005.

(b)Management’s report on internal controls over financial reporting.

Management’s report on internal controls over financial reporting, which appears on page [83] of this Annual Report, is incorporated herein by reference.

ITEM 9B.  OTHER INFORMATION

None.

109

PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

See Item 14 below. Information with respect to executive officers of the Company is included at the end of Part I. The Company has adopted a code of ethics that applies to all of its directors, officers (including its principal executive officer, principal financial officer, principal accounting officer, controller and any person performing similar functions) and employees. The Company makes its code of ethics available free of charge through its internet website, www.osg.comwww.osg.com.

ITEM 11.   EXECUTIVE COMPENSATION

See Item 14 below.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table provides information as of December 31, 2005 with respect to the Company’s equity (stock) compensation plans, all of which have been approved by the Company’s shareholders:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)			(c)
Equity compensation plans approved by security holders		253,457		$	36.03		2,649,207	*

*Consists of 2,556,410 shares eligible to be granted under the Company’s 2004 stock incentive plan and 92,797 shares eligible to be purchased pursuant to the Company’s 2000 Employee Stock Purchase Plan.

See also Item 14 below.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Item 14 below.

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

Except for the table in Item 12 above, the information called for under Items 10, 11, 12, 13 and 14 is incorporated by reference from the definitive Proxy Statement to be filed by the Company in connection with its 2006 Annual Meeting of Shareholders.

110

PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1)	The following consolidated financial statements of the Company are filed in response to Item 8.
	Consolidated Balance Sheets at December 31, 2005 and 2004.
	Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003.
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003.
	Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2005, 2004 and 2003.
	Notes to Consolidated Financial Statements
	Report of Independent Registered Public Accounting Firm.
	Report of Independent Registered Public Accounting Firm on Internal Controls.
(a)(2)	Schedules of the Company have been omitted since they are not applicable or are not required.
(a)(3)	The following exhibits are included in response to Item 15(c):
3(i)	Certificate of Incorporation of the registrant, as amended to date (filed as Exhibit 3(i) to the registrant’s Annual Report on Form 10-K for 1998 and incorporated herein by reference).
3(ii)	By-Laws of the registrant, as amended to date (filed as Exhibit 3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).
4(a)	Rights Agreement dated as of October 20, 1998 between the registrant and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, with the form of Right Certificate attached as Exhibit A thereto and the Summary of Rights to Purchase Shares attached as Exhibit B thereto (filed as Exhibit 4.1 to the registrant’s Registration Statement on Form 8-A filed November 9, 1998 and incorporated herein by reference).
4(b)(1)	Form of Indenture dated as of December 1, 1993 between the registrant and The Chase Manhattan Bank (National Association) providing for the issuance of debt securities by the registrant from time to time (filed as Exhibit 4(b)(1) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).
4(b)(2)	Resolutions dated December 2, 1993 fixing the terms of two series of debt securities issued by the registrant under the Indenture (filed as Exhibit 4(b)(2) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).
4(b)(3)	Form of 83¤4% Debentures due December 1, 2013 of the registrant (filed as Exhibit 4(b)(3) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).

111

4(c)	Credit Agreement dated December 12, 2001 among the registrant, two subsidiaries of the registrant and certain banks (filed as Exhibit 4(d) to the registrant’s Annual Report on Form 10-K for 2001 and incorporated herein by reference).
4(d)	Amendment dated January 22, 2002 to the Credit Agreement listed at Exhibit 4(c) (filed as Exhibit 4(e) to the registrant’s Annual Report on Form 10-K for 2001 and incorporated herein by reference).
4(e)(1)	Indenture dated as of March 7, 2003 between the registrant and Wilmington Trust Company, as trustee, providing for the issuance of debt securities of the registrant from time to time (filed as Exhibit 4(e)(1) to the registrant’s Registration Statement on Form S-4 filed May 5, 2003 and incorporated herein by reference). Such Indenture is hereby modified, effective as of January 13, 2004, by deleting all references therein to “Wilmington Trust Company”, “March 7, 2003” and any specific day, month and/or year and substituting therefore blank spaces.
4(e)(2)	Resolutions dated as of February 27, 2003 fixing the terms of a series of debt securities issued by the registrant under the Indenture (filed as Exhibit 4(e)(2) to the registrant’s Registration Statement on Form S-4 filed May 5, 2003 and incorporated herein by reference).
4(e)(3)	Form of 8.250% Senior Notes due March 15, 2013 of the registrant (filed as Exhibit 4(e)(3) to the registrant’s Registration Statement on Form S-4 filed May 5, 2003 and incorporated herein by reference).
4(e)(4)	Form of Debt Security of the registrant (filed as Exhibit 4.4 to the registrant’s Registration Statement on Form S-3 filed January 13, 2004 and incorporated herein by reference).
4(e)(5)	Credit Agreement dated as of January 14, 2005, among the registrant, OSG Bulk Ships, Inc. and OSG International, Inc., as joint and several borrowers, the banks and financial institutions identified on Schedule I thereto, as lenders, and DnB NOR BANK ASA, as administrative agent (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated January 14, 2005).
**4(e)(6)	Credit Agreement dated as February 9, 2006, among the registrant, OSG Bulk Ships, Inc., OSG International, Inc., various lenders, DnB NOR Bank ASA, New York Branch (“DnB”), as administrative agent, HSBC Securities (USA) Inc. (“HSBC”), as documentation agent, Citigroup Global Markets Limited (“Citigroup”) and Nordea Bank Finland, Plc, New York branch (“Nordea”), as bookrunners, and Citigroup, DnB, HSBC and Nordea as lead arrangers.
	NOTE: The Exhibits filed herewith do not include other instruments authorizing long-term debt of the registrant and its subsidiaries, where the amounts authorized thereunder do not exceed 10% of total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees to furnish a copy of each such instrument to the Commission upon request.
10(i)(a)	Exchange Agreement dated December 9, 1969 (including exhibits thereto) between the registrant and various parties relating to the formation of the registrant (the form of which was filed as Exhibit 2(3) to Registration Statement No. 2-34124 and incorporated herein by reference).

112

10(i)(b)	Form of Additional Exchange Agreement referred to in Section 2.02 of Exhibit 10(i)(a) hereto (filed as Exhibit 2(4) to Registration Statement No. 2-34124 and incorporated herein by reference).
10(i)(c)	Time Charter Party relating to the Overseas Ann dated October 6, 2005 between DHT Ann VLCC Corp. and Ann Tanker Corporation (filed as Exhibit 10.3.1 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(d)	Time Charter Party relating to the Overseas Chris dated October 6, 2005 between DHT Chris VLCC Corp. and Chris Tanker Corporation (filed as Exhibit 10.3.2 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference.
10(i)(e)	Time Charter Party relating to the Regal Unity dated October 6, 2005 between DHT Regal Unity VLCC Corp. and Regal Unity Tanker Corporation (filed as Exhibit 10.3.3 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(f)	Time Charter Party relating to the Overseas Cathy dated October 6, 2005 between DHT Cathy Aframax Corp. and Cathy Tanker Corporation (filed as Exhibit 10.3.4 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(g)	Time Charter Party relating to the Overseas Sophie dated October 6, 2005 between DHT Sophie Aframax Corp. and Sophie Tanker Corporation (filed as Exhibit 10.3.5 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(h)	Time Charter Party relating to the Rebecca dated October 6, 2005 between Rebecca Aframax Corp. and Rebecca Tanker Corporation (filed as Exhibit 10.3.6 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(i)	Time Charter Party relating to the Ania dated October 6, 2005 between DHT Ania Aframax Corp. and Ania Aframax Corporation (filed as Exhibit 10.3.7 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(j)	Charter Framework Agreement dated October 6, 2005 between Double Hull Tankers, Inc., OSG International, Inc. and each of the Owners and Charterers named therein (filed as Exhibit 10.5 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
*10(iii)(a)	Basic Supplemental Executive Retirement Plan of the registrant, as amended and restated effective as of January 1, 2002 (filed as Exhibit 10(iii)(a) to the registrant’s Annual Report on Form 10-K for 2002 and incorporated herein by reference).
*10(iii)(b)	Supplemental Executive Retirement Plan Plus of the registrant, as amended and restated effective as of January 1, 2002 (filed as Exhibit 10(iii)(b) to the registrant’s Annual Report on Form 10-K for 2002 and incorporated herein by reference).
*10(iii)(c)	1998 Stock Option Plan adopted for employees of the registrant and its affiliates (filed as Exhibit 10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and incorporated herein by reference).

113

*10(iii)(d)	Amendment to the 1998 Stock Option Plan adopted for employees of the registrant and its affiliates (filed as Exhibit 10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 and incorporated herein by reference).
*10(iii)(e)	1999 Non-Employee Director Stock Option Plan of the registrant (filed as Exhibit 10(e)(4) to the registrant’s Annual Report on Form 10-K for 1998 and incorporated herein by reference).
*10(iii)(f)	Amendment Number 1 effective as of January 1, 2003 to the Basic Supplemental Executive Retirement Plan of the registrant, as amended and restated effective as of January 1, 2002 (filed as Exhibit 10(iii)(r) to the registrant’s Annual Report on Form 10-K for 2002 and incorporated herein by reference).
*10(iii)(g)	Amendment Number 1 effective as of January 1, 2003 to the Supplemental Executive Retirement Plan Plus of the registrant, as amended and restated effective as of January 1, 2002 (filed as Exhibit 10(iii)(s) to the registrant’s Annual Report on Form 10-K for 2002 and incorporated herein by reference).
*10(iii)(h)	Agreement dated January 19, 2004 with an executive officer (filed as Exhibit 10(iii)(v) to the registrant’s Annual Report on Form 10-K for 2003 and incorporated herein by reference).
*10(iii)(i)	Form of Director and Officer Indemnity Agreement for the directors and officers of the registrant (filed as Exhibit 10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).
*10(iii)(j)	2004 Stock Incentive Plan of the registrant (filed as Appendix A to the registrant’s Proxy Statement filed with the SEC on April 28, 2004 and incorporated herein by reference).
*10(iii)(k)	Amendment No. 1 to the 1999 Non-Employee Director Stock Option Plan of the registrant (filed as Exhibit 10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 and incorporated herein by reference).
*10(iii)(l)	Amendment Number 2 effective as of January 1, 2005 to the Supplemental Executive Retirement Plan Plus of the registrant, as amended and restated effective as of January 1, 2002.
*10(iii)(m)	Amendment Number 3 effective as of January 1, 2005 to the Supplemental Executive Retirement Plan Plus of the registrant, as amended and restated effective as of January 1, 2005.
*10(iii)(n)	Summary of equity compensation program for non-employee directors under the registrant’s 2004 Stock Incentive Plan (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated June 7, 2005 and incorporated herein by reference).
*10(iii)(o)	Agreement dated as of January 1, 2006 with an executive officer (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated January 20, 2006 and incorporated herein by reference).
*10(iii)(p)	Agreement dated as of January 1, 2006 with an executive officer (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K dated January 20, 2006 and incorporated herein by reference).
*10(iii)(q)	Agreement dated as of January 1, 2006 with an executive officer (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K dated January 20, 2006 and incorporated herein by reference).

114

*10(iii)(r)	Severance Protection Plan of the registrant effective January 1, 2006 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated January 27, 2006 and incorporated herein by reference).
*10(iii)(s)	Notice of Eligibility effective as of January 27, 2006 in favor of an executive officer (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K dated January 27, 2006 and incorporated herein by reference).
*10(iii)(t)	Notice of Eligibility effective as of January 27, 2006 in favor of an executive officer (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K dated January 27, 2006 and incorporated herein by reference).
*10(iii)(u)	Notice of Eligibility effective as of January 27, 2006 in favor of an executive officer (filed as Exhibit 10.4 to the registrant’s Current Report on Form 8-K dated January 27, 2006 and incorporated herein by reference).
*10(iii)(v)**	Agreement dated January 20, 2005 with an executive officer.
*10(iii)(w)**	Agreement dated August 12, 2004 and amended as of January 20, 2005 with an executive officer.
**12	Computation of Ratio of Earnings to Fixed Charges.
**21	List of subsidiaries of the registrant.
**23	Consent of Independent Registered Public Accounting Firm of the registrant.
*31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.
**31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.
**32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)The Exhibits marked with one asterisk (*) are a management contract or a compensatory plan or arrangement required to be filed as an exhibit.

(2)The Exhibits which have not previously been filed or listed are marked with two asterisks (**).

115

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 28, 2006
	OVERSEAS SHIPHOLDING GROUP, INC.
	By	/s/ Myles R. Itkin
		Myles R. Itkin
		Senior Vice President,
		Chief Financial Officer and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each of such persons appoints  Morten Arntzen and Myles R. Itkin, and each of them, as his agents and attorneys-in-fact, in his name, place and stead in all capacities, to sign and file with the SEC any amendments to this report and any exhibits and other documents in connection therewith, hereby ratifying and confirming all that such attorneys-in-fact or either of them may lawfully do or cause to be done by virtue of this power of attorney.

	Name		Date
/s/ MORTEN ARNTZEN		February 28, 2006
Morten Arntzen, Principal
Executive Officer and Director
/s/ MYLES R. ITKIN		February 28, 2006
Myles R. Itkin, Principal
Financial Officer and
Principal Accounting Officer
/s/ G. ALLEN ANDREAS, III		February 28, 2006
G. Allen Andreas, III, Director
/s/ ALAN R. BATKIN		February 28, 2006
Alan R. Batkin, Director
/s/ THOMAS B. COLEMAN		February 28, 2006
Thomas B. Coleman, Director
/s/ CHARLES FRIBOURG		February 28 2006
Charles Fribourg, Director
/s/ STANLEY KOMAROFF		February 28, 2006
Stanley Komaroff, Director

116

/s/ SOLOMON N. MERKIN	February 28, 2006
Solomon N. Merkin, Director
/s/ JOEL I. PICKET	February 28, 2006
Joel I. Picket, Director
/s/ ARIEL RECANATI	February 28, 2006
Ariel Recanati, Director
/s/ OUDI RECANATI	February 28, 2006
Oudi Recanati, Director
/s/ THOMAS F. ROBARDS	February 28, 2006
Thomas F. Robards, Director
/s/ MICHAEL J. ZIMMERMAN	February 28, 2006
Michael J. Zimmerman, Director

117

EXHIBIT INDEX

(a)(1)	The following consolidated financial statements of the Company are filed in response to Item 8.
	Consolidated Balance Sheets at December 31, 2005 and 2004.
	Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003.
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003.
	Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2005, 2004 and 2003.
	Notes to Consolidated Financial Statements.
	Report of Independent Registered Public Accounting Firm.
	Report of Independent Registered Public Accounting Firm on Internal Controls.
(a)(2)	Schedules of the Company have been omitted since they are not applicable or are not required.
(a)(3)	The following exhibits are included in response to Item 15(c):
3(i)	Certificate of Incorporation of the registrant, as amended to date (filed as Exhibit 3(i) to the registrant’s Annual Report on Form 10-K for 1998 and incorporated herein by reference).
3(ii)	By-Laws of the registrant, as amended to date (filed as Exhibit 3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).
4(a)	Rights Agreement dated as of October 20, 1998 between the registrant and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, with the form of Right Certificate attached as Exhibit A thereto and the Summary of Rights to Purchase Shares attached as Exhibit B thereto (filed as Exhibit 4.1 to the registrant’s Registration Statement on Form 8-A filed November 9, 1998 and incorporated herein by reference).
4(b)(1)	Form of Indenture dated as of December 1, 1993 between the registrant and The Chase Manhattan Bank (National Association) providing for the issuance of debt securities by the registrant from time to time (filed as Exhibit 4(b)(1) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).
4(b)(2)	Resolutions dated December 2, 1993 fixing the terms of two series of debt securities issued by the registrant under the Indenture (filed as Exhibit 4(b)(2) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).
4(b)(3)	Form of 83/4% Debentures due December 1, 2013 of the registrant (filed as Exhibit 4(b)(3) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).

118

4(c)	Credit Agreement dated December 12, 2001 among the registrant, two subsidiaries of the registrant and certain banks (filed as Exhibit 4(d) to the registrant’s Annual Report on Form 10-K for 2001 and incorporated herein by reference).
4(d)	Amendment dated January 22, 2002 to the Credit Agreement listed at Exhibit 4(c) (filed as Exhibit 4(e) to the registrant’s Annual Report on Form 10-K for 2001 and incorporated herein by reference).
4(e)(1)	Indenture dated as of March 7, 2003 between the registrant and Wilmington Trust Company, as trustee, providing for the issuance of debt securities of the registrant from time to time (filed as Exhibit 4(e)(1) to the registrant’s Registration Statement on Form S-4 filed May 5, 2003 and incorporated herein by reference). Such Indenture is hereby modified, effective as of January 13, 2004, by deleting all references therein to “Wilmington Trust Company”, “March 7, 2003” and any specific day, month and/or year and substituting therefore blank spaces.
4(e)(2)	Resolutions dated as of February 27, 2003 fixing the terms of a series of debt securities issued by the registrant under the Indenture (filed as Exhibit 4(e)(2) to the registrant’s Registration Statement on Form S-4 filed May 5, 2003 and incorporated herein by reference).
4(e)(3)	Form of 8.250% Senior Notes due March 15, 2013 of the registrant (filed as Exhibit 4(e)(3) to the registrant’s Registration Statement on Form S-4 filed May 5, 2003 and incorporated herein by reference).
4(e)(4)	Form of Debt Security of the registrant (filed as Exhibit 4.4 to the registrant’s Registration Statement on Form S-3 filed January 13, 2004 and incorporated herein by reference).
4(e)(5)	Credit Agreement dated as of January 14, 2005, among the registrant, OSG Bulk Ships, Inc. and OSG International, Inc., as joint and several borrowers, the banks and financial institutions identified on Schedule I thereto, as lenders, and DnB NOR BANK ASA, as administrative agent (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated January 14, 2005).
**4(e)(6)	Credit Agreement dated as February 9, 2006, among the registrant, OSG Bulk Ships, Inc., OSG International, Inc., various lenders, DnB NOR Bank ASA, New York Branch (“DnB”), as administrative agent, HSBC Securities (USA) Inc. (“HSBC”), as documentation agent, Citigroup Global Markets Limited (“Citigroup”) and Nordea Bank Finland, Plc, New York branch (“Nordea”), as bookrunners, and Citigroup, DnB, HSBC and Nordea as lead arrangers.
	NOTE: The Exhibits filed herewith do not include other instruments authorizing long-term debt of the registrant and its subsidiaries, where the amounts authorized thereunder do not exceed 10% of total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees to furnish a copy of each such instrument to the Commission upon request.
10(i)(a)	Exchange Agreement dated December 9, 1969 (including exhibits thereto) between the registrant and various parties relating to the formation of the registrant (the form of which was filed as Exhibit 2(3) to Registration Statement No. 2-34124 and incorporated herein by reference).

119

10(i)(b)	Form of Additional Exchange Agreement referred to in Section 2.02 of Exhibit 10(i)(a) hereto (filed as Exhibit 2(4) to Registration Statement No. 2-34124 and incorporated herein by reference).
10(i)(c)	Time Charter Party relating to the Overseas Ann dated October 6, 2005 between DHT Ann VLCC Corp. and Ann Tanker Corporation (filed as Exhibit 10.3.1 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(d)	Time Charter Party relating to the Overseas Chris dated October 6, 2005 between DHT Chris VLCC Corp. and Chris Tanker Corporation (filed as Exhibit 10.3.2 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference.
10(i)(e)	Time Charter Party relating to the Regal Unity dated October 6, 2005 between DHT Regal Unity VLCC Corp. and Regal Unity Tanker Corporation (filed as Exhibit 10.3.3 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(f)	Time Charter Party relating to the Overseas Cathy dated October 6, 2005 between DHT Cathy Aframax Corp. and Cathy Tanker Corporation (filed as Exhibit 10.3.4 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(g)	Time Charter Party relating to the Overseas Sophie dated October 6, 2005 between DHT Sophie Aframax Corp. and Sophie Tanker Corporation (filed as Exhibit 10.3.5 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(h)	Time Charter Party relating to the Rebecca dated October 6, 2005 between Rebecca Aframax Corp. and Rebecca Tanker Corporation (filed as Exhibit 10.3.6 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(i)	Time Charter Party relating to the Ania dated October 6, 2005 between DHT Ania Aframax Corp. and Ania Aframax Corporation (filed as Exhibit 10.3.7 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
10(i)(j)	Charter Framework Agreement dated October 6, 2005 between Double Hull Tankers, Inc., OSG International, Inc. and each of the Owners and Charterers named therein (filed as Exhibit 10.5 to Double Hull Tankers, Inc.’s Registration Statement on Form F-1 (Registration No. 333-128460) and incorporated herein by reference).
*10(iii)(a)	Basic Supplemental Executive Retirement Plan of the registrant, as amended and restated effective as of January 1, 2002 (filed as Exhibit 10(iii)(a) to the registrant’s Annual Report on Form 10-K for 2002 and incorporated herein by reference).
*10(iii)(b)	Supplemental Executive Retirement Plan Plus of the registrant, as amended and restated effective as of January 1, 2002 (filed as Exhibit 10(iii)(b) to the registrant’s Annual Report on Form 10-K for 2002 and incorporated herein by reference).
*10(iii)(c)	1998 Stock Option Plan adopted for employees of the registrant and its affiliates (filed as Exhibit 10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and incorporated herein by reference).

120

*10(iii)(d)	Amendment to the 1998 Stock Option Plan adopted for employees of the registrant and its affiliates (filed as Exhibit 10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 and incorporated herein by reference).
*10(iii)(e)	1999 Non-Employee Director Stock Option Plan of the registrant (filed as Exhibit 10(e)(4) to the registrant’s Annual Report on Form 10-K for 1998 and incorporated herein by reference).
*10(iii)(f)	Amendment Number 1 effective as of January 1, 2003 to the Basic Supplemental Executive Retirement Plan of the registrant, as amended and restated effective as of January 1, 2002 (filed as Exhibit 10(iii)(r) to the registrant’s Annual Report on Form 10-K for 2002 and incorporated herein by reference).
*10(iii)(g)	Amendment Number 1 effective as of January 1, 2003 to the Supplemental Executive Retirement Plan Plus of the registrant, as amended and restated effective as of January 1, 2002 (filed as Exhibit 10(iii)(s) to the registrant’s Annual Report on Form 10-K for 2002 and incorporated herein by reference).
* 10(iii)(h)	Agreement dated January 19, 2004 with an executive officer (filed as Exhibit 10(iii)(v) to the registrant’s Annual Report on Form 10-K for 2003 and incorporated herein by reference).
* 10(iii)(i)	Form of Director and Officer Indemnity Agreement for the directors and officers of the registrant (filed as Exhibit 10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).
* 10(iii)(j)	2004 Stock Incentive Plan of the registrant (filed as Appendix A to the registrant’s Proxy Statement filed with the SEC on April 28, 2004 and incorporated herein by reference).
* 10(iii)(k)	Amendment No. 1 to the 1999 Non-Employee Director Stock Option Plan of the registrant (filed as Exhibit 10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 and incorporated herein by reference).
* 10(iii)(l)	Amendment Number 2 effective as of January 1, 2005 to the Supplemental Executive Retirement Plan Plus of the registrant, as amended and restated effective as of January 1, 2002.
* 10(iii)(m)	Amendment Number 3 effective as of January 1, 2005 to the Supplemental Executive Retirement Plan Plus of the registrant, as amended and restated effective as of January 1, 2005.
* 10(iii)(n)	Summary of equity compensation program for non-employee directors under the registrant’s 2004 Stock Incentive Plan (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated June 7, 2005 and incorporated herein by reference).
* 10(iii)(o)	Agreement dated as of January 1, 2006 with an executive officer (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated January 20, 2006 and incorporated herein by reference).
*10(iii)(p)	Agreement dated as of January 1, 2006 with an executive officer (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K dated January 20, 2006 and incorporated herein by reference).
*10(iii)(q)	Agreement dated as of January 1, 2006 with an executive officer (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K dated January 20, 2006 and incorporated herein by reference).

121

*10(iii)(r)	Severance Protection Plan of the registrant effective January 1, 2006 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated January 27, 2006 and incorporated herein by reference).
*10(iii)(s)	Notice of Eligibility effective as of January 27, 2006 in favor of an executive officer (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K dated January 27, 2006 and incorporated herein by reference).
*10(iii)(t)	Notice of Eligibility effective as of January 27, 2006 in favor of an executive officer (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K dated January 27, 2006 and incorporated herein by reference).
*10(iii)(u)	Notice of Eligibility effective as of January 27, 2006 in favor of an executive officer (filed as Exhibit 10.4 to the registrant’s Current Report on Form 8-K dated January 27, 2006 and incorporated herein by reference).
*10(iii)(v)**	Agreement dated January 20, 2005 with an executive officer.
*10(iii)(w)**	Agreement dated August 12, 2004 and amended as of January 20, 2005 with an executive officer.
**12	Computation of Ratio of Earnings to Fixed Charges.
**21	List of subsidiaries of the registrant.
**23	Consent of Independent Registered Public Accounting Firm of the registrant.
**31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.
**31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.
**32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)The Exhibits marked with one asterisk (*) are a management contract or a compensatory plan or arrangement required to be filed as an exhibit.

(2)The Exhibits which have not previously been filed or listed are marked with two asterisks (**).

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EX-4.(E)(6)

Exhibit 4(e)(6)

$1,500,000,000

CREDIT AGREEMENT

among

OVERSEAS SHIPHOLDING GROUP, INC.,
OSG BULK SHIPS, INC.,
OSG INTERNATIONAL, INC.,

VARIOUS LENDERS

and

DnB NOR BANK ASA, NEW YORK BRANCH,

as Administrative Agent

Dated as of February 9, 2006

HSBC SECURITIES (USA) INC.,
as Documentation Agent,

and

CITIGROUP GLOBAL MARKETS LIMITED

and

NORDEA BANK FINLAND PLC, NEW YORK BRANCH,

as Bookrunners

and

CITIGROUP GLOBAL MARKETS LIMITED,

DnB NOR BANK ASA, NEW YORK BRANCH,

HSBC SECURITIES (USA) INC.,
and

NORDEA BANK FINLAND PLC, NEW YORK BRANCH
as Lead Arrangers

TABLE OF CONTENTS

		Page
SECTION 1.	Amount and Terms of Credit Facility	1
1.01	The Commitments	1
1.02	Minimum Amount of Each Borrowing; Limitation on Number of Borrowings	3
1.03	Notice of Borrowing	3
1.04	Disbursement of Funds	4
1.05	Notes	5
1.06	Pro Rata Borrowings	6
1.07	Interest	6
1.08	Interest Periods	7
1.09	Increased Costs, Illegality, etc.	8
1.10	Compensation	11
1.11	Change of Lending Office	12
1.12	Replacement of Lenders	12
SECTION 2.	Letters of Credit	13
2.01	Letters of Credit	13
2.02	Letter of Credit Requests; Minimum Stated Amount	14
2.03	Letter of Credit Participations	15
2.04	Agreement to Repay Letter of Credit Drawings	17
2.05	Increased Costs	18
SECTION 3.	Commitment Commission; Fees; Reductions of Commitment	18
3.01	Commitment Commission	18
3.02	Voluntary Termination of Unutilized Commitments	19
3.03	Mandatory Reduction of Commitments	20
SECTION 4.	Prepayments; Payments; Taxes	20
4.01	Voluntary Prepayments	20
4.02	Mandatory Repayments and Commitment Reductions	21
4.03	Method and Place of Payment	22
4.04	Net Payments; Taxes	23
SECTION 5.	Conditions Precedent to the Initial Borrowing Date	25
5.01	Effective Date; Notes	25
5.02	Fees, etc.	25
5.03	Opinions of Counsel	26
5.04	Corporate Authority	26
5.05	Financial Information	26
5.06	Consummation of the Refinancing	26
5.07	Environmental Claims	27
5.08	Appointment of Process Agent	27

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5.09	Officer’s Certificate	27
5.10	Insurance	27
5.11	List of Vessels	27
SECTION 6.	Conditions Precedent to All Credit Events	27
6.01	No Default; Representations and Warranties	27
6.02	Notice of Borrowing; Letter Of Credit Request	27
6.03	No Material Adverse Change	28
SECTION 7.	Representations, Warranties and Agreements	28
7.01	Due Organization and Power	28
7.02	Authorization and Consents	28
7.03	No Violation	28
7.04	Approval; Consents	29
7.05	Financial Statements	29
7.06	Litigation	29
7.07	Use of Proceeds; Margin Regulations	29
7.08	Tax Returns and Payments	29
7.09	Compliance with ERISA	30
7.10	Subsidiaries	30
7.11	Compliance with Laws, etc.	30
7.12	Investment Company Act	31
7.13	Environmental Matters and Claims	31
7.14	Insurance	32
7.15	OSG International Not Immune	32
7.16	Binding Obligations	32
7.17	Filings; Stamp Taxes	32
7.18	No Default	32
7.19	Chief Executive Office	32
7.20	Foreign Trade Control Regulations	32
7.21	Compliance with ISM Code and ISPS Code	33
7.22	Threatened Withdrawal of DOC, SMC or ISSC	33
7.23	Payment Free of Taxes	33
7.24	No Material Adverse Change	33
7.25	No Proceedings to Dissolve	33
7.26	No Marshall Islands Filing Necessary	33
7.27	True and Complete Disclosure	33
7.28	Solvency	34
SECTION 8.	Affirmative Covenants	34
8.01	Financial Statements	34
8.02	Books, Records and Inspections	36

ii

8.03	Maintenance of Assets	37
8.04	Preservation of Corporate Existence, etc.	37
8.05	Consents	37
8.06	Environmental Matters	37
8.07	Payment of Obligations	38
8.08	Compliance with Agreements, Statutes, etc.	38
8.09	Performance of Agreement	38
8.10	Notice of Default	38
8.11	Rating Change	38
8.12	Insurance	38
8.13	Shipping Management	39
8.14	Book Value	39
8.15	Exchange Listing	39
8.16	Ownership of OSG Bulk and OSG International	39
8.17	Agent for Service of Process	39
SECTION 9.	Negative Covenants	40
9.01	Liens	40
9.02	Consolidation, Merger, Sale of Assets, etc.	40
9.03	Sale and Leaseback Transactions	41
9.04	Indebtedness	41
9.05	Investments in Joint Ventures	42
9.06	Transactions with Affiliates	42
9.07	Maximum Leverage	42
9.08	Minimum Net Worth	42
9.09	Minimum Unencumbered Assets	42
9.10	Other Limitations	42
SECTION 10.	Events of Default	42
10.01	Payments	42
10.02	Representations, etc.	43
10.03	Covenants	43
10.04	Default Under Other Agreements	43
10.05	Bankruptcy, etc.	43
10.06	ERISA	43
10.07	Judgments	44
10.08	Impossibility, Illegality	44
10.09	Inability to Pay Debts	44
SECTION 11.	Definitions and Accounting Terms	45
11.01	Defined Terms	45

iii

SECTION 12.	Agency Provisions	62
12.01	Appointment	62
12.02	Nature of Duties	62
12.03	Lack of Reliance on the Agents	62
12.04	Certain Rights of the Agents	63
12.05	Reliance	63
12.06	Indemnification	63
12.07	The Administrative Agent in its Individual Capacity	63
12.08	Holders	64
12.09	Resignation by the Administrative Agent	64
12.10	Other Agents	65
SECTION 13.	Miscellaneous	65
13.01	Payment of Expenses, etc.	65
13.02	Right of Setoff	66
13.03	Notices	66
13.04	Benefit of Agreement	67
13.05	No Waiver; Remedies Cumulative	68
13.06	Payments Pro Rata	69
13.07	Calculations; Computations	69
13.08	GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL	70
13.09	Counterparts	71
13.10	Effectiveness	71
13.11	Headings Descriptive	71
13.12	Amendment or Waiver; etc.	71
13.13	Survival	73
13.14	Domicile of Loans	73
13.15	Limitation on Additional Amounts, etc.	73
13.16	Confidentiality	73
13.17	Register	74
13.18	Judgment Currency	74
13.19	Language	75
13.20	Waiver of Immunity	75
13.21	USA PATRIOT Act Notice	75

iv

SCHEDULE I	-	Commitments
SCHEDULE II	-	Lender Addresses
SCHEDULE III	-	Outstanding Indebtedness
SCHEDULE IV	-	Existing Liens
SCHEDULE V	-	Existing Indebtedness
SCHEDULE VI	-	Associated Costs Rate
SCHEDULE VII		Closing Date Assets
EXHIBIT A	-	Form of Notice of Borrowing
EXHIBIT B-1	-	Form of Revolving Note
EXHIBIT B-2	-	Form of Swingline Note
EXHIBIT C	-	Letter of Credit Request
EXHIBIT D-1	-	Form of Opinion of James I. Edelson, Esq., General Counsel to OSG and its Subsidiaries
EXHIBIT D-2	-	Opinion of White & Case LLP
EXHIBIT E	-	Form of Section 4.04(b) Certificate
EXHIBIT F	-	Assignment and Assumption Agreement

v

CREDIT AGREEMENT, dated as of February 9, 2006, among OVERSEAS SHIPHOLDING GROUP, INC., a Delaware corporation (“OSG” or the “Parent”), OSG BULK SHIPS, INC., a New York corporation (“OSG Bulk”) and OSG INTERNATIONAL, INC., a Marshall Islands corporation (“OSG International” and together with OSG and OSG Bulk, collectively, the “Borrowers” and each a “Borrower”), the Lenders party hereto from time to time, and DnB NOR BANK ASA, New York Branch, as Administrative Agent (in such capacity, the “Administrative Agent”).  All capitalized terms used herein and defined in Section 11 are used herein as therein defined.

W I T N E S S E T H :

WHEREAS, subject to and upon the terms and conditions herein set forth, the Lenders are willing to make available to the Borrowers on a joint and several basis a credit facility in a maximum aggregate amount of $1,500,000,000 as provided for herein;

NOW, THEREFORE, IT IS AGREED:

SECTION 1.  Amount and Terms of Credit Facility.

1.01  The Commitments.  (a)  Subject to and upon the terms and conditions set forth herein, each Lender severally agrees to make at any time on or after the Initial Borrowing Date and prior to the Final Maturity Date a revolving loan or revolving loans (each, a “Revolving Loan” and, collectively, the “Revolving Loans”) to the Borrowers on a joint and several basis, which Revolving Loans (i) shall bear interest in accordance with Section 1.07, (ii) shall be denominated in Dollars or in an Alternate Currency in each case, as elected by the Borrowers, (iii) may be repaid and reborrowed in accordance with the provisions hereof, (iv) shall not exceed for any such Lender at any time that aggregate principal amount outstanding which, when added to the product of (x) such Lender’s Percentage and (y) the sum of (I) all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) at such time, and (II) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) then outstanding equals the Commitment of such Lender at such time, (v) shall not exceed for all such Lenders at any time that aggregate principal amount outstanding which, when added to the sum of (I) the amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Loans) at such time, and (II) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) then outstanding equals the Total Commitment at such time, and (vi) in the case of Alternate Currency Revolving Loans, shall not exceed for all Lenders at any time in aggregate principal amount (using the Dollar Equivalent thereof) outstanding, the Alternate Currency Sublimit.

(b)Subject to and upon the terms and conditions set forth herein, the Swingline Lender agrees to make, at any time and from time to time on or after the Initial

Borrowing Date and prior to the Swingline Expiry Date, a revolving loan or revolving loans (each, a “Swingline Loan” and, collectively, the “Swingline Loans”) to the Borrowers on a joint and several basis, which Swingline Loans (i) shall bear interest in accordance with Section 1.07, (ii) shall be denominated in Dollars, (iii) may be repaid and reborrowed in accordance with the provisions hereof, (iv) as provided in Section 4.02(c) shall be repaid no later than the date which is five Business Days following the incurrence thereof, (v) shall not exceed in aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all Revolving Loans then outstanding (for this purpose, using the Dollar Equivalent of each Alternate Currency Revolving Loan then outstanding) and the aggregate amount of all Letter of Credit Outstandings at such time, an amount equal to the Total Commitment at such time, and (vi) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount.  Notwithstanding anything to the contrary contained in this Section 1.01(b), (i) the Swingline Lender shall not be obligated to make any Swingline Loans at a time when a Lender Default exists with respect to any Lender unless the Swingline Lender has entered into arrangements satisfactory to it and the Borrowers to eliminate the Swingline Lender’s risk with respect to the Defaulting Lenders’ participation in such Swingline Loans, including by cash collateralizing such Defaulting Lenders’ Percentage of the outstanding Swingline Loans, and (ii) the Swingline Lender shall not make any Swingline Loan after it has received written notice from any Borrower, any other Credit Party or the Required Lenders stating that a Default or an Event of Default exists and is continuing until such time as the Swingline Lender shall have received written notice (A) of rescission of all such notices from the party or parties originally delivering such notice or notices or (B) of the waiver of such Default or Event of Default by the Required Lenders.

(c)On any Business Day, the Swingline Lender may, in its sole discretion, give notice to the Lenders that the Swingline Lender’s outstanding Swingline Loans shall be funded with one or more Borrowings of Dollar Revolving Loans (provided that such notice shall be deemed to have been automatically given upon the occurrence of a Default or an Event of Default under Section 10.05 or Section 10.09 or upon the exercise of any of the remedies provided in the last paragraph of Section 10), in which case one or more Borrowings of Dollar Revolving Loans in an aggregate principal amount equal to such outstanding Swingline Loans (each such Borrowing, a “Mandatory Borrowing”) shall be made on the immediately succeeding Business Day by all Lenders pro rata based on each such Lender’s Percentage (determined before giving effect to any termination of the Commitments pursuant to the last paragraph of Section 10) and the proceeds thereof shall be applied directly by the Swingline Lender to repay the Swingline Lender for such outstanding Swingline Loans.  Each Lender hereby irrevocably agrees to make Dollar Revolving Loans upon one Business Day’s notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by the Swingline Lender notwithstanding (i) the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any conditions specified in Section 6 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) the date of such Mandatory Borrowing, and (v) the amount of the Total Commitment at such time.  For the avoidance of doubt, any Swingline Loan which has been funded with one or more Mandatory Borrowings shall cease to be a Swingline Loan.  In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to any Borrower),

2

then each Lender hereby agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrowers on or after such date and prior to such purchase) from the Swingline Lender such participations in the outstanding Swingline Loans as shall be necessary to cause the Lenders to share in such Swingline Loans ratably based upon their respective Percentages (determined before giving effect to any termination of the Commitments pursuant to the last paragraph of Section 10), provided that (x) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is required to be purchased and, to the extent attributable to the purchased participation, shall be payable to the participant from and after such date and (y) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay the Swingline Lender interest on the principal amount of participation purchased for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the overnight Federal Funds Rate for the first three days and at the interest rate otherwise applicable to Revolving Loans hereunder for each day thereafter.

(d)In the event that the Borrowers fail to reimburse any Issuing Lender in accordance with Section 2.04 for any Drawing paid by such Issuing Lender under any Letter of Credit issued by it, then on the date specified in Section 2.04(a), the Borrowers shall be deemed to have made a request for a borrowing of Revolving Loans in an amount equal to the Drawing with an initial Interest Period of seven days which such deemed request shall not be subject to any condition precedent set forth in Section 6 and shall be irrevocable.  Each Lender acknowledges and agrees that its obligation to make its pro rata share of any such borrowing available to the Administrative Agent is absolute and unconditional and shall not be affected by any event, happening or circumstance whatsoever, including the failure of any condition precedent set forth in Section 5 to be satisfied at the time of such deemed request.

1.02  Minimum Amount of Each Borrowing; Limitation on Number of Borrowings.  (a)  The aggregate principal amount of each Borrowing of Loans under a respective Tranche shall not be less than the Minimum Borrowing Amount for such Tranche of Loans.

(b)More than one Borrowing may occur on the same date, but at no time shall there be outstanding more than twelve Borrowings of Loans subject to different Interest Periods.

1.03  Notice of Borrowing.  (a)  Whenever the Borrowers desire to make a Borrowing of Revolving Loans hereunder, OSG as agent for the Borrowers shall give the Administrative Agent at its Notice Office at least four Business Days’ prior written notice of each Revolving Loan to be made hereunder, provided that any such notice shall be deemed to have been given on a certain day only if given before 11:00 A.M. (New York time).  Each such written notice (each a “Notice of Borrowing”), except as otherwise expressly provided in Section 1.09, shall be irrevocable and shall be given in the form of Exhibit A, appropriately completed to specify (i) the aggregate principal amount of the Revolving Loans to be made pursuant to such Borrowing (stated in Dollars, or in the case of Alternate Currency Revolving Loans, in the relevant Alternate Currency), (ii) the date of such Borrowing (which shall be a Business Day), (iii) the initial Interest Period to be applicable thereto and (iv) to which account the proceeds of such Revolving Loans are to be deposited.  The Administrative Agent shall promptly give each

3

Lender which is required to make Revolving Loans, notice of such proposed Borrowing, of such Lender’s proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing.

(b)(i)  Whenever the Borrowers desire to incur Swingline Loans hereunder, OSG as agent for the Borrowers shall give the Swingline Lender no later than 12:00 Noon (New York time) on the date that a Swingline Loan is to be incurred, written notice or telephonic notice promptly confirmed in writing of each Swingline Loan to be incurred hereunder.  Each such notice shall be irrevocable and specify in each case (A) the date of Borrowing (which shall be a Business Day) and (B) the aggregate principal amount of the Swingline Loans to be incurred pursuant to such Borrowing.

(ii)Mandatory Borrowings shall be made upon the notice specified in Section 1.01(c), with the Borrowers irrevocably agreeing, by their incurrence of any Swingline Loan, to the making of the Mandatory Borrowings as set forth in Section 1.01(c).

(c)Without in any way limiting the obligation of the Borrowers to deliver a written Notice of Borrowing in accordance with Section 1.03(a), the Administrative Agent or the Swingline Lender, as the case may be, may act without liability upon the basis of telephonic notice of such Borrowing, believed by the Administrative Agent or the Swingline Lender, as the case may be, in good faith to be from the Chairman of the Board, Chief Administrative Officer, President, Chief Financial Officer, the Treasurer or any Senior Vice President of OSG (or any other officer of the OSG designated in writing to the Administrative Agent by the Chief Executive Officer, Chief Administrative Officer, President, Chief Financial Officer, the Treasurer or any Senior Vice President of the OSG as being authorized to give such notices under this Agreement) prior to receipt of Notice of Borrowing.  In each such case, the Borrowers hereby waive the right to dispute the Administrative Agent’s or the Swingline Lender’s record of the terms of such telephonic notice of such Borrowing of Loans, absent manifest error.

1.04  Disbursement of Funds.  Except as otherwise specifically provided in the immediately succeeding sentence, no later than 11:00 A.M. (New York time) on the date specified in each Notice of Borrowing (or (x) in the case of Swingline Loans, no later than 3:00 P.M. (New York time) on the date specified pursuant to Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, no later than 11:00 A.M. (New York time) on the date specified in Section 1.01(c)) each Lender with a Commitment will make available its pro rata portion of each such Borrowing requested to be made on such date (or in the case of Swingline Loans, the Swingline Lender will make available the full amount thereof).  All such amounts shall be made available in Dollars (or, in the case of Alternate Currency Revolving Loans, in the relevant Alternate Currency) and in immediately available funds at the Payment Office of the Administrative Agent and the Administrative Agent will, except in the case of Revolving Loans made pursuant to a Mandatory Borrowing, make available to the Borrowers (prior to 2:30 P.M. (New York Time) on such day to the extent of funds actually received by the Administrative Agent prior to 11:00 A.M. (New York Time) on such day) at the Payment Office in Dollars (or, in the case of Alternate Currency Revolving Loans, in the relevant Alternate Currency) in the account specified in the applicable Notice of Borrowing, the aggregate of the amounts so made available by the Lenders.  Unless the Administrative Agent shall have been notified by any Lender prior to the date of Borrowing that such Lender does not intend to make available to the

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Administrative Agent such Lender’s portion of any Borrowing to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date of Borrowing and the Administrative Agent may, in reliance upon such assumption, make available to the Borrowers a corresponding amount.  If such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender.  If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Borrowers and the Borrowers shall immediately pay such corresponding amount to the Administrative Agent.  The Administrative Agent shall also be entitled to recover on demand from such Lender or the Borrowers, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrowers until the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (i) if recovered from such Lender, at the overnight Federal Funds Rate and (ii) if recovered from the Borrowers, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 1.07.  Nothing in this Section 1.04 shall be deemed to relieve any Lender from its obligation to make Loans hereunder or to prejudice any rights which the Borrowers may have against any Lender as a result of any failure by such Lender to make Loans hereunder.

1.05  Notes.  (a)  The Borrowers’ obligation to pay the principal of, and interest on, the Loans made by each Lender shall, if requested by such Lender, be evidenced (i) in the case of Revolving Loans by a promissory note duly executed and delivered by the Borrowers substantially in the form of Exhibit B-1, with blanks appropriately completed in conformity herewith (each a “Revolving Note” and, collectively, the “Revolving Notes”) and (ii) in the case of Swingline Loans, by promissory notes duly executed and delivered by the Borrowers substantially in the form of Exhibit B-2 (the “Swingline Note”).

(b)Each Revolving Note shall (i) be executed by the Borrowers, (ii) be payable to the order of such Lender that has requested a Revolving Note and be dated the Initial Borrowing Date (or, in the case of Revolving Notes issued after the Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be in a stated principal amount (expressed in Dollars) equal to the Commitment of such Lender and be payable in the principal amount of the Revolving Loans evidenced thereby; provided that if, because of fluctuations in exchange rates after the Initial Borrowing Date, the Revolving Note of any Lender would not be at least as great as the outstanding aggregate principal amount (taking the Dollar Equivalent of all Alternate Currency Revolving Loans evidenced thereby) of the Revolving Loans made by such Lender to the Borrowers at any time outstanding, the respective Lender may, at any time after the occurrence of any Default or Event of Default, request (and in such case the Borrowers shall promptly execute and deliver) a new Revolving Note in an amount equal to the aggregate principal amount (taking the Dollar Equivalent of all Alternate Currency Revolving Loans evidenced thereby) of such Revolving Loans of such Lender outstanding on the date of the issuance of such new Revolving Note, (iv) mature on the Final Maturity Date, (v) bear interest as provided in the appropriate clause in Section 1.07, (vi) be subject to voluntary prepayment and mandatory repayment as provided in Sections 4.01 and 4.02, (vii) be subject to the Scheduled Commitment Reductions provided in Section 3.03, (viii) with respect to each Revolving Loan evidenced

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thereby, be payable in the respective Permitted Currency in which such Revolving Loan was made and (ix) be entitled to the benefits of this Agreement and the other Credit Documents.

(c)The Swingline Note issued by the Borrowers to the Swingline Lender shall (i) be payable to the Swingline Lender or its registered assigns and be dated the Initial Borrowing Date, (ii) be in a stated principal amount (expressed in Dollars) equal to the Maximum Swingline Amount and be payable in the outstanding principal amount of Swingline Loans evidenced thereby, (iii) mature on the Swingline Expiry Date, (iv) bear interest as provided in the appropriate clause of Section 1.07, (v) be subject to voluntary prepayment as provided in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vi) be entitled to the benefits of this Agreement and the other Credit Documents.

(d)Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will, prior to any transfer of any of its Notes, endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby.  Failure to make any such notation or any error in any such notation or endorsement shall not affect the Borrowers’ obligations in respect of such Loans.

(e)Notwithstanding anything to the contrary contained above in this Section 1.05 or elsewhere in this Agreement, Notes shall be delivered only to Lenders that at any time specifically request the delivery of such Notes.  No failure of any Lender to request or obtain a Note evidencing its Loans to the Borrowers shall affect or in any manner impair the obligations of the Borrowers to pay the Loans (and all related Obligations) incurred by the Borrowers that would otherwise be evidenced thereby in accordance with the requirements of this Agreement.  Any Lender that does not have a Note evidencing its outstanding Loans shall in no event be required to make the notations otherwise described in preceding clause (d).  At any time (including, without limitation, to replace any Note that has been destroyed or lost) when any Lender requests the delivery of a Note to evidence any of its Loans, the Borrowers shall promptly execute and deliver to such Lender the requested Note in the appropriate amount or amounts to evidence such Loans; provided that, in the case of a substitute or replacement Note, the Borrowers shall have received from such requesting Lender (i) an affidavit of loss or destruction and (ii) a customary lost/destroyed note indemnity, in each case in form and substance reasonably acceptable to the Borrowers and such requesting Lender, and duly executed by such requesting Lender.

1.06  Pro Rata Borrowings.  All Borrowings of Revolving Loans under this Agreement shall be incurred from the Lenders pro rata on the basis of their Commitments; provided that all Mandatory Borrowings shall be incurred from the Lenders pro rata on the basis of their Percentages.  It is understood that no Lender shall be responsible for any default by any other Lender of its obligation to make Loans hereunder and that each Lender shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder.

1.07  Interest.  (a)  The Borrowers jointly and severally agree to pay interest in respect of the unpaid principal amount of each Revolving Loan from the date the proceeds thereof are made available to the Borrowers until the maturity (whether by acceleration or otherwise) of such Revolving Loan at a rate per annum which shall, during each Interest Period

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applicable thereto, be equal to the sum of the Applicable Margin as in effect from time to time during such Interest Period plus the applicable LIBOR Rate for such Interest Period plus, to the extent applicable, the Associated Costs Rate.

(b)The Borrowers jointly and severally agree to pay interest in respect of the unpaid principal amount of each Swingline Loan from the date the proceeds thereof are made available to the Borrowers until the maturity (whether by acceleration or otherwise) of such Swingline Loan at a rate per annum which shall be equal to the sum of the Applicable Margin plus the Overnight Euro Dollar Offered Rate as in effect from time to time.

(c)Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan and any other overdue amount payable hereunder shall, in each case, bear interest at a rate per annum (the “Default Rate”) equal to 2.00% per annum in excess of the rate then borne by such Loans (or, if such overdue amount is not interest or principal in respect of a Loan, 2.00% per annum in excess of the Applicable Margin plus the Overnight Euro Dollar Offered Rate as in effect from time to time), in each case with such interest to be payable on demand.

(d)Accrued and unpaid interest shall be payable in respect of each Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period, on any repayment or prepayment (on the amount repaid or prepaid), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand.

(e)Upon each Interest Determination Date, the Administrative Agent shall determine the LIBOR Rate for each Interest Period applicable to the Loans to be made pursuant to the applicable Borrowing and shall promptly notify the Borrowers and the respective Lenders thereof.  Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto.

1.08  Interest Periods.  At the time the Borrowers give any Notice of Borrowing in respect of the making of any Loan (in the case of the initial Interest Period applicable thereto) or on the fourth Business Day prior to the expiration of an Interest Period applicable to such Loan (in the case of any subsequent Interest Period), it shall have the right to elect, by giving the Administrative Agent notice thereof, the interest period (each an “Interest Period”) applicable to such Loan, which Interest Period shall, at the option of the Borrowers, be a seven day or a one, three or six or, if agreed to by all Lenders, 12 month period; provided that:

(i)all Loans comprising a Borrowing shall at all times have the same Interest Period;

(ii)the initial Interest Period for any Loan shall commence on the date of Borrowing of such Loan and each Interest Period occurring thereafter in respect of such Loan shall commence on the day on which the immediately preceding Interest Period applicable thereto expires;

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(iii)if any Interest Period relating to a Loan begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month;

(iv)if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the first succeeding Business Day; provided, however, that if any Interest Period for a Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day;

(v)all interest shall be calculated from and including the first day of an Interest Period to but excluding the last day of such Interest Period;

(vi)unless the Required Lenders otherwise agree, no Interest Period longer than one month may be selected at any time when a Default or Event of Default has occurred and is continuing;

(vii)no Interest Period in respect of any Borrowing of any Loans shall be selected which extends beyond the Final Maturity Date; and

(viii)the selection of Interest Periods shall be subject to the provisions of Section 1.02(b).

If upon the expiration of any Interest Period applicable to a Borrowing, the Borrowers have failed to elect a new Interest Period to be applicable to such Loans as provided above, the Borrowers shall be deemed to have elected a one month Interest Period to be applicable to such Loans effective as of the expiration date of such current Interest Period.

1.09  Increased Costs, Illegality, etc.  (a)  In the event that any Lender shall have determined reasonably and in good faith (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto but, with respect to clauses (i) and (iv) below, may be made only by the Administrative Agent):

(i)on any Interest Determination Date that, by reason of any changes arising after the date of this Agreement affecting the interbank market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of LIBOR Rate and the Overnight Euro Dollar Offered Rate, as the case may be; or

(ii)at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Loan because of (x) any change since the Effective Date in any applicable law or governmental rule, regulation, order, guideline or request (whether or not having the force of law) or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, order, guideline or request, such as, for example, but not limited to:  (A) a change in the basis of taxation of payment to any Lender of the principal of or interest on such Loan or any other amounts payable hereunder (except for

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changes in the rate of tax on, or determined by reference to, the net income, gross receipts or net profits of such Lender, or any franchise tax based on net income, net profits or net worth, of such Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which such Lender’s principal office or applicable lending office is located or any subdivision thereof or therein), but without duplication of any amounts payable in respect of Taxes pursuant to Section 4.04, or (B) a change in official reserve requirements and/or (y) other circumstances arising since the Effective Date affecting the interbank market; or

(iii)at any time, that the making or continuance of any Loan has been made (x) unlawful by any law or governmental rule, regulation or order and/or (y) impossible by compliance by any Lender in good faith with any governmental request (whether or not having force of law); or

(iv)at any time, that any Alternate Currency is not available in sufficient amounts, as determined in good faith by the Administrative Agent;

then, and in any such event, such Lender (or the Administrative Agent, in the case of clauses (a)(i) or (iv) above) shall promptly give notice (by telephone confirmed in writing) to the Borrowers and, except in the case of clauses (a)(i) and (iv) above, to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the Lenders).  The preceding sentence shall not apply to increased costs with respect to Taxes which are addressed in Section 4.04.  Thereafter (w) in the case of clause (i) above, any Notice of Borrowing given by the Borrowers with respect to any affected Loans which have not yet been incurred shall be deemed rescinded by the Borrowers and the Total Unutilized Commitment shall thereafter not be available to be borrowed hereunder, and the rate of interest applicable to any affected Loans then outstanding shall be determined pursuant to clause (e) below until such time as the Administrative Agent notifies the Borrowers and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, (x) in the case of clause (ii) above, the Borrowers agree, subject to the provisions of Section 1.11 and Section 13.15 (to the extent applicable), to pay to such Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its reasonable good faith discretion shall determine) as shall be required to compensate such Lender for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing in reasonable detail the basis for and the calculation thereof, submitted to the Borrowers by such Lender in good faith shall, absent manifest error, be final and conclusive and binding on all the parties hereto), (y) in the case of clause (iii) above, and subject to Section 1.11, such Lender shall so notify the Administrative Agent and the Borrowers (and the Administrative Agent shall promptly give notice thereof to the other Lenders) and thereafter, the Commitment of such Lender shall be permanently reduced by an amount sufficient to alleviate such circumstance arising pursuant to clause (iii)(x) or (y) above, or shall be terminated in its entirety if all of such Lender’s Loans are so affected, and the Borrowers shall prepay in full the affected Loans of such Lender, together with accrued interest thereon and, in the event of a termination of such Lender’s Commitment, any Commitment Commission which may be due to such Lender under this Agreement (and, in the event all of such Lender’s Loans are being repaid, any other amounts which may be owing to such Lender hereunder (including, without limitation, any accrued and

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unpaid interest)), on either the last day of the then current Interest Period applicable to each such affected Loan (if such Lender may lawfully continue to maintain and fund such Loans) or immediately (if such Lender may not lawfully continue to maintain and fund such Loans to such day) and (z) in the case of clause (iv) above, Alternate Currency Revolving Loans denominated in the affected Permitted Currency (other than any such Alternate Currency Revolving Loans which have theretofore been funded) shall no longer be available until such time as the Administrative Agent notifies the Borrowers and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing given by the Borrowers with respect to such Alternate Currency Revolving Loans which have not yet been incurred shall be deemed rescinded by the Borrowers.  The Administrative Agent and each Lender (to the extent it continues to be a Lender hereunder) agree that if any of them gives notice to the Borrowers of any of the events described in clause (i), (ii), (iii) or (iv) above, it shall promptly notify the Borrowers and, in the case of any such Lender, the Administrative Agent, if such event ceases to exist.  If any such event described in clause (iii) above ceases to exist as to a Lender (to the extent it continues at such time to be a Lender hereunder), the obligations of such Lender to make Loans on the terms and conditions contained herein shall, to the extent of such Lender’s outstanding Loans and Commitments as in effect at such time, be immediately reinstated.

(b)If any Lender in good faith determines that the introduction of or effectiveness of or any change after the Effective Date in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change after the Effective Date in interpretation or administration thereof by the NAIC or any governmental authority, central bank or comparable agency, in any such case, will have the effect of increasing the amount of capital required or requested to be maintained by such Lender, or any corporation controlling such Lender, based on the existence of such Lender’s Commitments hereunder or its obligations hereunder, then the Borrowers jointly and severally agree, subject to the provisions of Section 13.15 (to the extent applicable), to pay to such Lender, upon its written demand therefor, such additional amounts as shall be required to compensate such Lender or such other corporation for the increased cost to such Lender or such other corporation or the reduction in the rate of return to such Lender or such other corporation as a result of such increase of capital, to the extent not already compensated by the LIBOR Rate, Additional Cost Rate or any other provision hereof.  Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 1.09(b), will give prompt written notice thereof to the Borrowers, which notice shall show in reasonable detail the basis for and calculation of such additional amounts.

(c)In the event that any Lender shall have determined (which determination shall, absent manifest error, be final and conclusive and binding on all parties hereto) at any time that such Lender is required to maintain reserves (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) which have been established after the Effective Date by any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body with jurisdiction over such Lender (including any branch, Affiliate or funding office thereof) in respect of any Alternate Currency Revolving Loan or any category of liabilities which includes deposits by reference to which the interest rate on any Alternate Currency Revolving Loan is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any

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Lender to non-United States residents in each case by reason of any change since the Effective Date in any applicable law or governmental rule, regulation order, guideline or request (whether or not having the force of law) or any change in the interpretation or administration thereof by the NAIC or any governmental authority, central bank or comparable agency, then, unless such reserves already are included in the calculation of the interest rate applicable to such Alternate Currency Revolving Loans or in Section 1.09(a)(ii) or are otherwise compensated by any other provision hereof, such Lender shall promptly notify the applicable Borrowers in writing specifying the additional amounts required to indemnify such Lender against the cost of maintaining such reserves (such written notice to provide in reasonable detail a computation of such additional amounts) and such Borrowers agree, subject to the provisions of Section 13.15 (to the extent applicable), to pay to such Lender such specified amounts on written demand therefor by such Lender.

(d)In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable and non-discriminatory, provided that such Lender’s determination of compensation owing under clauses (b) and (c) of this Section 1.09 shall, absent manifest error, but subject to the provisions of Section 13.15 (to the extent applicable), be final and conclusive and binding on all the parties hereto.

(e)If a determination has been made pursuant to Section 1.09(a)(i), then the Borrowers and the Administrative Agent, acting in accordance with the instruction of the Lenders, shall then negotiate in good faith in order to agree upon a mutually satisfactory interest rate and/or Interest Period to be substituted for those which would otherwise have applied under this Agreement. If the Borrowers and the Administrative Agent are unable to agree upon such a substituted interest rate and/or Interest Period within 30 days of the giving of such determination notice, the Administrative Agent shall set an interest rate and Interest Period to take effect from the expiration of the Interest Period in effect at the date of determination, which rate shall be equal to the Applicable Margin plus the cost to the Lenders (as certified by each Lender) of funding such Loan. In the event the state of affairs referred to in this Section 1.09 shall extend beyond the end of any Interest Period, the foregoing procedure shall continue to apply until circumstances are such that the applicable rate may be determined pursuant to this Agreement.

(f)In the event that any Lender shall reasonably determine (which determination shall, absent manifest error, be final and conclusive and binding on all parties hereto) at any time that by reason of Regulation D such Lender is required to maintain reserves in respect of Loans during any period it has a Loan outstanding, then such Lender shall promptly notify the Borrowers by telephone confirmed in writing specifying the additional amounts required to indemnify such Lender against the cost of maintaining such reserves (such written notice to provide in sufficient detail a computation of such additional amount) and the Borrowers shall directly pay to such Lender such specified amounts as additional interest at the time that it is otherwise required to pay interest in respect of such Loan or, if later, on demand.

1.10  Compensation.  The Borrowers jointly and severally agree, subject to the provisions of Section 13.15 (to the extent applicable), to compensate each Lender, upon its written request (which request shall set forth in reasonable detail the basis for requesting and the calculation of such compensation), for all reasonable losses, expenses and liabilities (including,

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without limitation, any such loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Loans but excluding any loss of anticipated profits) which such Lender may sustain in respect of Loans made to the Borrowers:  (i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of Loans does not occur on a date specified therefor in a Notice of Borrowing (whether or not withdrawn by the Borrowers or deemed withdrawn pursuant to Section 1.09(a)); (ii) if any prepayment or repayment (including any prepayment or repayment made pursuant to Section 1.09(a), Section 4.01 or Section 4.02 or as a result of an acceleration of the Loans pursuant to Section 10) of any of its Loans, or assignment of its Loans pursuant to Section 1.12, occurs on a date which is not the last day of an Interest Period with respect thereto; (iii) if any prepayment of any of its Loans is not made on any date specified in a notice of prepayment given by the Borrowers; or (iv) as a consequence of any other Default or Event of Default arising as a result of the Borrowers’ failure to repay Loans or make payment on any Note held by such Lender when required by the terms of this Agreement.

1.11  Change of Lending Office.  Each Lender agrees that on the occurrence of any event giving rise to the operation of Section 1.09(a)(ii) or (iii), Section 1.09(b), Section 1.09(c) or Section 4.04 with respect to such Lender, it will, if requested by the Borrowers, use reasonable good faith efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans or Letters of Credit affected by such event, provided that such designation is made on such terms that such Lender and its lending office suffer no unindemnified economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section.  Nothing in this Section 1.11 shall affect or postpone any of the obligations of the Borrowers or the rights of any Lender provided in Section 1.09 and Section 4.04.

1.12  Replacement of Lenders.  (x)  If any Lender becomes a Defaulting Lender or otherwise defaults in its obligations to make Loans, (y) upon the occurrence of any event giving rise to the operation of Section 1.09(a)(ii) or (iii), Section 1.09(b), Section 1.09(c) or Section 4.04 with respect to any Lender which results in such Lender charging to the Borrowers increased costs in excess of those being generally charged by the other Lenders, or (z) as provided in Section 13.12(b) in the case of certain refusals by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders, the Borrowers shall have the right, if no Default or Event of Default will exist immediately after giving effect to the respective replacement, to replace such Lender (the “Replaced Lender”) with one or more other Eligible Transferee or Eligible Transferees, none of whom shall constitute a Defaulting Lender at the time of such replacement (collectively, the “Replacement Lender”) reasonably acceptable to the Administrative Agent; provided that:

(i)at the time of any replacement pursuant to this Section 1.12, the Replacement Lender shall enter into one or more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans of and in each case all participations in Letters of Credit by, the Replaced Lender and, in connection therewith, shall pay to (x) the Replaced Lender in respect thereof an amount

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equal to the sum (without duplication) of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, (B) an amount equal to Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced Lender) together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but unpaid, Commitment Commission owing to the Replaced Lender pursuant to Section 3.01, (y) each Issuing Lender an amount equal to such Replaced Lender’s Percentage of any Unpaid Drawing relating to Letters of Credit issued by such Issuing Lender (which at such time remains an Unpaid Drawing) to the extent such amount was not theretofore funded by such Replaced Lender and (z) the Swingline Lender an amount equal to such Replaced Lender’s Percentage of any Mandatory Borrowing to the extent such amount was not theretofor funded by such Replaced Lender; and

(ii)all obligations of the Borrowers due and owing to the Replaced Lender at such time (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid), shall be paid in full to such Replaced Lender concurrently with such replacement.

Upon the execution of the respective Assignment and Assumption Agreement, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Lender, delivery to (i) the Replacement Lender of the appropriate Note or Notes executed by the Borrowers, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.09, 1.10, 2.05, 4.04, 13.01 and 13.06), which shall survive as to such Replaced Lender and (ii) if so requested by the Borrowers, the Replaced Lender shall deliver all Notes in its possession to the Borrowers.

SECTION 2.  Letters of Credit.

2.01  Letters of Credit.  (a)  Subject to and upon the terms and conditions herein set forth, OSG as agent for the Borrowers may request that any Issuing Lender issue, at any time on and after the Initial Borrowing Date and prior to the 60^th day prior to the Final Maturity Date, for the joint and several account of the Borrowers, irrevocable sight standby letters of credit, in a form customarily used by such Issuing Lender or in such other form as has been approved by such Issuing Lender (each such letter of credit, a “Letter of Credit”).  All Letters of Credit shall be denominated in Dollars and shall be issued on a sight draft basis.

(b)Subject to the terms and conditions contained herein, each Issuing Lender hereby agrees that it will, at any time and from time to time on or after the Initial Borrowing Date and prior to the 60th day prior to the Final Maturity Date, following its receipt of the respective Letter of Credit Request, issue for the joint and several account of the Borrowers one or more Letters of Credit in support of such obligations as are permitted to remain outstanding without giving rise to a Default or Event of Default hereunder, provided that the respective Issuing Lender shall be under no obligation to issue any Letter of Credit of the types described above if at the time of such issuance:

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(i)any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain such Issuing Lender from issuing such Letter of Credit or any requirement of law applicable to such Issuing Lender or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over such Issuing Lender shall prohibit, or request that such Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Lender with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Issuing Lender is not otherwise compensated) not in effect on the date hereof, or any unreimbursed loss, cost or expense which was not applicable, in effect or known to such Issuing Lender as of the date hereof and which such Issuing Lender in good faith deems material to it, or the issuance of such letter of credit would violate a policy of general application of such Issuing Lender; or

(ii)such Issuing Lender shall have received notice from any Lender prior to the issuance of such Letter of Credit of the type described in the second sentence of Section 2.02(b); or

(iii)a Lender Default exists, unless such Issuing Lender has entered into arrangements satisfactory to it and the Borrowers to eliminate such Issuing Lender’s risk with respect to the participation in Letters of Credit of any Defaulting Lender(s), including by cash collateralizing any such Defaulting Lender’s (or Defaulting Lenders’) Percentage (or Percentages) of the Letter of Credit Outstandings.

(c)Notwithstanding anything to the contrary contained in this Agreement, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time would exceed the lesser of (x) $250,000,000 and (y) when added to the aggregate principal amount of all Revolving Loans (for this purpose, using the Dollar Equivalent for all Alternate Currency Revolving Loans) and Swingline Loans then outstanding, an amount equal to the Total Commitment at such time, (ii) each Letter of Credit shall by its terms terminate on or before the earlier of (A) the date which occurs 12 months after the date of the issuance thereof (although any such Letter of Credit shall be extendible for successive periods of up to 12 months, but, in each case, not beyond the 20th Business Day prior to the Final Maturity Date, on terms acceptable to the respective Issuing Lender) and (B) 20 Business Days prior to the Final Maturity Date and (iii) each Letter of Credit shall be denominated in Dollars.

2.02  Letter of Credit Requests; Minimum Stated Amount.  (a)  Whenever the Borrowers desire that a Letter of Credit be issued, OSG as agent for the Borrowers shall give the Administrative Agent and the respective Issuing Lender at least four Business Days’ (or such shorter period as is acceptable to the respective Issuing Lender) written notice prior to the proposed date of issuance (which shall be a Business Day).  Each notice shall be substantially in the form of Exhibit C (each a “Letter of Credit Request”).

(b)The making of each Letter of Credit Request shall be deemed to be a representation and warranty by each Borrower that such Letter of Credit may be issued in

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accordance with, and will not violate the requirements of, Section 2.01(c).  Unless the respective Issuing Lender determines that, or has received notice from any Lender before it issues a Letter of Credit that one or more of the conditions specified in Section 6 are not then satisfied, or that the issuance of such Letter of Credit would violate Section 2.01(c), then such Issuing Lender shall issue the requested Letter of Credit for the joint and several account of the Borrowers in accordance with such Issuing Lender’s usual and customary practices.

(c)The initial Stated Amount of each Letter of Credit shall not be less than $100,000 or such lesser amount as is acceptable to the respective Issuing Lender.

2.03  Letter of Credit Participations.  (a)  Immediately upon the issuance by any Issuing Lender of any Letter of Credit, such Issuing Lender shall be deemed to have sold and transferred to each Lender with a Commitment, other than such Issuing Lender (each such Lender, in its capacity under this Section 2.03, a “Participant”), and each such Participant shall be deemed irrevocably and unconditionally to have purchased and received from such Issuing Lender, without recourse or warranty, an undivided interest and participation, to the extent of such Participant’s Percentage, in such Letter of Credit, each drawing made thereunder and the obligations of the Borrowers under this Agreement with respect thereto, and any security therefor or guaranty pertaining thereto.  Upon any change in the Commitments or Percentages of the Lenders pursuant to Sections 1.12 or 13.04, it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 2.03 to reflect the new Percentages of the assignor and assignee Lender or of all Lenders with Commitments, as the case may be.

(b)In determining whether to pay under any Letter of Credit, such Issuing Lender shall have no obligation relative to the other Lenders other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to substantially comply on their face with the requirements of such Letter of Credit.  Subject to the provisions of the immediately preceding sentence, any action taken or omitted to be taken by any Issuing Lender under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, as determined by a court of competent jurisdiction, shall not create for such Issuing Lender any resulting liability to any Credit Party or any Lender.

(c)In the event that any Issuing Lender makes any payment under any Letter of Credit issued by it and the Borrowers shall not have reimbursed such amount in full to such Issuing Lender pursuant to Section 2.04(a), such Issuing Lender shall promptly notify the Administrative Agent, which shall promptly notify each Participant, of such failure, and each Participant shall promptly and unconditionally pay to the Administrative Agent for the account of such Issuing Lender the amount of such Participant’s Percentage (as relates to the respective Letter of Credit) of such unreimbursed payment in Dollars and in same day funds.  If the Administrative Agent so notifies, prior to 1:00 P.M. (New York time) on any Business Day, any Participant required to fund a payment under a Letter of Credit, such Participant shall make available to the Administrative Agent at the Payment Office for the account of such Issuing Lender in Dollars such Participant’s Percentage (as relates to the respective Letter of Credit) of the amount of such payment on such Business Day in same day funds.  If and to the extent such Participant shall not have so made its Percentage of the amount of such payment available to the

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Administrative Agent for the account of such Issuing Lender, such Participant agrees to pay to the Administrative Agent for the account of such Issuing Lender, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent for the account of such Issuing Lender at the overnight Federal Funds Rate for the first three days and at the interest rate applicable to Revolving Loans for each day thereafter.  The failure of any Participant to make available to the Administrative Agent for the account of such Issuing Lender its Percentage of any payment under any Letter of Credit issued by it shall not relieve any other Participant of its obligation hereunder to make available to the Administrative Agent for the account of such Issuing Lender its Percentage of any such Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Administrative Agent for the account of such Issuing Lender such other Participant’s Percentage of any such payment.

(d)Whenever any Issuing Lender receives a payment of a reimbursement obligation as to which the Administrative Agent has received (for the account of any such Issuing Lender) any payments from the Participants pursuant to clause (c) above, such Issuing Lender shall forward such payment to the Administrative Agent, which in turn shall distribute to each Participant which has paid its Percentage thereof, in same day funds, an amount equal to such Participant’s share (based upon the proportionate aggregate amount originally funded by such Participant to the aggregate amount funded by all Participants) of the principal amount of such reimbursement obligation and interest thereon accruing after the purchase of the respective participations.

(e)Each Issuing Lender shall, promptly after the issuance of, or amendment to, a Letter of Credit give the Administrative Agent and the Borrowers written notice of such issuance or amendment, as the case may be, and such notice shall be accompanied by a copy of the issued Letter of Credit or amendment, as the case may be.  Upon receipt of such notice, the Administrative Agent shall promptly notify each Participant, in writing, of such issuance or amendment and in the event a Participant shall so request, the Administrative Agent shall furnish such Participant with a copy of such issuance or amendment.

(f)Each Issuing Lender shall deliver to the Administrative Agent, promptly on the first Business Day of each week, by facsimile transmission, the aggregate daily Stated Amount available to be drawn under the outstanding Letters of Credit issued by such Issuing Lender for the previous week.  Upon request, the Administrative Agent shall, within 10 days after the last Business Day of each calendar month, deliver to each Participant a report setting forth for such preceding calendar month the aggregate daily Stated Amount available to be drawn under all outstanding Letters of Credit during such calendar month.

(g)The obligations of the Participants to make payments to the Administrative Agent for the account of the respective Issuing Lender with respect to Letters of Credit issued by it shall be irrevocable and not subject to any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances:

(i)any lack of validity or enforceability of this Agreement or any of the other Credit Documents;

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(ii)the existence of any claim, setoff, defense or other right which the Borrowers or any of their respective Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, any Lender, any Issuing Lender, any Participant, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrowers or any of their respective Subsidiaries and the beneficiary named in any such Letter of Credit);

(iii)any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(iv)the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or

(v)the occurrence of any Default or Event of Default.

2.04  Agreement to Repay Letter of Credit Drawings.  (a)  The Borrowers hereby jointly and severally agree to reimburse each Issuing Lender, by making payment to the Administrative Agent in immediately available funds at the Payment Office, for any payment or disbursement made by such Issuing Lender under any Letter of Credit issued by it (each such amount, so paid until reimbursed, an “Unpaid Drawing”), not later than the Business Day following receipt by the Borrowers of notice of such payment or disbursement from the Issuing Lender, the Administrative Agent or any other Lender (provided that no such notice shall be required to be given if a Default or an Event of Default under Section 10.05 shall have occurred and be continuing, in which case the Unpaid Drawing shall be due and payable immediately without presentment, demand, protest or notice of any kind (all of which are hereby waived by the Borrowers)), with interest on the amount so paid or disbursed by such Issuing Lender, to the extent not reimbursed prior to 12:00 Noon (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but excluding the date such Issuing Lender was reimbursed by the Borrowers therefor at a rate per annum equal to the Overnight Euro Dollar Offer Rate, as in effect from time to time, plus the Applicable Margin; provided, however, to the extent such amounts are not reimbursed prior to 12:00 Noon (New York time) on the third Business Day following such payment or disbursement, the Borrowers shall be deemed to have requested a borrowing of Dollar Revolving Loans as provided in Section 1.01(d).  Each Issuing Lender shall give the Borrowers prompt written notice of each Drawing under any Letter of Credit issued by it, provided that the failure to give any such notice shall in no way affect, impair or diminish the Borrowers’ obligations hereunder.

(b)The obligations of the Borrowers under this Section 2.04 to reimburse the respective Issuing Lender with respect to drawings on Letters of Credit (each, a “Drawing”) (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which any Borrower may have or have had against any Lender (including in its capacity as Issuing Lender or Participant or as Participant), or any non-application or misapplication by the beneficiary of the proceeds of such Drawing, the respective Issuing Lender’s only obligation to the Borrowers

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being to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit.  Subject to the provisions of the immediately preceding sentence, any action taken or omitted to be taken by any Issuing Lender under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct as determined by a court of competent jurisdiction, shall not create for such Issuing Lender any resulting liability to any Borrower or any other Credit Party.

2.05  Increased Costs.  If at any time, any Issuing Lender or any Participant determines that the introduction of or any change after the Effective Date in any applicable law, rule, regulation, order, guideline or request or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by any Issuing Lender or any Participant with any request or directive made by any such authority (whether or not having the force of law) after the Effective Date, shall either (a) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by any Issuing Lender or participated in by any Participant, or (b) impose on any Issuing Lender or any Participant any other conditions relating, directly or indirectly, to this Agreement or any Letter of Credit; and the result of any of the foregoing is to increase the cost to any Issuing Lender or any Participant of issuing, maintaining or participating in any Letter of Credit, or reduce the amount of any sum received or receivable by any Issuing Lender or any Participant hereunder or reduce the rate of return on its capital with respect to Letters of Credit, then, upon demand to the Borrowers by such Issuing Lender or any Participant (a copy of which demand shall be sent by such Issuing Lender or such Participant to the Administrative Agent), the Borrowers jointly and severally agree to pay to such Issuing Lender or such Participant such additional amount or amounts as will compensate such Lender for such increased cost or reduction in the amount receivable or reduction on the rate of return on its capital.  Any Issuing Lender or any Participant, upon determining that any additional amounts will be payable pursuant to this Section 2.05, will give prompt written notice thereof to the Borrowers, which notice shall include a certificate submitted to the Borrowers by such Issuing Lender or such Participant (a copy of which certificate shall be sent by such Issuing Lender or such Participant to the Administrative Agent), setting forth in reasonable detail the basis for and the calculation of such additional amount or amounts necessary to compensate such Issuing Lender or such Participant, although the failure to give any such notice shall not release or diminish the Borrowers’ obligations to pay additional amounts pursuant to this Section 2.05.  In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable and non-discriminatory, provided that such Lender’s determination of compensation owing under this Section 2.05 shall, absent manifest error, but subject to the provisions of Section 13.15 (to the extent applicable), be final and conclusive and binding on all parties hereto.  The certificate required to be delivered pursuant to this Section 2.05 shall, if delivered in good faith and absent manifest error, be final and conclusive and binding on the Borrowers.

SECTION 3.  Commitment Commission; Fees; Reductions of Commitment.

3.01  Commitment Commission.  (a)  The Borrowers jointly and severally agree to pay the Administrative Agent for distribution to each Non-Defaulting Lender a commitment commission (the “Commitment Commission”) for the period from the Effective Date to and

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including the Final Maturity Date (or such earlier date as the Total Commitment shall have been terminated) computed at a rate for each day equal to 0.30 multiplied by the Applicable Margin on such day multiplied by the daily average Unutilized Commitment of such Non-Defaulting Lender; provided that for purposes of calculating the Commitment Commission, outstanding Swingline Loans shall not be deemed to be a utilization of the Commitments of the Lenders other than the Swingline Lender.  Accrued Commitment Commission shall be due and payable quarterly in arrears on each Payment Date and on the Final Maturity Date (or such earlier date upon which the Total Commitment is terminated).

(b)The Borrowers jointly and severally agree to pay to the Administrative Agent for distribution to each Lender (based on each such Lender’s respective Percentage), a fee in respect of each Letter of Credit (the “Letter of Credit Fee”) for the period from and including the date of issuance of such Letter of Credit to and including the date of termination or expiration of such Letter of Credit, computed at a rate per annum equal to the Applicable Margin then in effect from time to time on the daily Stated Amount of each such Letter of Credit.  Accrued Letter of Credit Fees shall be due and payable in arrears on each Payment Date and on the Final Maturity Date (or such earlier date upon which the Total Commitment is terminated).

(c)The Borrowers jointly and severally agree to pay directly to each Issuing Lender, for its own account, a facing fee in respect of each Letter of Credit issued by it (the “Facing Fee”) for the period from and including the date of issuance of such Letter of Credit to and including the date of termination or expiration of such Letter of Credit, computed at a rate per annum equal to 1/8 of 1% on the daily Stated Amount of such Letter of Credit, provided that in any event the minimum amount of Facing Fees payable in any twelve-month period for each issued Letter of Credit shall be not less than $500; it being agreed that, on the day of issuance of any Letter of Credit and on each anniversary thereof prior to the termination or expiration of such Letter of Credit, if $500 will exceed the amount of Facing Fees that will accrue with respect to such Letter of Credit for the immediately succeeding twelve-month period, the full $500 shall be payable on the date of issuance of such Letter of Credit and on each such anniversary thereof.  Except as otherwise provided in the proviso to the immediately preceding sentence, accrued Facing Fees shall be due and payable in arrears on each Payment Date following issuance of a Letter of Credit and upon the first day on or after the termination of the Total Commitment upon which no Letters of Credit remain outstanding.

(d)The Borrowers jointly and severally agree to pay, upon each payment (including any partial payment) under, issuance of, extension of, or amendment to, any Letter of Credit issued hereunder, such amount as shall at the time of such event be the administrative charge which the respective Issuing Lender is generally charging in connection with such occurrence with respect to letters of credit, provided that such administrative charges shall not exceed $1,000 in the aggregate for any single letter of credit.

(e)The Borrowers shall pay to the Administrative Agent and the other Agents, for their own account, such other fees as have been agreed to in writing by OSG or the Borrowers and such Agent.

3.02  Voluntary Termination of Unutilized Commitments.  Upon at least four Business Days’ prior notice to the Administrative Agent at its Notice Office (which notice the

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Administrative Agent shall promptly transmit to each of the Lenders), the Borrowers shall have the right, at any time or from time to time, without premium or penalty, to terminate the Total Unutilized Commitment, in whole or in part, in integral multiples of $1,000,000 and a minimum amount of $10,000,000 in the case of partial reductions thereto, provided that each such reduction shall apply proportionately to permanently reduce the Commitment of each Lender.  Partial reductions of the Total Unutilized Commitment shall be applied to reduce the amounts of the Scheduled Commitment Reductions on a pro rata basis (based upon the then remaining Scheduled Commitment Reductions after giving effect to any prior reductions thereto).

3.03  Mandatory Reduction of Commitments.  (a)  The Total Commitment (and the Commitment of each Lender) shall terminate on April 30, 2006 if the Initial Borrowing Date has not occurred on or prior to such date.

(b)In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Commitment (and the Commitment of each Lender) shall terminate in its entirety on the Final Maturity Date.

(c)In addition to any other mandatory repayments or commitment reductions pursuant to this Section 3.03, on each date set forth below (each a “Scheduled Commitment Reduction Date”), the Total Commitment as then in effect shall be reduced by the amount set forth opposite such Scheduled Commitment Reduction Date in the table below (each such reduction, as the same may be reduced as provided in Sections 3.02, a “Scheduled Commitment Reduction”):

Scheduled Commitment Reduction Date	Amount
February 9, 2011	$	150,000,000
February 9, 2012	$	150,000,000

(d)Unless the Majority Lenders otherwise agree, the Total Commitment (and the Commitment of each Lender) shall terminate in its entirety on the 60th day following the occurrence of a Change of Control.

(e)Each reduction to the Total Commitment pursuant to this Section 3.03 and Section 4.02 shall be applied proportionately to reduce the Commitment of each Lender.

(f)Upon any termination or reduction of commitments pursuant to this Section 3.03, the Borrowers shall be required to take the actions specified in Section 4.02(a).

SECTION 4.  Prepayments; Payments; Taxes.

4.01  Voluntary Prepayments.  The Borrowers shall have the right to prepay the Loans, without premium or penalty except as provided by law, in whole or in part at any time and from time to time on the following terms and conditions:

(i)the Borrowers shall give the Administrative Agent prior to 12:00 Noon (New York time) at its Notice Office at least four Business Days’ prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay such Loans, the

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amount of such prepayment and the specific Borrowing or Borrowings pursuant to which made, which notice the Administrative Agent shall promptly transmit to each of the Lenders;

(ii)each prepayment of Revolving Loans shall be in an integral multiple of $1,000,000 (taking the Dollar Equivalent thereof of any amounts to be prepaid in an Alternate Currency) and in an aggregate principal amount of at least $10,000,000 (taking the Dollar Equivalent thereof of amounts to be prepaid in an Alternate Currency) or such lesser amount of a Borrowing which is outstanding, provided that no partial prepayment of Loans made pursuant to any Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing to an amount less than $10,000,000;

(iii)each prepayment of Swingline Loans shall be in an integral multiple of $1,000,000 and in an aggregate principal amount of at least $5,000,000 or such other amount as is agreeable to the Swingline Lender or such lesser amount of a Borrowing which is outstanding;

(iv)at the time of any prepayment of Loans pursuant to this Section 4.01 on any date other than the last day of the Interest Period applicable thereto, the Borrowers shall pay the amounts required pursuant to Section 1.10;

(v)in the event of certain refusals by a Lender as provided in Section 13.12(b) to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders, the Borrowers may, upon five Business Days’ written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), prepay all Loans, together with accrued and unpaid interest, Commitment Commission, and other amounts owing to such Lender (or owing to such Lender with respect to each Loan which gave rise to the need to obtain such Lender’s individual consent) in accordance with said Section 13.12(b) so long as (A) the Commitment of such Lender (if any) is terminated concurrently with such prepayment (at which time Schedule I shall be deemed modified to reflect the changed Commitments) and (B) the consents required by Section 13.12(b) in connection with the prepayment pursuant to this clause (v) have been obtained; and

(vi)except as expressly provided in the preceding clause (v), each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied pro rata among the Loans comprising such Borrowing.

4.02  Mandatory Repayments and Commitment Reductions.  (a)  (i)  On any day on which the sum of (I) the aggregate outstanding principal amount of all Revolving Loans (after giving effect to all other repayments thereof on such date (for this purpose, using the Dollar Equivalent for all Alternate Currency Revolving Loans)), (II) the aggregate outstanding principal amount of all Swingline Loans (after giving effect to all other repayments thereof on such date) and (III) the aggregate amount of all the Letter of Credit Outstandings exceeds the Total Commitment as then in effect, the Borrowers shall repay principal of Swingline Loans and, after all Swingline Loans have been repaid in full or if no Swingline Loans are outstanding, Revolving

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Loans (in the case of payments made with respect to Alternate Currency Revolving Loans, taking the Dollar Equivalent of the amounts paid in the respective Alternate Currency in which payments on such Alternate Currency Revolving Loans are owing) in an amount equal to such excess.  If, after giving effect to the prepayment of all outstanding Loans, the aggregate amount of the Letter of Credit Outstandings exceeds the Total Commitment as then in effect, the Borrowers shall pay to the Administrative Agent on such date an amount of cash or Cash Equivalents equal to the amount of such excess (up to a maximum amount equal to the Letter of Credit Outstandings at such time), such cash or Cash Equivalents to be held as security for all obligations of the Borrowers hereunder in a cash collateral account to be established by the Administrative Agent.

(ii)On any day on which the Dollar Equivalent of the aggregate outstanding principal amount of all Alternate Currency Revolving Loans exceeds the Alternate Currency Sublimit, the Borrowers shall prepay on such day the principal of outstanding Alternate Currency Revolving Loans in an amount (taking the Dollar Equivalent of the amounts paid in the respective Alternate Currency in which payments on such Alternate Currency Revolving Loans are owing) equal to such excess.

(b)With respect to each repayment of Loans required by this Section 4.02, the Borrowers may designate the specific Borrowing or Borrowings pursuant to which such Loans were made, provided that (i) all Loans with Interest Periods ending on such date of required repayment shall be paid in full prior to the payment of any other Loans and (ii) each repayment of any Loans comprising a Borrowing shall be applied pro rata among such Loans.  In the absence of a designation by the Borrowers as described in the preceding sentence, the Administrative Agent shall, subject to the preceding provisions of this clause (b), make such designation in its sole reasonable discretion with a view, but no obligation, to minimize breakage costs owing pursuant to Section 1.10.

(c)Notwithstanding anything to the contrary set forth in this Agreement each Swingline Loan shall be repaid in full on the fifth Business Day after the incurrence thereof.

(d)Notwithstanding anything to the contrary contained elsewhere in this Agreement, all then outstanding Loans shall be repaid in full on the Final Maturity Date.

(e)For purposes of making calculations pursuant to this Section 4.02, the Administrative Agent shall be entitled to use the Dollar Equivalent of any such amounts stated in a currency other than Dollars.

4.03  Method and Place of Payment.  Except as otherwise specifically provided herein, all payments under this Agreement or any Note shall be made to the Administrative Agent for the account of the Lender or Lenders entitled thereto not later than 12:00 Noon (New York time) on the date when due and shall be made in immediately available funds at the Payment Office of the Administrative Agent in (x) Dollars if such payment is made in respect of (i) principal of or interest on Dollar Revolving Loans owing by any Borrower or any increased costs or similar obligations owing by any Borrower in respect of Dollar Revolving Loans or (ii) except as provided in following clause (y), any other Obligation of any Borrower under this Agreement or under any Note issued by such Borrower and (y) in the applicable Alternate

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Currency if such payment is made in respect of (i) principal of or interest on Alternate Currency Revolving Loans or Commitments in respect thereof or (ii) any increased costs, indemnities or other amounts owing with respect to Alternate Currency Revolving Loans or Commitments in respect thereof.  Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension.

4.04  Net Payments; Taxes.  (a)  All payments made by any Credit Party hereunder or under any Note will be made without setoff, counterclaim or other defense.  All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income, net profits or any franchise or similar tax based on net income, net profits or net worth, of a Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as “Taxes”).  If any Taxes are so levied or imposed, the Borrowers jointly and severally agree to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note.  If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrowers jointly and severally agree to reimburse each Lender, upon the written request of such Lender, for taxes the Lender determines are incrementally imposed on or measured by the net income, net profits or any franchise tax based on net income, net profits or net worth, of such Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located on or measured by the additional payments made pursuant to the preceding sentence and for any withholding of taxes as such Lender shall determine are payable by, or withheld from, such Lender, in respect of such amounts so paid to or on behalf of such Lender pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Lender pursuant to this sentence.  The Borrowers will furnish to the Administrative Agent within 45 days after the date of payment of any Taxes is due pursuant to applicable law certified copies of tax receipts, or, if such tax receipts are not available, other documentation reasonably satisfactory to the Lender, evidencing such payment by the Borrowers.  The Borrowers jointly and severally agree to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender.

(b)(i)  Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) agrees to deliver to the U.S. Borrowers and the Agent on or prior to the Effective Date, or in the case of a Lender that is an assignee or transferee of an

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interest under this Agreement pursuant to Section 13.04 (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (A) two accurate and complete original signed copies of Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under an income tax treaty) (or successor forms) certifying to such Lender’s entitlement as of such date to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (B) if the Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under an income tax treaty) pursuant to clause (a) above, (x) a certificate substantially in the form of Exhibit E (any such certificate, a “Section 4.04 Certificate”) and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN (with respect to the portfolio interest exemption) (or successor form) certifying to such Lender’s entitlement as of such date to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note.  In addition, each Lender agrees that from time to time after the Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the U.S. Borrowers or the Agent two new accurate and complete original signed copies of Internal Revenue Service Form W-8ECI, Form W-8BEN (with respect to the benefits of any income tax treaty), or Form W-8BEN (with respect to the portfolio interest exemption) and a Section 4.04 Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note, or it shall immediately notify the U.S. Borrowers and the Agent of its inability to deliver any such Form or Certificate, in which case such Lender shall not be required to deliver any such Form or Certificate pursuant to this Section 4.04(b).  Notwithstanding anything to the contrary contained in Section 4.04(a), but subject to the immediately succeeding sentence, (x) each U.S. Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Lender has not provided to such U.S. Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) each U.S. Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made to or indemnify a Lender in respect of income or similar taxes imposed by the United States if (I) such Lender has not provided such U.S. Borrower the Internal Revenue Service Forms required to be provided such U.S. Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment, other than interest, to a Lender described in clause (B) above, to the extent that such forms do not establish a complete exemption from withholding of such taxes.  Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 4.04, each U.S. Borrower agrees to pay additional amounts and to indemnify each Lender in the manner set forth in Section 4.04(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Effective Date in any applicable law, treaty,

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governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of income or similar taxes.

(ii)Each Lender agrees to use reasonable efforts (consistent with legal and regulatory restrictions and subject to overall policy considerations of such Lender) to file any certificate or document or to furnish to a Borrower any information as reasonably requested by such Borrower that may be necessary to establish any available exemption from, or reduction in the amount of, any Taxes; provided, however, that nothing in this Section 4.04(b) shall require a Lender to disclose any confidential information (including, without limitation, its tax returns or its calculations).

(c)If the Borrowers pay any additional amount under this Section 4.04 to a Lender and such Lender determines in its sole discretion exercised in good faith that it has actually received or realized in connection therewith any refund or any reduction of, or credit against, its Tax liabilities in or with respect to the taxable year in which the additional amount is paid (a “Tax Benefit”), such Lender shall pay to the Borrowers an amount that such Lender shall, in its sole discretion exercised in good faith, determine is equal to the net benefit, after tax, which was obtained by such Lender in such year as a consequence of such Tax Benefit; provided, however, that (i) any Lender may determine, in its sole discretion exercised in good faith consistent with the policies of such Lender, whether to seek a Tax Benefit, (ii) any Taxes that are imposed on a Lender as a result of a disallowance or reduction (including through the expiration of any tax credit carryover or carryback of such Lender that otherwise would not have expired) of any Tax Benefit with respect to which such Lender has made a payment to the Borrowers pursuant to this Section 4.04(c) shall be treated as a Tax for which the Borrowers are obligated to indemnify such Lender pursuant to this Section 4.04 without any exclusions or defenses, (iii) nothing in this Section 4.04(c) shall require any Lender to disclose any confidential information to the Borrowers (including, without limitation, its tax returns), and (iv) no Lender shall be required to pay any amounts pursuant to this Section 4.04(c) at any time during which a Default or Event of Default exists.

SECTION 5.  Conditions Precedent to the Initial Borrowing Date.  The obligation of each Lender to make Loans on the Initial Borrowing Date is subject at the time of the making of such Loans to the satisfaction or waiver of the following conditions:

5.01  Effective Date; Notes.  (a)  The Effective Date shall have occurred at least 45 days prior to the Initial Borrowing Date (unless otherwise agreed by the Lead Arrangers).

(b)If requested by a Lender, the Borrowers shall have duly executed and delivered, for the account of such Lender, the appropriate Note for such Lender in each case, in the amount, maturity and as otherwise provided herein.

5.02  Fees, etc.  On the Initial Borrowing Date, the Borrowers shall have paid to the Administrative Agent, the other Agents and the Lenders all costs, fees, and expenses (including, without limitation, legal fees and expenses) and other compensation payable to the Administrative Agent, the other Agents and the Lenders in respect of the transactions contemplated by this Agreement to the extent then due.

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5.03  Opinions of Counsel.  (a)  On the Initial Borrowing Date, the Administrative Agent shall have received from James I. Edelson, Esq., General Counsel to the Borrowers and their Subsidiaries, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date covering the matters set forth in Exhibit D-1 and such other matters as the Administrative Agent may reasonably request.

(b)On the Initial Borrowing Date, the Administrative Agent shall have received from White & Case LLP, special New York counsel to the Administrative Agent, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date covering the matters set forth in Exhibit D-2 and such other matters as the Administrative Agent may reasonably request.

5.04  Corporate Authority.  On the Initial Borrowing Date, the Administrative Agent shall have received the following documents in form and substance satisfactory to the Administrative Agent and its legal advisors:

(i)copies certified as true and complete by an officer of each Borrower, of the resolutions of its board of directors and, with respect to OSG Bulk and OSG International, its shareholders evidencing approval of the Credit Documents and authorizing an appropriate officer of officers or attorney-in-fact or attorneys-in-fact to execute the same on its behalf;

(ii)copies, certified as true and complete by an officer of each Borrower, of all documents evidencing any other necessary action, approvals or consents with respect to the Credit Documents and the transactions contemplated thereby;

(iii)copies, certified as true and accurate by an officer of each Borrower, of the certificate or articles of incorporation and by-laws or similar constituent document thereof;

(iv)certificate of the jurisdiction of incorporation or formation, as the case may be, of each Borrower as to the good standing thereof; and

(v)a certificate signed by the President, Senior Vice President, Treasurer, Comptroller or Chief Financial Officer of each of the Borrowers to the effect that (A) no Default or Event of Default shall have occurred and be continuing and (B) the representations and warranties of the Borrowers contained in the Credit Documents are true and accurate as at the date of such certificate.

5.05  Financial Information.  On or prior to the Initial Borrowing Date, the Lenders shall have received such financial statements and information accurately and fairly representing the financial condition of the Borrowers and their Subsidiaries on a consolidated basis as may be reasonably requested by the Lenders.

5.06  Consummation of the Refinancing.  On or prior to the Initial Borrowing Date or concurrently with the incurrence of the Loans on the Initial Borrowing Date, all existing unsecured debt of the Borrowers and their Subsidiaries listed on Schedule III hereto (the “Outstanding Indebtedness”) shall have been repaid in full, together with all fees and other

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amounts owing thereon, all commitments thereunder shall have been terminated and all letters of credit issued pursuant thereto shall have been terminated (the “Refinancing”).

5.07  Environmental Claims.  On the Initial Borrowing Date, the Lenders shall be satisfied that none of the Borrowers nor any Subsidiary is subject to any Environmental Claim which could reasonably be expected to result in a Material Adverse Change.

5.08  Appointment of Process Agent.  On the Initial Borrowing Date, the Administrative Agent shall have received a duly executed copy of the acceptance by OSG Ship Management, Inc. of its appointment as agent for the service of process for OSG International, which acceptance shall be in such form and substance as may be reasonably satisfactory to the Administrative Agent.

5.09  Officer’s Certificate.  On the Initial Borrowing Date, the Administrative Agent shall have received a certificate signed by the President, any Senior Vice President or any other duly authorized executive officer of OSG certifying that under applicable law existing on the Initial Borrowing Date, none of the Borrowers shall be compelled to withhold or deduct any taxes from any amounts to become payable to the Administrative Agent for its own account or for the account of the Lenders.

5.10  Insurance.  On the Initial Borrowing Date, the Administrative Agent shall have received certificates of insurance or other evidence satisfactory to it indicating the existence and effectiveness of the insurance required to be maintained by or on behalf of OSG, the Subsidiaries and the Joint Ventures pursuant to Section 8.12 hereof.

5.11  List of Vessels.  On the Initial Borrowing Date, the Administrative Agent shall have received a list of vessels more than 50% owned directly or indirectly by the Borrowers or any Subsidiary (which list shall describe each Lien on any such vessel).

SECTION 6.  Conditions Precedent to All Credit Events.  The obligation of each Lender to make Loans (including Loans made on the Initial Borrowing Date and each Borrowing Date thereafter), and the obligation of any Issuing Lender to issue any Letter of Credit, is subject to the satisfaction of the following conditions:

6.01  No Default; Representations and Warranties.  At the time of each such Credit Event and also after giving effect thereto (i) no Default or Event of Default shall exist or be continuing and (ii) the representations and warranties contained in Section 7 hereof shall be true and correct as if made on the date of such Credit Event by reference to the facts and circumstances then existing.

6.02  Notice of Borrowing; Letter Of Credit Request.  (a)Prior to the making of each Loan, the Administrative Agent shall have received the Notice of Borrowing required by Section 1.03(a).

(b)Prior to the issuance of each Letter of Credit, the Administrative Agent and the respective Issuing Lender shall have received a Letter of Credit Request meeting the requirements of Section 2.02.

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6.03  No Material Adverse Change.  Since September 30, 2005, no Material Adverse Change shall have occurred.

The acceptance of the proceeds of each Credit Event shall constitute a representation and warranty by each Borrower to the Administrative Agent and each of the Lenders that all of the applicable conditions specified in Section 5 and in this Section 6 and applicable to such Credit Event have been satisfied as of that time.  All of the applicable Notes, certificates, legal opinions and other documents and papers referred to in Section 5 and in this Section 6, unless otherwise specified, shall be delivered to the Administrative Agent at the Notice Office for the account of each of the Lenders and, except for the Notes, in sufficient counterparts for each of the Lenders and shall be in form and substance reasonably satisfactory to the Administrative Agent.

SECTION 7.  Representations, Warranties and Agreements.  In order to induce the Lenders to enter into this Agreement and to make the Loans and issue (or participate in) the Letters of Credit, each Borrower makes the following representations, warranties and agreements, in each case on the Effective Date, all of which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans and issuance of the Letter of Credit, with the occurrence of each Credit Event on or after the Effective Date being deemed to constitute a representation and warranty that the matters specified in this Section 7 are true and correct as if made on the Effective Date and on the date of each such Credit Event by reference to the facts and circumstances then existing.

7.01  Due Organization and Power.  Each of the Borrowers is a corporation duly formed and is validly existing in good standing under the laws of its jurisdiction of incorporation or formation and is duly qualified to do business as a foreign corporation in each jurisdiction wherein the nature of the business transacted thereby makes such qualification necessary, except where failure to so qualify would not result in a Material Adverse Change, has full power and authority and, to the best of its knowledge after due investigation, all material governmental licenses, authorizations, consents and approvals required to carry on its business as now being conducted and to own its properties and has full power and authority to enter into and perform its obligations under the Credit Documents to which it is a party, and has complied with all statutory, regulatory and other requirements relative to such business, property and instruments to which it is a party, or to which its property is subject, other than those agreements for which non-compliance, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Change.

7.02  Authorization and Consents.  All necessary corporate action has been taken to authorize, and all necessary consents and authorities have been obtained and remain in full force and effect to permit, each Borrower to enter into and perform its obligations under the Credit Documents to which it is a party and, to borrow, service and repay the Loans and, as of the Effective Date, no further consents or authorities are necessary for the service and repayment of the Loans or any part thereof.

7.03  No Violation.  Neither the execution and delivery by the Borrowers of the Credit Documents to which it is a party, or any instrument or agreement referred to therein, or contemplated thereby, nor the consummation of the transactions therein contemplated, nor compliance with the terms, conditions and provisions thereof by each of them, will (i) conflict

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with, or result in a breach or violation of, or constitute a default under the organizational documents of the Borrowers; (ii) conflict with or contravene any applicable law or any contractual restriction binding on or affecting the Borrowers or any of their respective assets or properties; (iii) result in a breach or violation of, or constitute a default under, or permit the acceleration of any material obligation or liability in, or but for any requirement of the giving of notice or the passage of time (or both) would constitute such a conflict with, breach or violation of, or default under, or permit any such acceleration in, any material contractual obligation or any material agreement or document to which any of the Borrowers is a party or by which any of the Borrowers or any of their respective assets or properties is bound (or to which any such obligation, agreement or document relates); or (iv) result in any Lien upon any of the Borrowers’ respective material assets or properties.

7.04  Approval; Consents.  All consents, licenses, approvals and authorizations required, whether by statute or otherwise, in connection with the entry into and performance by the Borrowers, and the validity and enforceability against the Borrowers, of the Credit Documents have been obtained and are in full force and effect;

7.05  Financial Statements.  Each of the audited consolidated balance sheet of OSG and its Subsidiaries as at December 31, 2004 and the related audited consolidated statements of operations and retained earnings and cash flows for the fiscal year then ended reported on by Ernst & Young LLP and included in OSG’s 2004 Form 10-K, as well as the unaudited consolidated statements of income and retained earnings and cash flows for such three and nine month period then ended on September 30, 2005 as reported on OSG’s September 30, 2005 Form 10-Q, copies of all of which have been furnished to the Administrative Agent, fairly present, in all material respects, the consolidated financial condition of OSG and its Subsidiaries as at such dates and the consolidated results of the operations of OSG and its Subsidiaries for the periods ended on such dates, all in accordance with the GAAP consistently applied.

7.06  Litigation.  No action, suit or proceeding is pending or threatened against any Borrower or any of its Subsidiaries before any court, board of arbitration or administrative agency which would be reasonably likely to result in any Material Adverse Change or which in any manner draws into question the validity or enforceability of the Credit Documents.

7.07  Use of Proceeds; Margin Regulations.  (a)  All proceeds of the Loans may be used only for the following (i) to effect the Refinancing, and/or (ii) from time to time, for working capital and general corporate purposes.

(b)At the time of each Credit Event occurring on or after the Initial Borrowing Date, not more than 25% of the value of the assets of OSG and its Subsidiaries subject to the restrictions in Section 9.04(b) will constitute Margin Stock.  Neither the making of any Loan nor the use of the proceeds thereof nor the occurrence of any other Credit Event will violate the provisions of Regulation T, U or X.

7.08  Tax Returns and Payments.  United States Federal income tax returns of OSG and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1999.  OSG and its Subsidiaries have timely filed with the appropriate taxing authority all United States Federal, state, local and foreign income tax returns and all other

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material tax or information returns which are required to be filed by them (collectively, the “Tax Returns”).  All of the Tax Returns (and any tax or information return becoming due after the date hereof and on or before the Initial Borrowing Date) are true and complete in all material respects.  OSG and its Subsidiaries have paid all material federal, state, local and foreign taxes (collectively, the “OSG Taxes”) due pursuant to the Tax Returns or pursuant to any assessment received by OSG or any Subsidiary, other than OSG Taxes which are being contested in good faith by appropriate proceedings and for which adequate reserves (in conformity with GAAP consistently applied) shall have been set aside on their books.  The charges, accruals and reserves on the books of OSG and the Subsidiaries in respect of OSG Taxes are adequate in all material respects and in conformity with GAAP consistently applied.  There is no material action, suit, proceeding, audit, investigation or claim pending or, to the knowledge of OSG or its Subsidiaries, threatened in respect of any OSG Taxes for which OSG or any of its Subsidiaries is or may become liable nor has any deficiency or claim for any OSG Taxes been proposed, asserted or, to the knowledge of OSG or its Subsidiaries threatened.  Neither OSG nor its Subsidiaries, has consented to any waivers or extensions of any statute of limitations with respect to the collection or assessment of any OSG Taxes against it.

7.09  Compliance with ERISA.  The execution and delivery of this Agreement and the consummation of the transactions hereunder will not involve any prohibited transaction within the meaning of ERISA or Section 4975 of the Code and no condition exists or event or transaction has occurred in connection with any Plan maintained or contributed to by any member of the ERISA Group or any ERISA Affiliate resulting from the failure of any thereof to comply with ERISA which is reasonably likely to result in any member of the ERISA Group or any ERISA Affiliate incurring any liability, fine or penalty which individually or in the aggregate could result in a Material Adverse Change.  No member of the ERISA Group nor any ERISA Affiliate, individually or collectively, has incurred, or reasonably expects to incur, Withdrawal Liabilities or liabilities upon the happening of a Termination Event the aggregate of which for all such Withdrawal Liabilities or other liabilities exceeds or would exceed $30,000,000.  With respect to any Multiemployer Plan, Multiple Employer Plan or Plan, no member of the ERISA Group nor any ERISA Affiliate is aware of or has been notified that any “variance” from the “minimum funding standard” has been requested (each such term as defined in Part 3, Subtitle B of Title 1 of ERISA).  No member of the ERISA Group nor any ERISA Affiliate has received any notice that any Multiemployer Plan is in reorganization, within the meaning of Title IV of ERISA, which reorganization could result in a Material Adverse Change.

7.10  Subsidiaries.  (a)  Each Material Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and authority and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and to own its properties; and

(b)On the Initial Borrowing Date there are no Non-Recourse Subsidiaries.

7.11  Compliance with Laws, etc.  Each of the Borrowers and their Subsidiaries is in compliance with all applicable laws, except where any failure to comply with any such applicable laws would not, alone or in aggregate, result in a Material Adverse Change.

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7.12  Investment Company Act.  Neither OSG nor any of its Subsidiaries is an “investment company” or an “affiliated person” of, or a “promoter” or “principal underwriter” for or a company “controlled” by an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended; neither the making of the Loans nor the application of the proceeds or repayment thereof by the Borrowers, nor the consummation of the other transactions contemplated hereby, will violate any provision of such act or any rule, regulation or order of the Securities and Exchange Commission thereunder.

7.13  Environmental Matters and Claims.  (a)  OSG and each of its Subsidiaries, when required, will be in compliance with all applicable United States federal and state, local, foreign and international laws, regulations, conventions and agreements relating to the pollution, pollution prevention or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, navigable waters, waters of the contiguous zone, ocean waters and international waters), including, without limitation, laws, regulations, conventions and agreements relating to (i) emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous materials, oil, hazardous substances, petroleum and petroleum products and by-products (“Materials of Environmental Concern”), or (ii) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (“Environmental Laws”) (except as to all of the above, where the failure to do so would not be reasonably likely to result in a Material Adverse Change);

(b)OSG and each of its Subsidiaries will when required, have all permits, licenses, approvals, ruling, variances, exemptions, clearances, consents or other authorizations required under applicable Environmental Laws (“Environmental Approvals”) and will, when required, be in compliance with all Environmental Approvals required to operate their respective businesses as then being conducted (except where the failure to comply with, obtain or renew such permits, licenses, rulings, variances, exemptions, clearances, consents or other authorizations would not be reasonably likely to result in a Material Adverse Change);

(c)neither OSG, nor any of its Subsidiaries has received any notice of any claim, action, cause of action, investigation or demand by any Person, entity, enterprise or government, or any political subdivision, intergovernmental body or agency, department or instrumentality thereof, alleging potential liability which would be reasonably likely to result in a Material Adverse Change or a requirement to incur investigatory costs, cleanup costs, response and/or remedial costs (whether incurred by a governmental entity or otherwise), natural resources damages, property damages, personal injuries, attorneys’ fees and expenses, or fines or penalties which would be reasonably likely to result in a Material Adverse Change, in each case arising out of, based on or resulting from (i) the presence, or release, or threat of release, of any Materials of Environmental Concern at any location, whether or not owned by such Person, or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law or Environmental Approval (“Environmental Claim”) (other than Environmental Claims that have been fully and finally adjudicated or otherwise determined and all fines, penalties and other costs (including permitted deductibles), if any, payable by OSG or any of its Subsidiaries in respect thereof have been paid in full or which are fully covered by insurance);

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(d)to the best of the Borrowers’ knowledge, after due investigation, there are no circumstances that would be reasonably likely to prevent or interfere with such full compliance in the future; and

(e)there is no Environmental Claim pending or, to the best of the Borrowers’ knowledge, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge or disposal of any Materials of Environmental Concern, that could reasonably be expected to form the basis of any Environmental Claim against such Persons the adverse disposition of which could reasonably be expected to result in a Material Adverse Change.

7.14  Insurance.  OSG and its Subsidiaries have insured their properties and assets against such risks and in such amounts as are customary for companies engaged in similar businesses.

7.15  OSG International Not Immune.  OSG International is generally subject to suit, and neither OSG International nor any of its properties or assets has any immunity from the jurisdiction of any court or from legal process (whether through service of process or notice of attachment prior to judgment, attachment in aid of execution or otherwise) under laws of the Marshall Islands or any political subdivision thereof.

7.16  Binding Obligations.  The Credit Documents constitute or will, when executed and delivered, constitute the legal, valid and binding obligations of each Borrower enforceable against such Borrower in accordance with their respective terms, except to the extent that such enforcement may be limited by equitable principles, principles of public policy or applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting generally the enforcement of creditors’ rights.

7.17  Filings; Stamp Taxes.  It is not necessary for the legality, validity, enforceability or admissibility into evidence of the Credit Documents that any of them or any document relating thereto be registered, filed, recorded or enrolled with any court or authority in any relevant jurisdiction or that any stamp, registration or similar taxes be paid on or in relation to the Credit Documents.

7.18  No Default.  No Borrower nor any Subsidiary is in default under any material agreement by which it is bound, which default might lead to a Material Adverse Change, or is in default of any Material Financial Obligation.

7.19  Chief Executive Office.  The chief executive office and principal place of business of each of the Borrowers is located at 666 Third Avenue, New York, New York 10017.

7.20  Foreign Trade Control Regulations. None of the transactions contemplated in this Agreement will violate any of the provisions of the Foreign Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 500, as amended), any of the provisions of the Cuban Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 515, as amended), any of the provisions of the Libyan Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 550, as amended), any of the provisions of the

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Iranian Transaction Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 560, as amended), any of the provisions of the Iraqi Sanctions Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 575, as amended), any of the provisions of the Federal Republic of Yugoslavia (Serbia and Montenegro) Assets Control Regulations and Bosnia-Serb controlled areas of the Republic of Bosnia and Herzegovina (Title 31, Code of Federal Regulations, Chapter V, Part 585 as amended) or any of the provisions of the Regulations of the United States of America Governing Transactions in Foreign Shipping of Merchandise (Title 31, Code of Federal Regulations, Chapter V, Part 505, as amended).

7.21  Compliance with ISM Code and ISPS Code.Each of the Borrowers’ and their respective Subsidiaries’ vessels complies with the requirements of the ISM Code and the ISPS Code in all material respects including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto.

7.22  Threatened Withdrawal of DOC, SMC or ISSC.  There is no actual or, to the best of the Borrowers’ knowledge, threatened withdrawal of (a) any document of compliance (DOC) issued to an Operator in accordance with rule 13 of the ISM Code in respect of any of the Borrowers’ or their respective Subsidiaries’ vessels (and, for these purposes, the “Operator” of a vessel shall mean the Person who is concerned with the operation of such vessel and falls within the definition of “Company” set out in rule 1.1.2 of the ISM Code) or (b) safety management certificate (SMC) issued in respect of any of the Borrowers’ or their respective Subsidiaries’ vessels in accordance with rule 13 of the ISM Code or (c) the international ship security certificate (ISSC) issued pursuant to the ISPS Code in respect of any of the Borrowers’ or their respective Subsidiaries’ vessels.

7.23  Payment Free of Taxes.  On the Initial Borrowing Date, all payments made or required to be made by the Borrowers under or pursuant to this Agreement and the Notes can, subject to each non-U.S. Lender complying with its obligations under Section 4.04(b), be made free and clear of, and without deduction or withholding for an account of, any taxes.

7.24  No Material Adverse Change.  Since September 30, 2005, with respect to OSG and its Subsidiaries, there has been no Material Adverse Change.

7.25  No Proceedings to Dissolve.  There are no proceedings or actions pending or contemplated by the Borrowers or, to the best of the Borrowers’ knowledge, contemplated by any third party, to dissolve or terminate any Borrower.

7.26  No Marshall Islands Filing Necessary.  To ensure the enforceability or admissibility in evidence of each Credit Document, it is not necessary that such Credit Document be filed or recorded with any court or other authority in the Marshall Islands or any political subdivision thereof or that any stamp or similar tax be paid hereon or thereon or in respect hereof or thereof other than in connection with a proceeding brought to enforce the same.

7.27  True and Complete Disclosure.  All factual information (taken as a whole) furnished by or on behalf of the Borrowers in writing to the Administrative Agent or any Lender (including, without limitation, all information contained in the Credit Documents) for purposes of or in connection with this Agreement, the other Credit Documents or any transaction

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contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of the Borrowers in writing to the Administrative Agent or any Lender will be, true and accurate in all material respects and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time as such information was provided.

7.28  Solvency.  Immediately before and after the Initial Borrowing Date and each extension of credit hereunder, the Parent and its Subsidiaries taken as a whole will be Solvent.

SECTION 8.  Affirmative Covenants.  Each Borrower hereby covenants and agrees that on and after the Effective Date and until the Total Commitments and all Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings, together with interest, Commitment Commission and all other obligations incurred hereunder and thereunder, are paid in full:

8.01  Financial Statements.  The Borrowers shall deliver to the Administrative Agent with sufficient copies for each of the Lenders to be distributed to the Lenders by the Administrative Agent promptly upon receipt thereof:

(a)as soon as available and in any event within 90 days after the end of each fiscal year of OSG, (i) a consolidated balance sheet of OSG and the Subsidiaries (determined without giving effect to the last sentence of the definition of “Subsidiary”) as of the end of such fiscal year and the related consolidated statements of income and retained earnings and cash flows for such fiscal year, setting forth in each case in comparative form the figures as of the end of and for the previous fiscal year, complying in all material respects with all applicable rules and regulations promulgated by the Securities and Exchange Commission, in each case accompanied by an unqualified opinion of Ernst & Young LLP or other independent public accountants of nationally recognized standing and (ii) if there are any Non-Recourse Subsidiaries, an unaudited consolidated balance sheet of OSG and the Recourse Subsidiaries as of the end of such fiscal year and the related unaudited consolidated statements of income and retained earnings and cash flows for such fiscal year, setting forth in each case in comparative form the figures as of the end of and for the previous fiscal year, together with a letter from the independent public accountants referred to in the foregoing clause (i) confirming the mathematical accuracy of such financial statements and the derivation thereof on a reasonable basis from the audited financial statements referred to in clause (i) of this subsection (a);

(b)as soon as available and in any event within 60 days after the end of each of the first three fiscal quarters of each fiscal year of OSG, (i) an unaudited consolidated balance sheet of OSG and the Subsidiaries (determined without giving effect to the last sentence of the definition of “Subsidiary”) as of the end of such fiscal quarter and the related unaudited consolidated statements of income and retained earnings and cash flows for such fiscal quarter and for the portion of OSG’s fiscal year ended at the end of such fiscal quarter, setting forth in each case in comparative form the figures as of the end of and for the corresponding fiscal quarter and the corresponding portion of OSG’s previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of

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presentation and compliance in all material respects with all applicable rules and regulations of the Securities and Exchange Commission with respect to interim financial statements and consistency by the chief financial officer or the chief accounting office of OSG and (ii) if there are any Non-Recourse Subsidiaries, an unaudited consolidated balance sheet of OSG and the Recourse Subsidiaries as of the end of such fiscal quarter and the related unaudited consolidated statements of income and retained earnings and cash flows for such fiscal quarter and for the portion of OSG’s fiscal year ended at the end of such fiscal quarter, setting forth in each case in comparative form the figures as of the end of and for the corresponding fiscal quarter and the corresponding portion of OSG’s previous fiscal year, together with a certificate of the chief financial officer or chief accounting officer of OSG as to the derivation of such financial statements from the financial statements referred to in clause (i) of this subsection (b);

(c)simultaneously with the delivery of each set of financial statements referred to in clause (a)(i) and (b)(i) above, a compliance certificate of OSG executed by OSG’s chief financial officer or chief accounting officer (i) setting forth in reasonable detail the calculations required to establish whether the Financial Covenants are complied with as of the last day of the fiscal period covered by such financial statements, and (ii) stating whether any Default or Event of Default exists on the date of such certificate and, if any Default or Event of Default then exists, setting forth the details thereof and the action which the Borrowers are taking or propose to take with respect thereto;

(d)simultaneously with the delivery of each set of financial statements referred to in clause (a)(i) above, a statement of the firm of independent public accountants which reported on such statements (i) stating whether anything has come to their attention to cause them to believe that OSG and the Subsidiaries were not in compliance with any of the Financial Covenants on the date of such statements and (ii) confirming the calculations set forth in the officer’s certificates delivered simultaneously therewith pursuant to subsection (c) above or, with respect to the calculations required to derive the amounts referred to in the Financial Covenants, verifying the mathematical accuracy of such calculations;

(e)within three Business Days after the date on which any executive officer of any of the Borrowers obtains knowledge of (i) any Default or Event of Default, if such Default or Event of Default is then continuing, or (ii) a Material Adverse Change or (iii) any action, suit or proceeding of the type referred to in Section 7.06 hereof, a certificate of the chief financial officer or the chief accounting officer of each of the Borrowers setting forth the details thereof and the action which the Borrowers are taking or propose to take with respect thereto;

(f)promptly upon the mailing thereof to the shareholders of OSG generally, copies of all financial statements, reports and proxy statements so mailed;

(g)promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Form 10-K, 10-Q and 8-K (or their equivalents) which OSG shall have filed with the Securities and Exchange Commission;

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(h)as soon as possible, (i) copies of all reports and notices which any member of the ERISA Group or ERISA Affiliate files under ERISA with the Internal Revenue Service or the Pension Benefit Guaranty Corporation (“PBGC”) or the U.S. Department of Labor or the sponsor of the Multiemployer Plan or which any member of the ERISA Group or ERISA Affiliate receives from the PBGC or the sponsor of a Multiemployer Plan relating to (A) any Termination Event and (B) with respect to a Multiemployer Plan, any Withdrawal Liability, or any actual or expected reorganization (within the meaning of Title IV of ERISA) or termination of a Multiemployer Plan (within the meaning of Title IV of ERISA) and (C) a certificate of the chief financial officer or chief accounting officer of OSG setting forth in reasonable detail the calculation of the amount (to the extent then reasonably determinable) of any liability in connection with the foregoing;

(i)in the event of any change in OSG’s fiscal year, OSG shall as soon as possible, restate such of its consolidated financial statements required to be delivered under this Section 8.01 for such 12 month period as shall be necessary in order to permit the calculation of the financial covenants set forth herein;

(j)concurrently with the delivery of any compliance certificate under this Section 8.01, (x) a list of vessels more than 50% owned directly or indirectly by the Borrowers and any of their respective Subsidiaries (which list shall be current as of the end of each fiscal year and as of the end of each of the first three fiscal quarters and shall describe (i) each Lien on any such vessel and (ii) the percentage that each vessel is owned by the Borrowers or any of their respective Subsidiaries); provided, however, that the Borrowers shall update such list as soon as practicable (and in any event within 15 Business Days) in the event that there is a change of 10% or more (by number of vessels) in the Borrowers’ fleet of vessels and (y) a list of the Closing Date Assets owned directly or indirectly by the Borrowers and any of their respective Subsidiaries (which list shall be current as of the end of each fiscal year and as of the end of each of the first three fiscal quarters and shall describe (i)  the Book Value of such assets and (ii) the Book Value of such assets that secure Indebtedness of the Borrowers or any of their respective Subsidiaries); and

(k)from time to time such additional information regarding the financial position, results of operations, business or prospects of OSG and the Subsidiaries as the Administrative Agent, at the request of any Lender, may reasonably request.

8.02  Books, Records and Inspections.  (a)  Each of the Borrowers shall keep proper books and record of all transactions relating to the business activities of the Borrowers made until all obligations under this Agreement have been satisfied in full.

(b)Each of the Borrowers shall allow any representative or representatives designated by any Lender, at the risk and expense of such Lender and during normal business hours, subject to applicable laws and regulations, to visit and inspect any properties of the Borrowers or their respective Subsidiaries, and, on prior reasonable notice, to examine the Borrowers’ or Subsidiaries’ books of account, records, reports and other papers (and to make copies thereof and to take extracts therefrom) and to discuss their affairs, finances and accounts

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with the Borrowers’ and Subsidiaries’ officers and executive employees all at such reasonable times and as often as such Lender reasonably requests.

8.03  Maintenance of Assets.  Each of the Borrowers shall maintain and keep, and procure that each of its Subsidiaries shall maintain and keep, all properties used or useful in the conduct of their respective business in good condition, repair and working order (ordinary wear and tear excepted) and supplied with all necessary equipment and will make, or cause to be made, all necessary repairs, renewals and replacements thereof so that the business carried on in connection therewith and every material portion thereof may be properly conducted at all times except where the failure to do so would not be reasonably likely to result in a Material Adverse Change.

8.04  Preservation of Corporate Existence, etc.  OSG shall preserve and maintain, and shall cause each of the Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises; provided that, none of OSG nor any Subsidiary shall be required to preserve any right or franchise, and no Subsidiary (other than OSG Bulk and OSG International) shall be required to maintain its corporate existence if the Board of Directors of OSG or the Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of OSG or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to OSG, OSG and its Subsidiaries on a consolidated basis or the Lenders with respect to their rights hereunder and provided further that OSG Bulk and OSG International may be dissolved provided that all of the assets of OSG Bulk and OSG International, as the case may be, shall be distributed to OSG.

8.05  Consents.  The Borrowers shall without prejudice to the representations and warranties set forth in Section 7 and the other covenants in this Section 8, obtain every consent applicable to it and do all other acts and things which may from time to time be necessary for the continued due performance of all its obligations under the Credit Documents.

8.06  Environmental Matters.  The Borrowers shall promptly upon the occurrence of any of the following conditions, provide to the Administrative Agent (which shall promptly furnish a copy thereof to each Lender) a certificate of an executive officer of OSG, specifying in detail the nature of such condition and its proposed response or the response of its Environmental Affiliates:  (i) its receipt or the receipt by any of the Subsidiaries or any of their Environmental Affiliates of any communication whatsoever that alleges that such person is not in compliance with any applicable Environmental Law or Environmental Approval, if such non-compliance could reasonably be expected to result in a Material Adverse Change, (ii) knowledge by it, any of the Subsidiaries or any of their Environmental Affiliates that there exists any Environmental Claim pending or threatened against any such person, which could reasonably be expected to result in a Material Adverse Change, or (iii) any release, emission, discharge or disposal of any material that could form the basis of any Environmental Claim against it, any of the Subsidiaries or any of their Environmental Affiliates if such Environmental Claim could reasonably be expected to result in a Material Adverse Change.  Upon the written request by the Administrative Agent, the Borrowers will submit to the Lenders at reasonable intervals, a report providing an update of the status of any issue or claim identified in any notice or certificate required pursuant to this subsection.

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8.07  Payment of Obligations.  Each Borrower shall pay and discharge, or cause to be paid and discharged, or shall cause each Subsidiary to pay and discharge at or before maturity, all their respective obligations and liabilities, including, without limitation, all taxes, assessments and governmental charges or levies imposed upon them, the Subsidiaries or their respective income or property prior to the date upon which penalties attach thereto which, if not paid, could reasonably be expected to result, either singularly or in the aggregate, in a Material Adverse Change; provided, however, that the Borrowers shall not be required to pay and discharge, or cause to be paid and discharged, any such obligation, liability, tax, assessment, charge or levy so long as the legality thereof shall be contested in good faith and by appropriate proceedings and they or the relevant Subsidiary or Subsidiaries shall maintain in accordance with GAAP appropriate reserves with respect thereto.

8.08  Compliance with Agreements, Statutes, etc.  Each of the Borrowers shall do or cause to be done all things necessary to comply with all material contracts or agreements to which any of the Borrowers is a party, and all laws and the rules and regulations thereunder, applicable to the Borrowers or any of the Subsidiaries or their conduct of their business including, without limitation, those laws, rules and regulations relating to employee benefit plans and environmental matters except where the failure to do so would not be reasonably likely to result in a Material Adverse Change.

8.09  Performance of Agreement.  Each of the Borrowers shall duly perform and observe the terms of the Credit Documents to which it is a party.

8.10  Notice of Default.  Each of the Borrowers shall inform the Administrative Agent (which shall promptly, and in any event within three Business Days, notify the Lenders) of the occurrence of (i) any Default or Event of Default, (ii) any litigation or governmental proceeding pending or threatened against OSG or any Subsidiary which in any manner draws into question the validity or enforceability of any Credit Document or which could reasonably be expected to result in a Material Adverse Change and (iii) any other event or condition of which it becomes aware which is reasonably likely to result in a Material Adverse Change, in each case, promptly, and in any event within three Business Days after becoming aware of the occurrence thereof.

8.11  Rating Change.  Each of the Borrowers shall within 72 hours after any officer of OSG becomes aware of any change in the rating by Moody’s or S&P of OSG’s publicly-traded senior unsecured long-term debt securities, give notice of such change to the Administrative Agent.

8.12  Insurance.  Each of the Borrowers shall cause each Subsidiary, determined without giving effect to the last sentence of the definition of Subsidiary, to maintain and use its best efforts to cause each Joint Venture to maintain, with financially sound and reputable insurance companies (which may include protection and indemnity clubs) (i) in the case of OSG or any such Subsidiary or Joint Venture which engages in any Shipping and Related Businesses or in any business in products related to oil, including without limitation, owning, leasing or chartering any ship engaged in the transport of oil or related products, oil pollution insurance covering risks in the maximum amount available in accordance with standard industry practice or, if such insurance is not available at reasonable cost after taking into account the level of

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exposure to which OSG, the Subsidiaries and the Joint Ventures may be subject, such other amounts as are usually insured against by companies of established repute engaged in the same or similar business from time to time and (ii) such other insurance on all their respective properties in at least such amounts as are usually insured against by companies of established repute engaged in the same or similar business from time to time.

8.13  Shipping Management.  Each of the Borrowers shall at all times cause all vessels owned by the Borrowers and their Subsidiaries to be managed by one or more of the following shipping management companies (or another shipping management company acceptable to the Administrative Agent):

(a)OSG or any Subsidiary or affiliate of OSG, including OSG Ship Management, Inc., OSG Ship Management (UK) Ltd and OSG Ship Management GR Ltd;

(b)V Ships Ltd.;

(c)Thome Ship Management Pte Ltd.;

(d)Barber Ship Management International Ltd.;

(e)Columbia Ship Management;

(f)Dorchester Maritime Ltd.;

(g)Anglo Eastern Ship Management; or

(h)Hanseatic Shipping Co. Ltd.

8.14  Book Value.  Each of the Borrowers shall at all times use valuation procedures to determine Book Value which are consistent with GAAP consistently applied.

8.15  Exchange Listing.  OSG shall remain listed on the New York Stock Exchange, NASDAQ or such other exchange as is satisfactory to the Lenders.

8.16  Ownership of OSG Bulk and OSG International.  The Borrowers shall except as otherwise contemplated herein, cause each of OSG Bulk and OSG International to be direct or indirect wholly-owned Subsidiaries of OSG (excluding only director’s qualifying shares).

8.17  Agent for Service of Process.  OSG shall cause OSG International to maintain at all times OSG Ship Management, Inc., or another agent reasonably acceptable to the Administrative Agent, as its agent for service of process in the State of New York and shall cause any other such agent to execute and deliver to OSG and the Administrative Agent a letter in form and substance reasonably satisfactory to the Administrative Agent, accepting such agency, prior to or concurrently with such other agent’s acceptance of its appointment as agent for service of process for OSG International.

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SECTION 9.  Negative Covenants.  The Borrowers hereby covenant and agree that on and after the Initial Borrowing Date and until all Commitments and all Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings, together with interest, Commitment Commission and all other Obligations incurred hereunder and thereunder, are paid in full:

9.01  Liens.  The Borrowers will not, and will not permit any of their Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets (real or personal, tangible or intangible) whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable with recourse to the Borrowers or any of their respective Subsidiaries), or assign any right to receive income or knowingly permit the filing of any financing statement under the UCC or by way of security any other similar notice of Lien under any similar recording or notice statute; provided that the provisions of this Section 9.01 shall not prevent the creation, incurrence, assumption or existence of the following (Liens described below are herein referred to as “Permitted Liens”):

(i)Statutory and other like Liens arising in the ordinary course of business unrelated to borrowed money and securing obligations not yet delinquent or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established;

(ii)Liens arising from judgments, decrees or attachments not covered by insurance, so long as the obligations in connection therewith do not exceed $30,000,000;

(iii)Liens in existence on the Effective Date which are listed, and the property subject thereto described, in Schedule IV, provided that the aggregate principal amount of the Indebtedness, if any, secured by such Liens does not increase from that amount outstanding on the Effective Date, less any repayments of principal thereof; and

(iv)other Liens incurred after the Effective Date provided the Parent and its Subsidiaries are in pro forma compliance with the Financial Covenants and the covenant described in Section 9.04(b) below after giving effect to the incurrence thereof.

In connection with the granting of Liens described above in this Section 9.01 by the Borrowers or any of their Subsidiaries, the Administrative Agent shall be authorized to take any actions deemed appropriate by it in connection therewith.

9.02  Consolidation, Merger, Sale of Assets, etc.  (i)  Subject to the last proviso to section 8.04, none of the Borrowers will wind up, liquidate or dissolve its affairs or convey, sell, lease or otherwise dispose of all or substantially all of its consolidated assets (or agree to do any of the foregoing at any future time) and (ii) the Borrowers will not, and will not permit any of their respective Subsidiaries to enter into any transaction of merger or consolidation, (or agree to do any of the foregoing at any future time) unless:

(i)at the time of such consolidation or merger and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing;

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(ii)the surviving entity shall assume all liabilities and obligations of the parties thereto, provided that (a) the Borrowers shall have provided to the Administrative Agent not less than 10 Business Days prior to such consolidation or merger (1) a certificate declaring that no Default or Event of Default exists or would exist or would result from the intended consolidation or merger and (2) pro forma financial statements of the surviving entity together with a compliance certificate demonstrating compliance with all the Financial Covenants; and (b) the surviving entity shall have made to the Lenders the same representations and warranties as were made by the Borrowers in this Agreement; and

(iii)in the case of a merger or consolidation of the Parent, the surviving entity must be organized under the laws of a jurisdiction which will not result in the making or maintenance of credit under this Agreement by any Lender being illegal.

9.03  Sale and Leaseback Transactions.  The Borrowers will not, and will not permit any Subsidiary to, enter into any Sale and Leaseback Transaction unless (i) no Default or Event of Default exists or would result therefrom and (ii) the Parent and its Subsidiaries will remain in pro forma compliance with the Financial Covenants and the covenants set forth in Section 9.04(b) below after giving effect thereto.

9.04  Indebtedness.  (a)  The Borrowers will not, and will not permit any of their Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness except:

(i)Indebtedness incurred pursuant to this Agreement and the other Credit Documents;

(ii)Indebtedness of the Parent and its Subsidiaries so long as (x) the Parent and its Subsidiaries are in pro forma compliance with the Financial Covenants after giving effect to the incurrence thereof and (y) no Default or Event of Default exists at the time of incurrence thereof or would result therefrom (it being understood that any Indebtedness of a Subsidiary existing at the time such Subsidiary is acquired will be deemed to be incurred at the time of such acquisition);

(iii)Indebtedness outstanding on the Initial Borrowing Date as listed on Schedule V hereto;

(iv)Unsecured loans and advances among the Borrowers and their Subsidiaries; provided that any loans or advances owed by a Borrower will be subordinated to the obligations owed under this Agreement; and

(v)Indebtedness of the Parent or any of its Subsidiaries under performance guaranties and standby letters of credit issued in the ordinary course of business, in each case not supporting Indebtedness.

(b)Notwithstanding clause (a) above, neither the Borrowers nor any of their Subsidiaries shall incur any Indebtedness secured by any Closing Date Assets if after giving effect to such incurrence, the aggregate Book Value of the Closing Date Assets which secure Indebtedness exceeds 30% of the aggregate Book Value of the Closing Date Assets which are

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owned by the Borrowers and their Subsidiaries on the date of such incurrence.  For purposes of this clause (b), Closing Date Assets owned by a Subsidiary which has incurred Indebtedness, or the stock or obligations of which have been assigned to secure Indebtedness (directly or indirectly), shall be deemed to secure Indebtedness and shall have a Book Value equal to the lesser of (x) two times of the amount of such Indebtedness and (y) the aggregate Book Value of such Closing Date Assets.

9.05  Investments in Joint Ventures.  The Borrowers will not, and will not permit any Subsidiary to, make any Investment in any Joint Venture (other than a Joint Venture substantially all of the business of which is the LNG business) on any date if, immediately after giving effect to such Investment, the aggregate amount of all such Investments made by OSG and its Subsidiaries after September 30, 2005 would exceed 30% of Total Assets based on the most recent consolidated balance sheet of OSG (it being understand that at the time any Subsidiary ceases to be a Subsidiary, any remaining Investment in such Person held by the Borrowers and its Subsidiaries will be deemed an Investment in a Joint Venture in an amount equal to the Book Value of such remaining Investment).

9.06  Transactions with Affiliates.  The Borrowers will not, and will not permit any Subsidiary to, enter into or become party to any material transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate), except pursuant to the reasonable requirements of such Borrower’s or Subsidiary’s business and upon terms which are fair and reasonable and in the best interests of such Borrower or such Subsidiary.

9.07  Maximum Leverage.  OSG shall not permit the ratio of Funded Indebtedness to Total Capitalization on the last day of any fiscal quarter to be greater than 0.60 to 1.00.

9.08  Minimum Net Worth.  OSG shall not permit Tangible Net Worth on the last day of any fiscal quarter to be less than $1,200,000,000.

9.09  Minimum Unencumbered Assets.  OSG shall not permit the ratio of Unencumbered Tangible Assets to Unsecured Debt on the last day of any fiscal quarter to be less than 1.5 to 1.0.

9.10  Other Limitations.  OSG will not (i) change its fiscal year end or (ii) materially alter the nature of the business undertaken by it and its Subsidiaries (taken as a whole) as at the Effective Date, in either case, without the Required Lenders’ prior written approval.

SECTION 10.  Events of Default.  Upon the occurrence of any of the following specified events (each an “Event of Default”):

10.01  Payments.  (a)  Any non-payment of principal due under this Agreement or any Note on the due date therefore, unless failure to pay is caused by administrative or technical error and payment is made within three Business Days or the due date; or

(b)Any non-payment of interest or any other amount (other than principal) due under this Agreement or any Note within three Business Days of the due date therefor; or

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10.02  Representations, etc.  Any representation, warranty or other statement made by any Borrower in this Agreement or in any other instrument, document or other agreement delivered in connection therewith proves to have been untrue or misleading in any material respect as at the date as of which it was made, unless circumstances giving rise to such misrepresentation are capable of remedy and are remedied within 15 days after the earlier of the Administrative Agent giving notice to OSG requiring such remedy and the relevant Borrower becoming aware of the misrepresentation; or

10.03  Covenants.  (a)  One or more of the Borrowers defaults in the performance or observance of the covenants contained in Sections 8.10 or 8.13; or

(b)OSG defaults in the performance or observance of any Financial Covenant; or

(c)One or more of the Borrowers defaults in the performance of any term, covenant or agreement contained in this Agreement or in the Notes, or in any other instrument, document or other agreement delivered in connection therewith, in each case other than an Event of Default referred to elsewhere in this Section 10, and such default continues unremedied for a period of 15 days after written notice thereof has been given to the Borrowers by the Administrative Agent at the request of any Lender unless the Borrowers are diligently pursuing a remedy of such Default provided such Default is, in the determination of the Lenders capable of being remedied within a reasonable period of time (and in any event within 15 days) without adversely affecting the Lenders’ rights hereunder or under the Notes and such Default is in fact so remedied; or

10.04  Default Under Other Agreements.  Any Borrower or any Subsidiary defaults under (i) any Material Financial Obligation or (ii) any other material contract or agreement to which it is a party or by which it is bound and, in the case of this (ii), such default could reasonably be expected to result in a Material Adverse Change or any event or condition occurs that enables or permits (with or without the giving or notice of the lapse of time, or both) the holder or holders of Material Financial Obligations of OSG or any Subsidiary or any agent or trustee on their behalf to accelerate Indebtedness; or

10.05  Bankruptcy, etc.  Any of the Borrowers or Material Subsidiaries commences any proceedings relating to any substantial portion of its property under any reorganisation, arrangement or readjustment of debt, dissolution, winding up, adjustment, composition, bankruptcy or liquidation law or statute of any jurisdiction, whether now or hereafter in effect (a “Proceeding”), or there is commenced against any thereof any Proceeding and such Proceeding remains undismissed or unstayed for a period of 60 days; or any thereof by any act indicates consent to or approval of or acquiescence in any Proceeding or to the appointment of any receiver, trustee, liquidator or sequestrator of, or for, itself or any substantial portion of its property; or

10.06  ERISA.  Any member of the ERISA Group or any ERISA Affiliate shall (i) fail to pay when due an amount or amounts aggregating in excess of $5,000,000 which it or they shall have become liable to pay under Title IV of ERISA or (ii) any member of the ERISA Group or any ERISA Affiliate, individually or collectively, shall incur, or shall reasonably

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expect to incur, any Withdrawal Liability or liability upon the happening of a Termination Event and the aggregate of all such Withdrawal Liabilities and such other liabilities shall be in excess of $30,000,000; or

10.07  Judgments.  Any judgment or order is made the effect of which would be to render invalid this Agreement or the Notes or any material provision thereof or any Borrower asserts that any such agreement or provision thereof is invalid; or judgments or orders for the payment of money in excess of $30,000,000 in the aggregate for OSG and all Subsidiaries (or its equivalent in any other currency) shall be rendered against OSG and/or any of the Subsidiaries and such judgments or orders shall continue unsatisfied and unstayed for a period of 30 consecutive days and action shall legally be taken by the judgment creditor to attach or levy upon assets of OSG or its Subsidiary to enforce such judgment; or

10.08  Impossibility, Illegality.  It becomes impossible or unlawful for the Borrowers to fulfil any of the covenants and obligations contained in this Agreement or in the Notes, or for any of the Lenders to exercise any of the rights vested in any of them under this Agreement or the Notes and such impossibility or illegality, in the reasonable opinion of such Lender, will have a Material Adverse Change on any of its rights under this Agreement or the Notes or on any of its rights to enforce any thereof; or

10.09  Inability to Pay Debts.Any Borrower or Material Subsidiary is unable to pay or admits its inability to pay its debts as they fall due or a moratorium shall be declared in respect of any Indebtedness of any thereof;

then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent, upon the written request of the Required Lenders, shall by written notice to the Borrowers, take any or all of the following actions, without prejudice to the rights of the Administrative Agent, any Lender or the holder of any Note to enforce its claims against any Credit Party (provided that, if an Event of Default specified in Section 10.05 shall occur, the result which would occur upon the giving of written notice by the Administrative Agent to the Borrowers as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice):  (i) declare the Total Commitments terminated, whereupon all Commitments of each Lender shall forthwith terminate immediately and any Commitment Commission shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and the Notes and all Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Credit Party; (iii) terminate any Letter of Credit that may be terminated in accordance with its terms; and (iv) direct the Borrowers to pay (and the Borrowers jointly and severally agree that upon receipt of such notice, or upon the occurrence and during the continuance of an Event of Default specified in Section 10.05, it will pay) to the Administrative Agent at the Payment Office such additional amount of cash, to be held as security by the Administrative Agent, as is equal to the aggregate Stated Amount of all Letters of Credit issued for the Borrowers.

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SECTION 11.  Definitions and Accounting Terms.

11.01  Defined Terms.  As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Administrative Agent” shall have the meaning provided in the first paragraph of this Agreement, and shall include any successor thereto.

“Additional Cost Rate” shall have the meaning provided in Schedule VI hereto.

“Affiliate” shall mean, with respect to any Person, (i) any Person that directly, or indirectly through one or more intermediaries, Controls such Person (a “Controlling Person”) or (ii) any Person (other than such Person or a Subsidiary of such Person) which is Controlled by or is under common Control with a Controlling Person and, for these purposes, “Control” shall mean, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise (and “Controls” and “Controlled” shall be construed accordingly).

“Agents” shall mean, collectively, the Administrative Agent and the Documentation Agent, Bookrunners and Lead Arrangers as described on the cover page hereto.

“Aggregate RL Exposure” shall mean, at any time, the sum of (i) the aggregate principal amount of all Revolving Loans then outstanding (for this purpose, using the Dollar Equivalent of each Alternate Currency Revolving Loan then outstanding), (ii) the aggregate amount of all Letter of Credit Outstandings at such time, and (iii) the aggregate principal amount of all Swingline Loans then outstanding.

“Agreement” shall mean this Credit Agreement, as modified, supplemented, amended or restated from time to time.

“Alternate Currency” shall mean each of Euros, British Pound Sterling, Swiss Francs and Japanese Yen.

“Alternate Currency Revolving Loans” shall mean each Revolving Loan denominated in an Alternate Currency.

“Alternate Currency Sublimit” shall mean an amount equal to 50% of the Total Commitment as then in effect.

“Applicable Margin” shall mean a percentage per annum equal to (i) 0.70% for the period from the Effective Date until the fifth anniversary of the Effective Date and (ii) 0.75% for the period on and from and after the fifth anniversary of the Effective Date.

“Assignment and Assumption Agreement” shall mean the Assignment and Assumption Agreement substantially in the form of Exhibit F (appropriately complete).

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“Associated Costs Rate” shall mean the percentage rate per annum to be charged in addition to the interest rate which is intended to compensate each Lender for the cost to such Lender of compliance with (a) the cash ratios and special deposit requirements of the Bank of England and/or the banking supervision or other costs imposed by the UK Financial Services Authority (or in either case, any other authority which replaces all or any of its functions), determined in accordance with Schedule VI hereto, and (b) any reserve asset requirements of the European Central Bank.

“Attributable Debt” shall mean, as of the date of any determination thereof, in connection with any Sale and Leaseback Transaction which is not permitted pursuant to this Agreement, the lesser of (i) the sum of the Fair Market Value of any vessels subject to such transaction and the fair market value of any non-vessel assets subject to such transaction or (ii) the present value (computed in accordance with GAAP at the imputed rate of interest used in such transaction) of the obligation of a lessee in such transaction for Rentals during the remaining term of any lease (including any period for which such lease has been extended or may, at the option of the lessor, be extended).

“Bankruptcy Code” shall mean Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto.

“Book Value” shall mean, as of the date of any determination thereof, for any asset of OSG or any of its Subsidiaries, the value at which such asset is recorded and reported by OSG in its consolidated financial statements in accordance with GAAP, consistently applied.

“Borrower” shall have the meaning provided in the first paragraph of this Agreement.

“Borrowing” shall mean the borrowing of Loans from all the Lenders (other than any Lender which has not funded its share of a Borrowing in accordance with this Agreement) having Commitments on a given date having, in the case of Loans, the same Interest Period.

“Borrowing Date” shall mean the Initial Borrowing Date and each date on or after the Initial Borrowing Date and prior to the Final Maturity Date on which a Borrowing occurs.

“Business Day” shall mean a day (other than a Saturday or Sunday) on which banks are open for general business in New York and: (a) in relation to any date for payment or purchase of Sterling, London; (b) in relation to any date for payment or purchase of Yen, Tokyo; (c) in relation to any date for payment or purchase of euro, any TARGET Day; or (d) in relation to any date for payment or purchase of Swiss Francs, Zurich.

“Capitalized Lease” of any Person shall mean any lease or other arrangement conveying the right to use real or personal property where the obligations for Rentals are required to be capitalized on a balance sheet of the lessee in accordance with GAAP.

“Capitalized Rentals” of any Person shall mean, as of the date of any determination thereof, the capitalized amount of all Rentals due and to become due under all Capitalized Leases of such Person, as lessee, reflected as a liability on the balance sheet of such Person.

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“Cash Equivalents” shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), and (ii) time deposits, certificates of deposit or deposits in the interbank market of any commercial bank of recognized standing organized under the laws of the United States of America, any state thereof or any foreign jurisdiction having capital and surplus in excess of $500,000,000, and rated at least A or the equivalent thereof by S&P in respect of (ii) above, in each case having maturities of less than three months from the date of acquisition.

“Change of Control” shall mean, the occurrence of any of the following events:

(i)any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause (i) such person shall be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the Parent’s voting stock;

(ii)the replacement of a majority of the Board of Directors of the Parent over a two-year period from the directors who constituted the Board of Directors of the Parent at the beginning of such period, and such replacement shall not have been approved by a vote of at least a majority of the Board of Directors of the Parent then still in office who either were members of such Board of Directors at the beginning of such period or whose election as members of such Board of Directors was previously so approved;

(iii)the adoption of a plan relating to the Parent’s liquidation or dissolution; or

(iv)the Parent merges or consolidates with or into another Person or another Person merges with or into the Parent, or the sale of all or substantially all the Parent’s assets (determined on a consolidated basis) to another Person other than a transaction following which (A) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the Parent’s voting stock immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the voting stock of the surviving Person in such merger or consolidation transaction immediately after such transaction and (B) in the case of a sale of assets transaction, each transferee becomes an obligor in respect of the debt securities and a Subsidiary of the transferor of such assets.

“Closing Date Assets” shall mean assets owned, directly or indirectly by the Borrowers and their Subsidiaries as of December 31, 2005 other than “Investments in Joint Ventures” and “Intangible Assets”, as reflected on OSG’s consolidated balance sheet as at such date; provided that on any date for the determination thereof, (i) current assets shall be deemed to be Closing Date Assets to the extent the aggregate Book Value thereof on such date is $390,000,000 or less, (ii) assets that are not wholly-owned by the Borrowers or their Subsidiaries shall be valued by multiplying the Book Value of such assets by the ownership percentage of the

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Borrowers or their Subsidiaries in such asset and (iii) following the Initial Borrowing Date with the prior written consent of the Administrative Agent (which consent will not be unreasonably withheld or delayed), OSG may substitute the Book Value of Closing Date Assets with the Book Value of Substitute Assets for purposes of determining compliance with Section 9.04(b). On the Effective Date, Closing Date Assets include, without limitation, the vessels listed on Schedule VII hereto.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.  Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor.

“Commitment” shall mean, for each Lender, the amount set forth opposite such Lender’s name in Schedule I hereto as the same may be (x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.12 or 13.04(b).

“Commitment Commission” shall have the meaning provided in Section 3.01(a).

“Contingent Obligations” shall mean, as to any Person, any obligation of such Person guaranteeing or intending to guarantee any Indebtedness of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such Indebtedness or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such Indebtedness or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such Indebtedness of the ability of the primary obligor to make payment of such Indebtedness or (d) otherwise to assure or hold harmless the owner of such Indebtedness against loss in respect thereof, provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business.  The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the Indebtedness in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.

“Credit Documents” shall mean this Agreement and each Note.

“Credit Event” shall mean the making of any Loan or the issuance of any Letter of Credit.

“Credit Party” shall mean the Borrowers and any other Subsidiary of the Parent which at any time executes and delivers any Credit Document.

“Default” shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.

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“Default Rate” shall have the meaning set forth in Section 1.07(c).

“Defaulting Lender” shall mean any Lender with respect to which a Lender Default is in effect.

“Derivatives Obligations” shall mean, as to any Person, any obligation of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions.

“Dollar Equivalent” shall mean, at any time for the determination thereof, with respect to an amount of an Alternate Currency (or another foreign currency), the amount of Dollars which could be purchased with such amount of such Alternate Currency (or such other foreign currency, as applicable) at the spot exchange rate therefor as quoted by the Administrative Agent as of 11:00 A.M. (Local Time) on the date two Business Days prior to the date of any determination thereof for purchase on such date; provided, however, that for purposes of (i) determining compliance with Sections 1.01(a), 1.01(b), 2.01(c), 4.01 and 4.02(a) and (ii) calculating Fees pursuant to Section 3.01, the Dollar Equivalent of any amounts denominated in (or with respect to) an Alternate Currency shall be revalued on a monthly basis using the spot exchange rates therefor as quoted in the Wall Street Journal (or, if same does not provide such exchange rates, on such other basis as is satisfactory to the Administrative Agent) on the first Business Day of each calendar month, although if, at any time during a calendar month, the Aggregate RL Exposure (for the purposes of the determination thereof, using the Dollar Equivalent as recalculated based on the spot exchange rate therefor as quoted in the Wall Street Journal (or, if same does not provide such exchange rates, on such other basis as is satisfactory to the Administrative Agent) on the respective date of determination pursuant to this exception) would exceed 85% of the Total Commitment as then in effect, then at the discretion of the Administrative Agent or at the request of the Required Lenders, the Dollar Equivalent shall be reset based upon the spot exchange rates on such date as quoted in the Wall Street Journal (or, if same does not provide such exchange rates, on such other basis as is satisfactory to the Administrative Agent), which rates shall remain in effect until the first Business Day of the immediately succeeding calendar month or such earlier date, if any, as the rate is reset.  Notwithstanding anything to the contrary contained in this definition, at any time that a Default or an Event of Default then exists, the Administrative Agent may revalue the Dollar Equivalent of any amounts outstanding under the Credit Documents in an Alternate Currency in its sole discretion.  The Administrative Agent shall promptly notify OSG and each Lender of each determination of the Dollar Equivalent for each outstanding Alternate Currency Revolving Loan.

“Dollar Revolving Loan” shall mean all Revolving Loans incurred in Dollars.

“Dollars” and the sign “$” shall each mean lawful money of the United States.

“Drawing” has the meaning provided in Section 2.04(b).

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“Effective Date” shall have the meaning provided in Section 13.10.

“Eligible Transferee” shall mean and include a commercial bank, insurance company, financial institution, fund or other Person which regularly purchases interests in loans or extensions of credit of the types made pursuant to this Agreement, any other Person which would constitute a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act as in effect on the Effective Date or other “accredited investor” (as defined in Regulation D of the Securities Act).

“EMU Legislation” shall mean the legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency.

“Environmental Affiliate” shall mean any person or entity whose liability for Environmental Claims has been assumed by contract or operation of law by OSG or any of the Subsidiaries.

“Environmental Approvals” shall have the meaning set forth in Section 7.13(b).

“Environmental Claim” shall have the meaning set forth in Section 7.13(c).

“Environmental Law” shall have the meaning set forth in Section 7.13(a).

“Environmental Release” shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration into the environment.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.  Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

“ERISA Affiliate” shall mean a trade or business (whether or not incorporated) which is under common control with any Borrower within the meaning of Sections 414(b), (c), (m) or (o) of the Code.

“ERISA Group” shall mean OSG and its Subsidiaries.

“Event of Default” shall have the meaning provided in Section 10.

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

“Facing Fee” shall have the meaning provided in Section 3.01(c).

“Fair Market Value” shall mean, in respect of any vessel, the average of two sets of appraised values of such vessel as determined by two independent brokers chosen from a list of brokers to be agreed, such vessel to be valued on a stand alone basis, free and clear of any liens, charters or other encumbrances and with no value given to any pooling arrangements.  One

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broker shall be selected by the Borrowers and one broker shall be selected by the Administrative Agent.  No appraisal shall be dated more than 30 days prior to the date as of which the relevant calculation or determination is made or required to be made pursuant to this Agreement.

“Federal Funds Rate” shall mean, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 11:00 A.M. (New York time) on such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion.

“Final Maturity Date” shall mean the seventh anniversary of the Effective Date.

“Financial Covenants” shall mean the covenants described in Sections 9.07, 9.08 and 9.09.

“Funded Indebtedness” shall mean, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness (including the Loans) of OSG and its Subsidiaries on a consolidated basis.

“GAAP” means, at any time, generally accepted accounting principles in the United States, except that (so long as the Statement of Financial Accounting Standards No. 94 (or any substantially similar successor statement) is in effect), with respect to the financial statements of OSG and its Subsidiaries, the failure to consolidate Non-Recourse Subsidiaries shall be deemed to be in accordance with such principles.

“Hazardous Materials” shall mean:  (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or substances defined as or included in the definition of “hazardous substances,” “hazardous waste,” “hazardous materials,” “extremely hazardous substances,” “restricted hazardous waste,” “toxic substances,” “toxic pollutants,” “contaminants,” or “pollutants,” or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority under Environmental Laws.

“Indebtedness” shall mean, as to any Person, without duplication, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (ii) the maximum amount available to be drawn under all letters of credit, bankers’ acceptances and similar obligations issued for the account of such Person and all unpaid drawings in respect of such letters of credit, bankers’ acceptances and similar obligations, (iii) all indebtedness of the types described in clause (i), (ii), (iv), (v) or (vi) of this definition secured by any Lien on any property owned by such Person, whether or not such indebtedness has been assumed by such Person (provided that, if the Person has not assumed or otherwise become liable in respect of such indebtedness, such indebtedness shall be deemed to be in an amount

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equal to the fair market value of the property to which such Lien relates as determined in good faith by such Person), (iv) the aggregate amount of all Capitalized Rentals of such Person, (v) all Contingent Obligations of such Person, and (vi) all obligations under any interest rate protection agreement, any other hedging agreement or under any similar type of agreement.  Notwithstanding the foregoing, Indebtedness shall not include (a) Non-Recourse Debt or (b) trade payables and accrued expenses incurred by any Person in accordance with customary practices and in the ordinary course of business of such Person.

“Initial Borrowing Date” shall mean the date occurring on or after the Effective Date on which the initial Borrowing of Loans hereunder occurs.

“Intangible Assets” shall mean, as of the date of any determination thereof, goodwill, patents, trade names, trademarks, copyrights, franchises, and such other assets as are properly classified as “intangible assets” in accordance with GAAP, plus unamortized debt issuance costs.

“Interest Determination Date” shall mean, with respect to any Revolving Loan, the second Business Day prior to the commencement of any Interest Period relating to such Revolving Loan, unless market practice differs in the relevant interbank market for an Alternative Currency in which case the Interest Determination Date for that Alternate Currency will be determined by the Administrative Agent in accordance with the market practice of such relevant interbank market.

“Interest Period” shall have the meaning provided in Section 1.08.

“Investments” shall mean all investments, regardless of the form of consideration paid therefor, directly or indirectly in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or securities or by loan, advance, capital contribution or otherwise; provided, however, that “Investments” shall not mean or include routine investments in property to be used or consumed in the ordinary course of business.

“ISM Code” shall mean the International Safety Management Code for the Safe Operating of Ships and for Pollution Prevention constituted pursuant to Resolution A.741(18) of the International Maritime Organization and incorporated into the Safety of Life at Sea Convention.

“ISPS Code” shall mean the International Ship and Port Facility Code adopted by the International Maritime Organization at a conference in December 2002 and incorporated into the Safety of Life at Sea Convention and, in each case, shall include any amendments or extensions thereto and any regulation issued pursuant thereto.

“Issuing Lender” shall mean DnB NOR Bank ASA, New York Branch and any Lender (which, for purposes of this definition, also shall include any banking affiliate of any Lender which has agreed to issue Letters of Credit under this Agreement) which at the request of the Borrowers and with the consent of the Administrative Agent (which consent shall not be unreasonably withheld) agrees, in such Lender’s sole discretion, to become an Issuing Lender for the purpose of issuing Letters of Credit pursuant to Section 2.01.

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“Joint Venture” means at any date any person (other than a Subsidiary of OSG) in which OSG or any Subsidiary has an ownership interest or profits or loss which would be accounted for in the consolidated financial statements of OSG and its consolidated Subsidiaries by the equity method if such statements were prepared as of such date.

“Lender” shall mean each financial institution listed on Schedule I, as well as any Person which becomes a “Lender” hereunder pursuant to Section 1.13 or 13.04(b).

“Lender Default” shall mean (i) the refusal (which has not been retracted) or other failure (which has not been cured) of a Lender to make available its portion of any Borrowing required to be made in accordance with the terms of this Agreement as then in effect or (ii) a Lender having notified in writing the Borrowers and/or the Administrative Agent that it does not intend to comply with its obligations under Sections 1.01 or 2.03.

“Letter of Credit” shall have the meaning provided in Section 2.01(a).

“Letter of Credit Fee” shall have the meaning provided in Section 3.01(b).

“Letter of Credit Outstandings” shall mean, at any time, the sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the amount of all Unpaid Drawings.

“Letter of Credit Request” shall have the meaning provided in Section 2.02(a).

“LIBOR Rate” shall mean, with respect to any Interest Period and any Loan, the rate per annum determined by the Administrative Agent to be equal to the rate of interest for deposits in the Permitted Currency of the relevant Loan for a period equal to the number of days in such Interest Period which appears as of 11:00 A.M. (London time) on the LIBOR Reference Date for such Interest Period, as displayed on page LIBOR01 of the Reuters screen (or such other page which may replace such page) in the case of United States Dollars, Euro, British Pound Sterling or Japanese Yen or page LIBOR02 of the Reuters screen (or such other page which may replace such page) in the case of Swiss Francs, on such system or any other system of the information vendor being designated by the British Bankers’ Association to calculate the BBA Interest Settlement Rate (as defined in the British Bankers’ Association Recommended Terms and Conditions dated August 1985) or (ii) if no rate is so displayed at such time, LIBOR shall be equal to the arithmetic mean (rounded upwards if necessary to four decimal places) of the rates respectively quoted to the Administrative Agent by each of the reference banks chosen from time to time by the British Bankers’ Association for the purpose of establishing interest settlement rates as the offered rates for deposits of the relevant Permitted Currency in an amount approximately equal to the amount in relation to which LIBOR is to be determined for a period equivalent to such Interest Period to prime banks in the London interbank market at or about 11:00 A.M. (London time) on the LIBOR Reference Date for such Interest Period.

“LIBOR Reference Date” shall mean the day on which banks in the London interbank market generally will provide quotations for deposits in the relevant Permitted Currency.

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“Lien” shall mean, with respect to any asset, any interest in such asset securing an obligation owed to, or a claim by, a Person other than the owner of the asset, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest or lien arising from a mortgage, encumbrance, pledge, conditional sale, title retention agreement or trust receipt or a lease, consignment or bailment for security purposes or any arrangement having substantially the same economic effect as any of the foregoing.  The term “Lien” shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances (including, with respect to stock, any purchase options or calls, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements) affected property.  For the purposes of this Agreement, OSG or any of its Subsidiaries shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, Capitalized Lease or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes and such retention or vesting shall constitute a Lien.

“LNG” shall mean liquefied natural gas.

“Loan” shall mean each Revolving Loan and each Swingline Loan.

“Majority Lenders” shall mean, at any time, Lenders the sum of whose outstanding Commitments at such time (or, after the termination thereof, outstanding Revolving Loans (or, in the case of Alternate Currency Revolving Loans, the Dollar Equivalent thereof) and Percentages of (x) outstanding Swingline Loans at such time and (y) Letter of Credit Outstandings at such time) represents an amount greater than 50% of the sum of all outstanding Commitments in effect at such time (or, after the termination thereof, the sum of then total outstanding Revolving Loans (or, in the case of Alternate Currency Revolving Loans, the Dollar Equivalent thereof) (of Lenders and the aggregate Percentages of all Lenders of the total outstanding Swingline Loans and Letter of Credit Outstandings at such time).

“Mandatory Borrowing” shall have the meaning provided in Section 1.01(c).

“Margin Stock” shall have the meaning provided in Regulation U.

“Material Adverse Change” shall mean the occurrence of an event or condition which (a) materially impairs the ability of OSG and its Subsidiaries to meet or perform any of their obligations with regard to (i) this Agreement and the financing arrangements established in connection therewith or (ii) any of their respective other obligations that are material to OSG and its Subsidiaries considered as a whole or (b) materially impairs the rights of or benefits or remedies available to the Lenders under this Agreement.

“Material Financial Obligations” shall mean a principal or face amount of Indebtedness (in the case of Derivatives Obligations, determined in respect of any counterparty on a net basis), in each case, of OSG and/or of one or more of its Subsidiaries, and arising in one or more related or unrelated transactions, exceeding in the aggregate $30,000,000 (or its equivalent in any other currency).

“Material Subsidiary” shall mean, at any date, each of the following: (i) any Subsidiary of OSG (other than OSG Bulk and OSG International) which owns, leases or charters

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any vessel on such date and/or (ii) any Subsidiary or Subsidiaries of OSG the assets of which, individually or in the aggregate, had an aggregate book value (net of depreciation) as of the date of the consolidated balance sheet of OSG and its Subsidiaries most recently delivered or required to be delivered to the Administrative Agent under this Agreement prior to such date, in excess of the lesser of (x) $69,000,000 and (y) 2% of the aggregate Book Value (net of depreciation)  of all assets of OSG and its Subsidiaries as of the date of such balance sheet.

“Materials of Environmental Concern” shall have the meaning set forth in Section 7.13(a) herein.

“Maximum Swingline Amount” shall mean $100,000,000.

“Minimum Borrowing Amount” shall mean (i) for Revolving Loans, $10,000,000 (using the Dollar Equivalent thereof in the case of Alternate Currency Revolving Loans) and (ii) for Swingline Loans, $5,000,000.

“Modified Required Lenders” shall mean, at any time, Lenders the sum of whose outstanding Commitments at such time (or, after the termination thereof, outstanding Revolving Loans (or, in the case of Alternate Currency Revolving Loans, the Dollar Equivalent thereof) and Percentages of (x) outstanding Swingline Loans at such time and (y) Letter of Credit Outstandings at such time) represents an amount greater than 85% of the sum of all outstanding Commitments in effect at such time (or, after the termination thereof, the sum of then total outstanding Revolving Loans (or, in the case of Alternate Currency Revolving Loans, the Dollar Equivalent thereof) (of Lenders and the aggregate Percentages of all Lenders of the total outstanding Swingline Loans and Letter of Credit Outstandings at such time).

“Moody’s” shall mean Moody’s Investors Service, Inc. and its successors.

“Multiemployer Plan” shall mean a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA) to which any Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions or has within any of the preceding five plan years made or accrued an obligation to make contributions.

“Multiple Employer Plan” shall mean an employee benefit plan other than a Multiemployer Plan, subject to Title IV of ERISA to which a Borrower or ERISA Affiliate, and one or more employers other than a Borrower or ERISA Affiliate, is making or accruing an obligation to make contributions or, in the event that any such plan has been terminated, to which a Borrower or ERISA Affiliate made or accrued an obligation to make contributions during any of the five plan years preceding the date of termination of such plan.

“NAIC” shall mean the National Association of Insurance Commissioners (and its successors from time to time).

“Net Worth” shall mean, for OSG and its Subsidiaries on a consolidated basis, the sum of capital stock, capital in excess of par or stated value of shares of its capital stock, retained earnings and any other account which, in accordance with GAAP, constitutes stockholders’ equity, but excluding any treasury stock.

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“Non-Defaulting Lender” shall mean and include each Lender other than a Defaulting Lender.

“Non-Recourse Debt” shall mean Indebtedness of any Subsidiary of OSG (determined without giving effect to the last sentence of the definition of “Subsidiary”) (i) that is not guaranteed by OSG or any other Subsidiary, (ii) that is not secured by a lien on any asset of OSG or any other Subsidiary and (iii) with respect to which Indebtedness or Subsidiary none of OSG or any other Subsidiary has any express obligation or has written any instrument or letter indicating its support for such Indebtedness or Subsidiary; provided that Indebtedness of such Subsidiary shall constitute Non-Recourse Debt only if OSG shall have given the Lenders, through the Administrative Agent, written notice at least 20 days prior to the incurrence, issuance, assumption or guarantee thereof (or, in the case of Indebtedness of a Person to be acquired by such Subsidiary, prior to the time of such acquisition).

“Non-Recourse Subsidiaries” shall mean, at any time, a Subsidiary of OSG (determined without giving effect to the last sentence of the definition of “Subsidiary”) (i) having no Indebtedness at such time (other than Non-Recourse Debt) and (ii) as to which an officer of OSG has, prior to the issuance, incurrence or assumption of any Non-Recourse Debt by such Subsidiary, delivered a certificate to the Administrative Agent certifying that such Subsidiary is a Non-Recourse Subsidiary in accordance with the terms of this Agreement.

“Note” shall mean each Revolving Note and the Swingline Note.

“Notice of Borrowing” shall have the meaning provided in Section 1.03.

“Notice Office” shall mean the office of the Administrative Agent located at 200 Park Avenue, 31st Floor, New York, New York 10166, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto.

“Obligations” shall mean all amounts owing by the Borrowers or any of them to the Administrative Agent, any Lender, each Issuing Lender or the Swingline Lender pursuant to the terms of this Agreement or any other Credit Document.

“OSG” shall have the meaning provided in the first paragraph of this Agreement.

“OSG Bulk” shall have the meaning provided in the first paragraph of this Agreement.

“OSG International” shall have the meaning provided in the first paragraph of this Agreement.

“OSG Taxes” shall have the meaning provided in Section 7.08.

“Other Agents” shall have the meaning provided in Section 12.10.

“Outstanding Indebtedness” shall have the meaning provided in Section 5.06.

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“Overnight Euro Dollar Offered Rate” shall mean the “ask” rate as quoted in the interbank market at 11:00 A.M. New York time.  This rate will appear in the Reuters system on page PREB; if no such rate appears on such page for whatever reason, USF= on the Reuter Kobra system will be used in lieu thereof.

“Parent” shall have the meaning provided in the first paragraph of this Agreement.

“Participant” shall have the meaning provided in Section 2.03(a).

“PATRIOT Act” shall have the meaning provided in Section 13.21.

“Payment Date” shall mean the last Business Day of each March, June, September and December, commencing with March 2006.

“Payment Office” shall mean the office of the Administrative Agent located at 200 Park Avenue, 31st Floor, New York, New York 10166, with respect to Alternate Currency Revolving Loans such other office as the Administrative Agent may designate, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto.

“PBGC” shall have the meaning set forth in Section 8.01(h).

“Percentage” of any Lender at any time shall mean a fraction (expressed as a percentage) the numerator of which is the Commitment of such Lender at such time and the denominator of which is the Total Commitment at such time, provided that if the Percentage of any Lender is to be determined after the Total Commitment has been terminated, then the Percentages of the Lenders shall be determined immediately prior (and without giving effect) to such termination.

“Permitted Currencies” shall mean each Alternate Currency and Dollars.

“Permitted Liens” shall have the meaning provided in Section 9.01.

“Person” shall mean an individual, partnership, corporation, limited liability company, business trust, bank, trust company, joint venture, association, joint stock company, trust or other unincorporated organization, whether or not a legal entity, or any government or agency or political subdivision thereof.

“Plan” shall mean any employee benefit plan (other than a Multiemployer Plan or a Multiple Employer Plan) covered by Title IV of ERISA or Section 302 of ERISA.

“Recourse Subsidiaries” shall mean all Subsidiaries of OSG other than Non-Recourse Subsidiaries.

“Refinancing” shall have the meaning provided in Section 5.06.

“Register” shall have the meaning provided in Section 13.17.

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“Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements.

“Regulation T” shall mean Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.

“Regulation U” shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.

“Regulation X” shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.

“Rentals” shall mean and include as of the date of any determination thereof all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by a Person, as lessee or sublessee under a lease of real or personal property (excluding (i) fixed payments on any items of personal property involving rentals of less than $10,000 per month each and $50,000 per month in the aggregate), and (ii) hire and other amounts payable under any time charter of a vessel for a remaining period less than 12 months, including any optional extensions or renewals) but shall be exclusive of any amounts required to be paid by such Person, directly or indirectly (whether or not designated as rents or additional rents), on account of maintenance, repairs, insurance, taxes and similar charges incurred by such lessee or sublessee.  Fixed rents under any so-called “percentage leases” shall be computed solely on the basis of a minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues.

“Replaced Lender” shall have the meaning provided in Section 1.12.

“Replacement Lender” shall have the meaning provided in Section 1.12.

“Required Lenders” shall mean, at any time, Lenders the sum of whose outstanding Commitments at such time (or, after the termination thereof, outstanding Revolving Loans (or, in the case of Alternate Currency Revolving Loans, the Dollar Equivalent thereof) and Percentages of (x) outstanding Swingline Loans at such time and (y) Letter of Credit Outstandings at such time) represents an amount greater than 66 2/3% of the sum of all outstanding Commitments in effect at such time (or, after the termination thereof, the sum of then total outstanding Revolving Loans (or, in the case of Alternate Currency Revolving Loans, the Dollar Equivalent thereof) (of Lenders and the aggregate Percentages of all Lenders of the total outstanding Swingline Loans and Letter of Credit Outstandings at such time).

“Revolving Loan” shall have the meaning provided in Section 1.01(a).

“Revolving Note” shall have the meaning set forth in Section 1.05(a)(i).

“S&P” shall mean Standard & Poor’s Rating Services, a division of the McGraw-Hill Companies, Inc., and its successors.

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“Sale and Leaseback Transaction” shall mean any arrangement with any Person (not including OSG or any Subsidiary) providing for the leasing by OSG or a Subsidiary for a period, including renewals, in excess of three years of any asset which has been or is to be sold or transferred more than 180 days after the acquisition or occupancy thereof or the completion of construction and commencement of full operation thereof, whichever is later, by OSG or any Subsidiary to such Person.

“Scheduled Commitment Reduction” shall have the meaning provided in Section 3.03(c).

“Scheduled Commitment Reduction Date” shall have the meaning provided in Section 3.03(c).

“Secured Debt” shall mean (i) all Indebtedness of OSG and its Subsidiaries which is secured by a Lien on any of the property or assets of OSG or any of the Subsidiaries and (ii) Indebtedness incurred or guaranteed by any Subsidiary of a Borrower that is not a Borrower.  The Book Value of the assets securing the Indebtedness in clause (ii) above, shall be deemed to be the lesser of two times the amount of such Indebtedness and the aggregate Book Value of the assets of such Subsidiary which constitute Unencumbered Tangible Assets.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Shipping and Related Businesses” shall mean any one or all of the following:  owning, chartering, leasing, crewing, navigating, managing, supplying or operating or repairing commercial vessels of all kinds, including but not limited to cargo ships, liners, container ships, passenger vessels, tugs, barges and ferries; owning, operating or managing transportation assets ancillary to or in furtherance of the transportation of freight and passengers by water; owning, operating or managing terminals and other facilities of any kind incidental or ancillary to or in furtherance of the transportation of freight and passengers by water, and owning, managing or operating terminals, docks, piers, quays, wharves, dry docks, storage facilities and port facilities incidental or ancillary to or in furtherance of the transportation of freight and passengers by water.

“Solvent” shall mean with respect to any Person, as of any date of determination, (a) the amount of the “present fair saleable value” of the assets of such Person will, as of such date, exceed the amount of all liabilities of such Person, contingent or otherwise, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature.  For purposes of this definition, (i) ”debt” means liability on a “claim”, and (ii) ”claim” means (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (y) right to an equitable remedy for breach of performance if such breach gives rise

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to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

“Stated Amount” of each Letter of Credit shall, at any time, mean the maximum amount available to be drawn thereunder (in each case determined without regard to whether any conditions to drawing could then be met).

“Subsidiary” shall mean any corporation, limited liability company, partnership or other entity of which more than 50% (by number of votes having ordinary voting power) is beneficially owned or controlled, directly or indirectly, by OSG and/or one or more other Subsidiaries of OSG.  For purposes of the Credit Agreement, Non-Recourse Subsidiaries shall not constitute Subsidiaries of OSG.

“Substitute Assets” shall mean any assets acquired by the Borrowers and their Subsidiaries after the Effective Date, which are of equal or greater Book Value to the Closing Date Assets which are being substituted for by such Substitute Assets and designated by OSG as Substitute Assets.  Substitute Assets that are not wholly-owned shall be valued by multiplying the Book Value of such assets by the percentage such assets are owned by the Borrowers on their Subsidiaries.

“Swingline Expiry Date” shall mean that date which is five Business Days prior to the Final Maturity Date.

“Swingline Lender” shall mean DnB NOR Bank ASA, New York Branch, in its capacity as Swingline Lender hereunder.

“Swingline Loan” shall have the meaning provided in Section 1.01(b).

“Swingline Note” shall have the meaning provided in Section 1.05(a)(ii).

“Tangible Assets” shall mean for OSG and its Subsidiaries on a consolidated basis, the Book Value of all such Persons’ assets determined in accordance with GAAP (less depreciation, depletion and other properly deductible valuation reserves) after deducting Intangible Assets therefrom.

“Tangible Net Worth” shall mean for OSG and its Subsidiaries on a consolidated basis, Net Worth on such date less the amount of all Intangible Assets included therein.  For the purposes of determining Tangible Net Worth pursuant to this definition, the effect, if any, of cumulative foreign currency translation adjustments calculated in accordance with GAAP and set forth in the stockholders’ equity section of the financial statements shall be excluded.

“TARGET” means Trans-European Automated Real-time Gross Settlement Express Transfer payment system.

“TARGET Day” means any day on which TARGET is open for the settlement of payments in euro.

“Tax Benefit” shall have the meaning provided in Section 4.04(c).

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“Tax Returns” shall have the meaning provided in Section 7.08.

“Taxes” shall have the meaning provided in Section 4.04(a).

“Termination Event” shall mean (i) a “reportable event”, as such term is defined in Section 4043 of ERISA, (ii) the withdrawal of any Borrower or ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a “substantial employer” as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by any Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, (iii) the filing of a notice of intent to terminate a Plan under Section 4041 of ERISA or the termination or the treatment of a Multiemployer Plan amendment as a termination under Section 4041A of ERISA, (iv) the institution of proceedings to terminate a Plan or a Multiemployer Plan or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan.

“Total Assets” shall mean for OSG and its Subsidiaries on a consolidated basis, the Book Value of all such Persons’ assets determined in accordance with GAAP (less depreciation, depletion and other properly deductible valuation reserves).

“Total Capitalization” shall mean the sum of Funded Indebtedness and Net Worth.

“Total Commitment” shall mean, at any time, the sum of the Commitments of the Lenders at such time.

“Total Unutilized Commitment” shall mean, at any time, the sum of the Unutilized Commitments of the Lenders at such time less the aggregate principal amount of all Swingline Loans outstanding at such time.

“Tranche” shall mean the respective facility and commitments utilized in making Loans hereunder, with there being two separate Tranches, i.e., Revolving Loans and Swingline Loans.

“UCC” shall mean the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction.

“Unencumbered Tangible Assets” shall mean Tangible Assets (excluding the Book Value of any assets of any Subsidiaries, the shares or stock or any evidence of Indebtedness of which have been pledged to secure any obligation), less the sum of (without duplication) (a) Attributable Debt and (b) the Book Value of any assets of OSG and any Subsidiary which have become or have agreed to become subject to a Lien securing any Secured Debt.

“United States” and “U.S.” shall each mean the United States of America.

“Unpaid Drawing” shall have the meaning provided in Section 2.04(a).

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“Unsecured Debt” shall mean, as of the date of any determination thereof, all Indebtedness of OSG and its Subsidiaries other than Secured Debt.

“Unutilized Commitment” shall mean, with respect to any Lender, at any time, an amount equal to such Lender’s Commitment at such time, less the sum of (i) the aggregate principal amount of Revolving Loans made by such Lender then outstanding at such time (for this purpose using the Dollar Equivalent of all Alternate Currency Revolving Loans) and (ii) the Percentage of such Lender’s Letter of Credit Outstandings.

“U.S. Borrower” shall mean any Borrower that is a United States Person (as such term is defined in Section 7701(a)(30) of the Code).

“Withdrawal Liability” has the meaning given to such term under Part 1 of Subtitle E of Title IV of ERISA.

SECTION 12.  Agency Provisions.

12.01  Appointment.  The Lenders hereby designate DnB NOR Bank ASA, New York Branch, as Administrative Agent to act as specified herein and in the other Credit Documents.  Each Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Agents to take such action on its behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Agents by the terms hereof and thereof and such other powers as are reasonably incidental thereto.  The Agents may perform any of its duties hereunder by or through its respective officers, directors, agents, employees or affiliates and, may assign from time to time any or all of its rights, duties and obligations hereunder to any of its banking affiliates.

12.02  Nature of Duties.  The Agents shall have no duties or responsibilities except those expressly set forth in this Agreement.  None of the Agents nor any of their respective officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by it or them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by such Person’s gross negligence or willful misconduct (any such liability limited to the applicable Agent to whom such Person relates).  The duties of each of the Agents shall be mechanical and administrative in nature; none of the Agents shall have by reason of this Agreement or any other Credit Document any fiduciary relationship in respect of any Lender or the holder of any Note; and nothing in this Agreement or any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon any Agents any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein.

12.03  Lack of Reliance on the Agents.  Independently and without reliance upon the Agents, each Lender and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Borrowers and their respective Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith

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and (ii) its own appraisal of the creditworthiness of the Borrowers and their respective Subsidiaries and, except as expressly provided in this Agreement, none of the Agents shall have any duty or responsibility, either initially or on a continuing basis, to provide any Lender or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter.  None of the Agents shall be responsible to any Lender or the holder of any Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of the Borrowers and their respective Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of the Borrowers and their respective Subsidiaries or the existence or possible existence of any Default or Event of Default.

12.04  Certain Rights of the Agents.  If any of the Agents shall request instructions from the Required Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, the Agents shall be entitled to refrain from such act or taking such action unless and until the Agents shall have received instructions from the Required Lenders (or in the case of Section 3.03(d), the Majority Lenders); and the Agents shall not incur liability to any Person by reason of so refraining.  Without limiting the foregoing, no Lender or the holder of any Note shall have any right of action whatsoever against the Agents as a result of any of the Agents acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders.

12.05  Reliance.  Each of the Agents shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that the applicable Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by the Administrative Agent.

12.06  Indemnification.  To the extent any of the Agents is not reimbursed and indemnified by the Borrowers, the Lenders will reimburse and indemnify the applicable Agents, in proportion to their respective “percentages” as used in determining the Required Lenders (without regard to the existence of any Defaulting Lenders), for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by such Agents in performing their respective duties hereunder or under any other Credit Document, in any way relating to or arising out of this Agreement or any other Credit Document; provided that no Lender shall be liable in respect to an Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s gross negligence or willful misconduct.

12.07  The Administrative Agent in its Individual Capacity.  With respect to its obligation to make Loans under this Agreement, each of the Agents shall have the rights and

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powers specified herein for a “Lender” and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term “Lenders,” “Required Lenders,” “Modified Required Lenders,” “Majority Lenders,” “holders of Notes” or any similar terms shall, unless the context clearly otherwise indicates, include each of the Agents in their respective individual capacity.  Each of the Agents may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Credit Party or any Affiliate of any Credit Party as if it were not performing the duties specified herein, and may accept fees and other consideration from any of the Borrowers or any other Credit Party for services in connection with this Agreement and otherwise without having to account for the same to the Lenders.

12.08  Holders.  The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent.  Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor.

12.09  Resignation by the Administrative Agent.  (a)  The Administrative Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days’ prior written notice to the Borrowers and the Lenders.  Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (c) and (d) below or as otherwise provided below.

(b)The Required Lenders may replace the Administrative Agent hereunder at any time by giving 15 Business Days’ notice to the Administrative Agent.  Such termination shall take effect upon the appointment of a successor Administrative Agent.

(c)Upon any such notice of resignation by, or the replacement of, the Administrative Agent, the Required Lenders shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrowers.

(d)If a successor Administrative Agent shall not have been so appointed within such 15 Business Day period, the Administrative Agent, with the consent of the Borrowers (which shall not be unreasonably withheld or delayed), shall then appoint a commercial bank or trust company with capital and surplus of not less than $500,000,000 as successor Administrative Agent who shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Lenders appoint a successor Administrative Agent as provided above.

(e)If no successor Administrative Agent has been appointed pursuant to clause (c) or (d) above by the 25th Business Day after the date such notice of resignation or replacement was given by the Administrative Agent, the Administrative Agent’s resignation shall become effective and the Required Lenders shall thereafter perform all the duties of the

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Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above.

12.10  Other Agents.  Notwithstanding any other provision of this Agreement or any provision of any other Credit Document, each of the Documentation Agent, Bookrunners and Lead Arrangers identified on the cover page of this Agreement (the “Other Agents”) are named as such for recognition purposes only, and in their respective capacities as such shall have no powers, duties, responsibilities or liabilities with respect to this Agreement or the other Credit Documents or the transactions contemplated hereby and thereby; it being understood and agreed that each such Other Agent shall be entitled to all indemnification and reimbursement rights in favor of any of the Agents as provided for under Sections 12.06 and 13.01.  Without limitation of the foregoing, none of the Other Agents shall, solely by reason of this Agreement or any other Credit Documents, have any fiduciary relationship in respect of any Lender or any other Person.

SECTION 13.  Miscellaneous.

13.01  Payment of Expenses, etc.  (a)  The Borrowers jointly and severally agree that they shall:  (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of each of the Agents (including, without limitation, the reasonable fees and disbursements of White & Case LLP, counsel to the Administrative Agent and the Lead Arrangers and local counsel) in connection with the preparation, execution and delivery of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein and any amendment, waiver or consent relating hereto or thereto, of the Agents in connection with their respective syndication efforts with respect to this Agreement and of the Agents and each of the Lenders in connection with the enforcement of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein (including, without limitation, the reasonable fees and disbursements of counsel (including in-house counsel) for each of the Agents and for each of the Lenders); (ii) pay and hold each of the Lenders harmless from and against any and all present and future stamp, documentary, transfer, sales and use, value added, excise and other similar taxes with respect to the foregoing matters, the performance or enforcement of any obligations or the exercise of any rights under this Agreement or any other Credit Document, and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) indemnify the Agents and each Lender, and each of their respective affiliates, officers, directors, trustees, employees, representatives and agents from and hold each of them harmless against any and all liabilities, obligations (including removal or remedial actions), losses, damages, penalties, claims, actions, judgments, suits, costs, expenses and disbursements (including reasonable attorneys’ and consultants’ fees and disbursements) incurred by, imposed on or assessed against any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not any of the Agents or any Lender is a party thereto) related to the entering into and/or performance of this Agreement or any other Credit Document or the proceeds of any Loans hereunder or the consummation of any transactions contemplated herein, or in any other Credit Document or the exercise of any of their rights or remedies provided herein or in the other Credit Documents, or (b) the actual or alleged presence of Hazardous Materials on any vessel owned or operated by the Borrowers or their respective Subsidiaries or in the air, surface water or groundwater or on the surface or subsurface

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of any property at any time owned or operated by the Borrowers or any of their respective Subsidiaries, the generation, storage, transportation, handling, disposal or Environmental Release of Hazardous Materials at any location, whether or not owned or operated by the Borrowers or any of their respective Subsidiaries, the non-compliance of any such vessel or property with foreign, federal, state and local laws, regulations, and ordinances (including applicable permits thereunder) applicable to any such vessel or property, or any Environmental Claim asserted against the Borrowers, any of their respective Subsidiaries or any vessel or property at any time owned or operated by the Borrowers or any of their Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of counsel and other consultants incurred in connection with any such investigation, litigation or other proceeding (but excluding any losses, liabilities, claims, damages, penalties, actions, judgments, suits, costs, disbursements or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified).  To the extent that the undertaking to indemnify, pay or hold harmless each of the Agents or any Lender and each of their respective affiliates set forth in the preceding sentence may be unenforceable because it violates any law or public policy, the Borrowers shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law.

(b)The Borrowers also agree not to assert, and hereby waive, any claim for special, indirect, consequential or punitive damages against any Agent, any Lender, any of their Affiliates, or any of their respective officers, directors, trustees, employees, representatives and agents, on any theory of liability arising out of or otherwise relating to this Agreement, any other agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof.

13.02  Right of Setoff.  In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default, each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to any Credit Party or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Lender (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of the Borrowers or any Subsidiary but in any event excluding assets held in trust for any such Person against and on account of the Obligations and liabilities of the Borrowers or such Subsidiary, as applicable, to such Lender under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations purchased by such Lender pursuant to Section 13.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured.

13.03  Notices.  Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telexed, telegraphic or telecopier communication) and mailed, telexed, telecopied or delivered:  if to any Borrower, at such Borrower’s address specified under its signature below; if to any Lender, at its address specified opposite its name on Schedule II below; and if to the Administrative Agent, at its

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Notice Office; or, as to any other Credit Party, at such other address as shall be designated by such party in a written notice to the other parties hereto and, as to each Lender, at such other address as shall be designated by such Lender in a written notice to the Borrowers and the Administrative Agent.  All such notices and communications shall (i) when mailed, be effective three Business Days after being deposited in the mails, prepaid and properly addressed for delivery, (ii) when sent by overnight courier, be effective one Business Day after delivery to the overnight courier prepaid and properly addressed for delivery on such next Business Day, or (iii) when sent by telex or telecopier, be effective when sent by telex or telecopier, except that notices and communications to the Administrative Agent shall not be effective until received by the Administrative Agent.

13.04  Benefit of Agreement.  (a)  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, that (i) no Credit Party may assign or transfer any of its rights, obligations or interest hereunder or under any other Credit Document without the prior written consent of the Lenders, (ii) although any Lender may transfer, assign or grant participations in its rights hereunder, such Lender shall remain a “Lender” for all purposes hereunder (and may not transfer or assign all or any portion of its Commitments hereunder except as provided in Section 13.04(b)) and the transferee, assignee or participant, as the case may be, shall not constitute a “Lender” hereunder and (iii) no Lender shall transfer or grant any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (x) extend the final scheduled maturity of any Loan or Note in which such participant is participating, or reduce the rate or extend the time of payment of interest or Commitment Commission thereon (except (m) in connection with a waiver of applicability of any post-default increase in interest rates and (n) that any amendment or modification to the financial definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (x)) or reduce the principal amount thereof, or increase the amount of the participant’s participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitments shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant’s participation is not increased as a result thereof), or (y) consent to the assignment or transfer by the Borrowers of any of their rights and obligations under this Agreement.  In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto) and all amounts payable by the Borrowers hereunder shall be determined as if such Lender had not sold such participation.

(b)Notwithstanding the foregoing, any Lender (or any Lender together with one or more other Lenders) may (x) assign all or a portion of its Commitment (and related outstanding Obligations hereunder), to its (i) parent company and/or any affiliate of such Lender which is at least 50% owned by such Lender or its parent company or (ii) in the case of any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is managed or advised by the same investment advisor of such Lender or by an Affiliate of such investment advisor or (iii) to one or more Lenders or (y) assign with the consent of OSG as agent for the Borrowers (which consent shall not be unreasonably withheld or delayed and shall not be

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required if a Default or Event of Default then exists) all, or if less than all, a portion equal to at least $7,500,000 in the aggregate for the assigning Lender or assigning Lenders, of such Commitments, hereunder to one or more Eligible Transferees (treating any fund that invests in bank loans and any other fund that invests in bank loans and is managed or advised by the same investment advisor of such fund or by an Affiliate of such investment advisor as a single Eligible Transferee), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Assumption Agreement, provided that (i) at such time Schedule I shall be deemed modified to reflect the Commitments of such new Lender and of the existing Lenders, (ii) new Notes will be issued, at the Borrowers’ expense, to such new Lender and to the assigning Lender upon the request of such new Lender or assigning Lender, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments, (iii) the consent of the Administrative Agent, the Issuing Lender and the Swingline Lender shall be required in connection with any assignment pursuant to preceding clauses (x) and (y) (which consent shall not be unreasonably withheld or delayed), and (iv) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Lender, the payment of a non-refundable assignment fee of $3,000.  At the time of each assignment pursuant to this Section 13.04(b) to a person which is not already a Lender hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall, to the extent legally entitled to do so, provide to the Borrowers the appropriate Internal Revenue Service Forms (and, if applicable, a Section 4.04 Certificate described in Section 4.04(b)).  To the extent of any assignment pursuant to this Section 13.04(b), the assigning Lender shall be relieved of its obligations hereunder with respect to its assigned Commitments (it being understood that the indemnification provisions under this Agreement (including, without limitation, Sections 1.09, 1.10, 2.05, 4.04, 13.01 and 13.06) shall survive as to such assigning Lender).  To the extent that an assignment of all or any portion of a Lender’s Commitments and related outstanding Obligations pursuant to Section 1.12 or this Section 13.04(b) or a change of lending office of a Lender would, at the time of such assignment or change of lending office, result in increased costs under Section 1.09, 1.10 or 4.04 from those being charged by the respective Lender prior to such assignment or change of lending office, then the Borrowers shall not be obligated to pay such increased costs (although the Borrowers shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment or change of lending office).

(c)Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank and, with the consent of the Administrative Agent, any Lender which is a fund may pledge all or any portion of its Notes or Loans to a trustee for the benefit of investors and in support of its obligation to such investors.

13.05  No Waiver; Remedies Cumulative.  No failure or delay on the part of the Administrative Agent or any Lender or any holder of any Note in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between any Borrower or any other Credit Party and the Administrative Agent or any Lender or the holder of any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder.

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The rights, powers and remedies herein or in any other Credit Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Administrative Agent or any Lender or the holder of any Note would otherwise have.  No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or any Lender or the holder of any Note to any other or further action in any circumstances without notice or demand.

13.06  Payments Pro Rata.  (a)  Except as otherwise provided in this Agreement, the Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrowers in respect of any Obligations hereunder, it shall distribute such payment to the Lenders (other than any Lender that has consented in writing to waive its pro rata share of any such payment) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received.

(b)Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker’s lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise), which is applicable to the payment of the principal of, or interest on, the Loans or Commitment Commission, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the respective Credit Party to such Lenders in such amount as shall result in a proportional participation by all the Lenders in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

(c)Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 13.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders.

13.07  Calculations; Computations.  (a)  The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrowers to the Lenders).  In addition, all computations determining compliance with the Financial Covenants and Section 9.04(b), shall utilize accounting principles and policies in conformity with those used to prepare the historical financial statements delivered to the Lenders for the first fiscal year of OSG ended December 31, 2004.  Unless otherwise noted, all references in this Agreement to “generally accepted accounting principles” shall mean generally accepted accounting principles as in effect in the United States.

(b)All computations of interest and Commitment Commission hereunder shall be made on the basis of a year of 360 days (or, in the case of payments in British Pound

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Sterling, 365 days) for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or Commitment Commission are payable.

13.08  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL.  (a)  THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAWS RULES (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE GENERAL OBLIGATIONS LAW).  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  EACH BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED MAIL, POSTAGE PREPAID, TO SUCH BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION.  IF AT ANY TIME DURING WHICH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT REMAINS IN EFFECT, ANY BORROWER DOES NOT MAINTAIN A REGULARLY FUNCTIONING OFFICE IN NEW YORK CITY, IT WILL DULY APPOINT, AND AT ALL TIMES MAINTAIN, AN AGENT IN NEW YORK CITY FOR THE SERVICE OF PROCESS OR SUMMONS, AND WILL PROVIDE TO THE ADMINISTRATIVE AGENT AND THE LENDERS WRITTEN NOTICE OF THE IDENTITY AND ADDRESS OF SUCH AGENT FOR SERVICE OF PROCESS OR SUMMONS; PROVIDED THAT ANY FAILURE ON THE PART OF THE BORROWERS TO COMPLY WITH THE FOREGOING PROVISIONS OF THIS SENTENCE SHALL NOT IN ANY WAY PREJUDICE OR LIMIT THE SERVICE OF PROCESS OR SUMMONS IN ANY OTHER MANNER DESCRIBED ABOVE IN THIS SECTION 13.08 OR OTHERWISE PERMITTED BY LAW.

(b)EACH BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING

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BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

(c)EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

13.09  Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  A set of counterparts executed by all the parties hereto shall be lodged with OSG and the Administrative Agent.

13.10  Effectiveness.  This Agreement shall become effective on the date (the “Effective Date”) on which each Borrower, the Administrative Agent and each of the Lenders who are initially parties hereto shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Administrative Agent or, in the case of the Lenders, shall have given to the Administrative Agent telephonic (confirmed in writing), written or facsimile notice (actually received) at such office that the same has been signed and mailed to it.  The Administrative Agent will give the Borrowers and each Lender prompt written notice of the occurrence of the Effective Date.

13.11  Headings Descriptive.  The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

13.12  Amendment or Waiver; etc.  (a)  Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party thereto and the Required Lenders (or, in the case of Section 3.03(d), the Majority Lenders), provided that no such change, waiver, discharge or termination shall, without the consent of each Lender (other than a Defaulting Lender) (with Obligations being directly affected in the case of following clause (i)) and in the case of the following clause (v), to the extent (in the case of the following clause (v)) that any such Lender would be required to make a Loan in excess of its pro rata portion provided for in this Agreement or would receive a payment or prepayment of Loans or a commitment reduction that (in any case) is less than its pro rata portion provided for in this Agreement, in each case, as a result of any such amendment, modification or waiver referred to in the following clause (v)), (i) extend the final scheduled maturity of any Loan or Note, extend the timing for or reduce the principal amount of any Scheduled Commitment Reduction, or reduce the rate or extend the time of payment of interest on any Loan or Note or Commitment Commission (except in connection with the waiver of applicability of any post-default increase in interest rates or reduce the principal amount thereof (except to the extent repaid in cash), (ii) amend, modify or waive any provision of this Section 13.12, (iii) reduce the percentage specified in the definition of Required Lenders or Majority Lenders (it being understood that, with the consent of the Required Lenders, additional

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extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders and Majority Lenders on substantially the same basis as the extensions of Loans and Commitments are included on the Effective Date), (iv) consent to the assignment or transfer by any Borrower of any of its rights and obligations under this Agreement, or (v) amend, modify or waive Section 1.06 or amend, modify or waive any other provision in this Agreement to the extent providing for payments or prepayments of Loans or reductions in Commitments, in each case, to be applied pro rata among the Lenders entitled to such payments or prepayments of Loans or reductions in Commitments (it being understood that the provision of additional extensions of credit pursuant to this Agreement, or the waiver of any mandatory commitment reduction or any mandatory prepayment of Loans by the Required Lenders shall not constitute an amendment, modification or waiver for purposes of this clause (v)); provided, further, that no such change, waiver, discharge or termination shall (t) increase the Commitments of any Lender over the amount thereof then in effect without the consent of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Commitments shall not constitute an increase of the Commitment of any Lender, and that an increase in the available portion of any Commitment of any Lender shall not constitute an increase in the Commitment of such Lender), (u) without the consent of each Issuing Lender, amend, modify or waive any provision of Section 2 or alter its rights or obligations with respect to Letters of Credit, (v) without the consent of each Agent, amend, modify or waive any provision of Section 12 as same applies to such Agent or any other provision as same relates to the rights or obligations of such Agent or (w) without the consent of the Swingline Lender, amend, modify or waive any provision relating to the rights or obligations of the Swingline Lender.

(b)If, in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by clauses (i) through (iv), inclusive, of the first proviso to Sections 13.12(a), the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then the Borrowers shall have the right, so long as all non-consenting Lenders whose individual consent is required are treated as described in either clauses (A) or (B) below, to either (A) replace each such non-consenting Lender or Lenders (or, at the option of the Borrowers if the respective Lender’s consent is required with respect to less than all Loans (or related Commitments), to replace only the respective Commitments and/or Loans of the respective non-consenting Lender which gave rise to the need to obtain such Lender’s individual consent) with one or more Replacement Lenders pursuant to Section 1.12 so long as at the time of such replacement, each such Replacement Lender consents to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting Lender’s Commitment (if such Lender’s consent is required as a result of its Commitment), and/or repay outstanding Loans and terminate any outstanding Commitments of such Lender which gave rise to the need to obtain such Lender’s consent, in accordance with Sections 4.01(iv), provided that, unless the Commitments are terminated, and Loans repaid, pursuant to preceding clause (B) are immediately replaced in full at such time through the addition of new Lenders or the increase of the Commitments and/or outstanding Loans of existing Lenders (who in each case must specifically consent thereto), then in the case of any action pursuant to preceding clause (B) the Modified Required Lenders (determined before giving effect to the proposed action) shall specifically consent thereto, provided, further, that in any event the Borrowers shall not have the right to replace a Lender, terminate its Commitment or repay its Loans solely as a result of the exercise of such Lender’s

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rights (and the withholding of any required consent by such Lender) pursuant to the second proviso to Section 13.12(a).

13.13  Survival.  All indemnities set forth herein including, without limitation, in Sections 1.09, 1.10, 2.05, 4.04, 13.01 and 13.06 shall, subject to Section 13.15 (to the extent applicable), survive the execution, delivery and termination of this Agreement and the Notes and the making and repayment of the Loans.

13.14  Domicile of Loans.  Each Lender may transfer and carry its Loans at, to or for the account of any office, subsidiary or Affiliate of such Lender.  Notwithstanding anything to the contrary contained herein, to the extent that a transfer of Loans pursuant to this Section 13.14 would, at the time of such transfer, result in increased costs under Section 1.09, 1.10, 2.05 or 4.04 from those being charged by the respective Lender prior to such transfer, then the Borrowers shall not be obligated to pay such increased costs (although, without prejudice to Section 1.11, the Borrowers shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective transfer).

13.15  Limitation on Additional Amounts, etc.  Notwithstanding anything to the contrary contained in Sections 1.09, 1.10, 2.05, 4.04 or 13.01 (but excluding 13.01(b)) of this Agreement, unless a Lender gives notice to the Borrowers that it is obligated to pay an amount under any such Section within one year after the later of (x) the date the Lender incurs the respective increased costs, Taxes, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital or (y) the date such Lender has actual knowledge of its incurrence of the respective increased costs, Taxes, loss, expense or liability, reductions in amounts received or receivable or reduction in return on capital, then such Lender shall only be entitled to be compensated for such amount by the Borrowers pursuant to said Section 1.09, 1.10, 2.05, 4.04 or 13.01 (but excluding 13.01(b)) as the case may be, to the extent the costs, Taxes, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital are incurred or suffered on or after the date which occurs one year prior to such Lender giving notice to the Borrowers that they are obligated to pay the respective amounts pursuant to said Section 1.09, 1.10, 2.05, 4.04 or 13.01 (but excluding 13.01(b)) as the case may be.  This Section 13.15 shall have no applicability to any Section of this Agreement other than said Sections 1.09, 1.10, 2.05, 4.04 and 13.01 (but excluding 13.01(b)).

13.16  Confidentiality.  (a)  Subject to the provisions of clauses (i) and (ii) of this Section 13.16(a), each Lender agrees that it will use its best efforts not to disclose without the prior consent of the Borrowers (other than to its employees, auditors, advisors or counsel or to another Lender if the Lender or such Lender’s holding or parent company or board of trustees in its sole discretion determines that any such party should have access to such information, provided such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Lender) any information with respect to the Borrowers or any of their respective Subsidiaries which is now or in the future furnished pursuant to this Agreement or any other Credit Document, provided that any Lender may disclose any such information (i) as has become generally available to the public other than by virtue of a breach of this Section 13.16(a) by the respective Lender, (ii) as may be required in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar

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organizations (whether in the United States or elsewhere) or their successors, (iii) as may be required in respect to any summons or subpoena or in connection with any litigation, (iv) in order to comply with any law, order, regulation or ruling applicable to such Lender, (v) to the Administrative Agent and (vi) to any prospective or actual transferee or participant in connection with any contemplated transfer or participation of any of the Notes or Commitments or any interest therein by such Lender, provided that such prospective transferee expressly agrees (in writing or by electronic means) to be bound by the confidentiality provisions contained in this Section 13.16.

(b)Each Borrower hereby acknowledges and agrees that each Lender may share with any of its affiliates any information related to such Borrower or any of its Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of such Borrower or its Subsidiaries), provided such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Lender.

13.17  Register.  Each Borrower hereby designates the Administrative Agent to serve as such Borrower’s agent, solely for purposes of this Section 13.17, to maintain a register (the “Register”) on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment and prepayment in respect of the principal amount of the Loans of each Lender.  Failure to make any such recordation, or any error in such recordation shall not affect such Borrower’s obligations in respect of such Loans.  With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor.  The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 13.04(b).  Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Lender and/or the new Lender.  The Borrowers jointly and severally agree to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 13.17, except to the extent caused by the Administrative Agent’s own gross negligence or willful misconduct.

13.18  Judgment Currency.  If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from any Borrower hereunder or under any of the Notes in the currency expressed to be payable herein or under the Notes (the “specified currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the specified currency with such other currency at the Administrative Agent’s New York office on the Business Day preceding that on

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which final judgment is given.  The obligations of each Borrower in respect of any sum due to any Lender or the Administrative Agent hereunder or under any Note shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Lender or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the specified currency with such other currency; if the amount of the specified currency so purchased is less than the sum originally due to such Lender or the Administrative Agent, as the case may be, in the specified currency, the Borrowers agree, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds the sum originally due to any Lender or the Administrative Agent, as the case may be, in the specified currency, such Lender or the Administrative Agent, as the case may be, agrees to remit such excess to such Borrowers.

13.19  Language.  All correspondence, including, without limitation, all notices, reports and/or certificates, delivered by any Credit Party to the Administrative Agent, or any Lender shall, unless otherwise agreed by the respective recipients thereof, be submitted in the English language or, to the extent the original of such document is not in the English language, such document shall be delivered with a certified English translation thereof.

13.20  Waiver of Immunity.  Each Borrower, in respect of itself, each other Credit Party, its and their process agents, and its and their properties and revenues, hereby irrevocably agrees that, to the extent that any Borrower, any other Credit Party or any of its or their properties has or may hereafter acquire any right of immunity from any legal proceedings, whether in the United States, the Republic of the Marshall Islands or elsewhere, to enforce or collect upon the Obligations of any Borrower or any other Credit Party related to or arising from the transactions contemplated by any of the Credit Documents, including, without limitation, immunity from service of process, immunity from jurisdiction or judgment of any court or tribunal, immunity from execution of a judgment, and immunity of any of its property from attachment prior to any entry of judgment, or from attachment in aid of execution upon a judgment, each Borrower, for itself and on behalf of the other Credit Parties, hereby expressly waives, to the fullest extent permissible under applicable law, any such immunity, and agrees not to assert any such right or claim in any such proceeding, whether in the United States, the Republic of the Marshall Islands.

13.21  USA PATRIOT Act Notice.  Each Lender hereby notifies each Credit Party that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub.: 107-56 (signed into law October 26, 2001)) (the “PATRIOT Act”), it is required to obtain, verify, and record information that identifies each Credit Party, which information includes the name of each Credit Party and other information that will allow such Lender to identify each Credit Party in accordance with the PATRIOT Act, and each Credit Party agrees to provide such information from time to time to any Lender.

*     *     *

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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written.

OVERSEAS SHIPHOLDING GROUP, INC.,
	as a Borrower
By:	/s/ Myles Itkin
	Name: Myles Itkin
	Title:	Senior Vice President, Chief Financial Officer and Treasurer
	Address: 666 Third Avenue New York, NY 10017
	Telephone: (212) 578-1942
	Facsimile: (212) 251-1170
With a copy to:
OSG BULK SHIPS, INC.,
	as a Borrower
By:	/s/ Myles Itkin
	Name: Myles Itkin
	Title:		Senior Vice President and Treasurer
	Address: 666 Third Avenue New York, NY 10017
	Telephone: (212) 578-1942
	Facsimile: (212) 251-1170
OSG INTERNATIONAL, INC.,
	as a Borrower
By:	/s/ Myles Itkin
	Name: Myles Itkin
	Title:		Senior Vice President and Treasurer
	Address: 666 Third Avenue New York, NY 10017
	Telephone: (212) 578-1942
	Facsimile: (212) 251-1170

DnB NOR BANK ASA, NEW YORK BRANCH,
	as Administrative Agent
By:	/s/ Nikolai A. Nachamkin
	Name:	Nikolai A. Nachamkin
	Title:	Senior Vice President
By:	/s/ Tor Ivar Hansen
	Name:	Tor Ivar Hansen
	Title:	Assistant Vice President

CITIBANK, N.A.,
	as a Lender
By:	/s/ Charles R. Delamater
	Name:	Charles R. Delamater
	Title:	Managing Director Senior Credit Officer

HSBC BANK USA NATIONAL ASSOCIATION,
	as a Lender
By:	/s/ C J Warner
	Name:	C J Warner
	Title:	Head of Transport, Services & Infrastructure

NORDEA BANK NORGE ASA, GRAND CAYMAN BRANCH,
	as a Lender
By:	/s/ Martin Lunder
	Name:	Martin Lunder
	Title:	Senior Vice President

By:	/s/ Hans Chr. Kjelsrud
	Name:	Hans Chr. Kjelsrud
	Title:	Senior Vice President

SCHEDULE I

COMMITMENTS

Lender	Commitments
CITIBANK, N.A.	$	375,000,000
DnB NOR BANK ASA, NEW YORK BRANCH	$	375,000,000
HSBC BANK USA NATIONAL ASSOCIATION	$	375,000,000
NORDEA BANK NORGE ASA, NEW YORK BRANCH	$	375,000,000
Total	$	1,500,000,000

SCHEDULE II

LENDER ADDRESSES

INSTITUTIONS	ADDRESSES
CITIBANK, N.A.	388 Greenwich Street 23rd Floor New York, NY 10013 Attn: Charles R. Delamator/Elizabeth O’Hagan Telephone:  212-816-5480/5448 Facsimile:  212-816-5429/646-291-1881 Email: charles.r.delamator@citigroup.com elibeth.ohagan@citigroup.com
DnB NOR BANK ASA, NEW YORK BANK	200 Park Avenue, 31st Floor New York, NY 10166 Attn: Nikolai Nachamkin/Tor Ivar Hansen Telephone:  212-618-3863/3856 Facsimile:   212-681-3900 e-mail:         nikolai.nachamkin@dnbnor.no       tor.ivar.hansen@dnbnor.no
HSBC BANK USA NATIONAL ASSOCIATION	425 Fifth Avenue, 5th Floor New York, NY 10018 Attn: Chris Warner/Bryan DeBroka Telephone:  212-525-8868/2581 Facsimile:   212-525-2469 e-mail:         chris.warner@us.hsbc.com       bryan.debroka@us.hsbc.com
NORDEA BANK NORGE ASA, GRAND CAYMAN BRANCH	437 Madison Avenue, 21st Floor New York, NY 10022 Attn: Martin Lunder/Anne Engen Telephone:  212-318-9634/9633 Facsimile:   212-521-4420 e-mail:         martin.lunder@nordea.com       anne.engen@nordea.com

SCHEDULE III

OUTSTANDING INDEBTEDNESS

	Drawn		Undrawn		Total
1Credit Agreement providing for a Senior Revolving Credit Facility of $500,000,000 dated January 14, 2005 between Overseas Shipholding Group, Inc, OSG Bulk Ships, Inc., and OSG International, Inc., as joint and several borrowers, and DnB NOR Bank ASA, New York Branch, as Administrative Agent.	$	199,000,000	$	301,000,000	$	500,000,000
2Credit Agreement providing for a Senior Revolving Credit Facility of $155,000,000 dated November 30, 2004, between Overseas Shipholding Group, Inc, OSG Bulk Ships, Inc., and OSG International, Inc., as joint and several borrowers, and Vereins-Und-Westbank AG, as Administrative Agent.	$	—	$	155,000,000	$	155,000,000
3Credit Agreement providing for a Senior Revolving Credit Facility of $100,000,000 dated July 23, 2004, as amended September 22, 2005, between Overseas Shipholding Group, Inc, OSG Bulk Ships, Inc., and OSG International, Inc., as joint and several borrowers, and DnB NOR Bank ASA, New York Branch, as Administrative Agent.	$	—	$	100,000,000	$	100,000,000
4Credit Agreement providing for a Senior Revolving Credit Facility of $180,000,000 dated October 21, 2003 between Overseas Shipholding Group, Inc, OSG Bulk Ships, Inc., and OSG International, Inc., as joint and several borrowers, and DnB NOR Bank ASA, New York Branch, as Administrative Agent.	$	—	$	180,000,000	$	180,000,000
5Credit Agreement providing for a Senior Revolving Credit Facility of $150,000,000 dated August 20, 2003 between Overseas Shipholding Group, Inc, OSG Bulk Ships, Inc., and OSG International, Inc., as joint and several borrowers, and HSH Nordbank AG, as Agent.	$	—	$	150,000,000	$	150,000,000
6Credit Agreement among Overseas Shipholding Group, Inc, OSG Bulk Ships, Inc., and OSG International, Inc., as joint and several borrowers, and JPMorgan Chase, as Administrative Agent, dated December 12, 2001, as amended January 22, 2002.	$	—	$	200,000,000	$	200,000,000
7Credit Agreement providing for a Senior 364 Day Facility of $45,000,000 dated October 31, 2005 between Overseas Shipholding Group, Inc, OSG Bulk Ships, Inc., and OSG International, Inc., as joint and several borrowers, and DnB NOR Bank ASA, New York Branch, as Lender	$	1,000,000	$	44,000,000	$	45,000,000
	$	200,000,000	$	1,130,000,000	$	1,330,000,000

SCHEDULE IV

EXISTING LIENS

Debtor	Secured Party	Jurisdiction	Collateral
Fifth Aframax Tanker Corp.	Danish Ship Finance A/S (Danmarks Skibskredit A/S)	Marshall Islands	Overseas Shirley
Sixth Aframax Tanker Corp.	Danish Ship Finance A/S (Danmarks Skibskredit A/S)	Marshall Islands	Overseass Josefa Camejo
Seventh Aframax Tanker Corp.	Deutsche Schiffsbank	Marshall Islands	Overseas Fran
Eighth Aframax Tanker Corp.	Deutsche Schiffsbank	Marshall Islands	Overseas Portland
1372 Tanker Corporation	Danish Ship Finance A/S (Danmarks Skibskredit A/S)	Marshall Islands	Overseas Mulan
Alcesmar Ltd	Danish Ship Finance A/S (Danmarks Skibskredit A/S)	Marshall Islands	Overseas Alcesmar
Alcmar Ltd	Danish Ship Finance A/S (Danmarks Skibskredit A/S)	Cyprus	Alcmar
Antigmar Ltd	Danish Ship Finance A/S (Danmarks Skibskredit A/S)	Marshall Islands	Overseas Antigmar
Andromar Ltd	Danish Ship Finance A/S (Danmarks Skibskredit A/S)	Marshall Islands	Overseas Andromar
Ariadmar Ltd	Danish Ship Finance A/S (Danmarks Skibskredit A/S)	Marshall Islands	Overseas Ariadmar

SCHEDULE V

EXISTING INDEBTEDNESS

Borrower(s)	Lender(s)	Governing Agreement	Aggregate Principal Amount		Guarantor(s)
Fifth Aframax Tanker Corp. and Sixth Aframax Tanker Corp. as joint and several borrowers	Danish Ship Finance A/S (Danmarks Skibskredit A/S)	Loan Agreement dated March 22, 2004	$	52,727,274	OSG, OBS, and OIN, jointly and severally
Seventh Aframax Tanker Corp. and Eighth Aframax Tanker Corp.as joint and several borrowers	Deutsche Schiffsbank	Term Loan and Revolving Credit Agreement dated August 20, 2004	66,477,872		OSG, OBS, and OIN, jointly and severally
1372 Tanker Corporation	Danish Ship Finance A/S (Danmarks Skibskredit A/S)	Credit Agreement dated August 1, 2002	40,909,094		OSG, OBS, and OIN, jointly and severally
Alcesmar Ltd, Alcmar Ltd, Antigmar Ltd, Andromar Ltd, and Ariadmar Ltd, as joint and several borrowers	Danish Ship Finance A/S (Danmarks Skibskredit A/S)	Loan Agreement dated January 26, 2005	169,696,970		OSG, OBS, and OIN, jointly and severally
Overseas Shipholding Group, Inc.	Public	Indenture with Chase Manhattan Bank	84,975,000
Overseas Shipholding Group, Inc.	Public	Indenture with Wilmington Trust Company	200,000,000
Overseas Shipholding Group, Inc.	Public	Indenture with Wilmington Trust Company dated March 7, 2003	150,000,000
			$	764,786,210

SCHEDULE VI

ASSOCIATED COSTS RATE

1.The Associated Costs Rate is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the UK Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2.On the first day of each Interest Period (or as soon as possible thereafter) the Administrative Agent shall calculate, as a percentage rate, a rate (the “Additional Cost Rate”) for each Lender, in accordance with the paragraphs set out below.  The Associated Costs Rate will be calculated by the Administrative Agent as a weighted average of the Lenders’ Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.

3.The Additional Cost Rate for any Lender lending from a lending office in a participating member state (as defined in the relevant EMU Legislation) will be the percentage notified by that Lender to the Administrative Agent.  This percentage will be certified by that Lender in its notice to the Administrative Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender’s participation in all Loans made from that lending office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that lending office.

4.The Additional Cost Rate for any Lender lending from a lending office in the United Kingdom will be calculated by the Administrative Agent as follows:

(a)in relation to a Loan denominated in Pounds Sterling:

AB + C(B-D) + E x 0.01per cent. per annum

100-(A+C)

(b)in relation to a Loan in any Currency other than Pounds Sterling:

E x 0.01per cent. per annum

300

Where:

Ais the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.

Bis the percentage rate of interest (excluding the Applicable Margin, the Associated Costs Rate and, if any portion of the Loan is overdue, the additional rate of interest specified in Section 1.08(c)) payable for the relevant Interest Period on the Loan.

Cis the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.

Dis the percentage rate per annum payable by the Bank of England to the Administrative Agent on interest bearing Special Deposits.

Eis designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Administrative Agent as being the average of the most recent rates of charge supplied by the Lenders to the Administrative Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.

5.For the purposes of this Schedule VI:

(a)“Eligible Liabilities” and “Special Deposits” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

(b)“Fees Rules” means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

(c)“Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and

(d)“Tariff Base” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

6.In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e., 5per cent. will be included in the formula as 5 and not as 0.05).  A negative result obtained by subtracting D from B shall be taken as zero.  The resulting figures shall be rounded to four decimal places.

7.If requested by the Administrative Agent, each Lender shall, as soon as practicable after publication by the UK Financial Services Authority, supply to the Administrative Agent, the rate of charge payable by that Lender to the UK Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the UK Financial Services Authority (calculated for this purpose by that Lender as being the average of the Fee Tariffs applicable to that Lender for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Lender.

8.Each Lender shall supply any information required by the Administrative Agent for the purpose of calculating its Additional Cost Rate.  In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:

(a)the jurisdiction of its lending office for Loans made by such Lender; and

(b)any other information that the Administrative Agent may reasonably require for such purpose.

2

Each Lender shall promptly notify the Administrative Agent of any change to the information provided by it pursuant to this paragraph.

9.The percentages of each Lender for the purpose of A and C above and the rates of charge of each Lender for the purpose of E above shall be determined by the Administrative Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies the Administrative Agent to the contrary, each Lender’s obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a lending office in the same jurisdiction as its lending office.

10.The Administrative Agent shall have no liability to any Person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.

11.The Administrative Agent shall distribute the additional amounts received as a result of the Associated Costs Rate to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender pursuant to paragraphs 3, 7 and 8 above.

12.Any determination by the Administrative Agent pursuant to this Schedule VI in relation to a formula, the Associated Costs Rate, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all parties.

13.The Administrative Agent may from time to time, after consultation with the Borrowers and the Lenders, determine and notify to all parties any amendments which are required to be made to this Schedule VI in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the UK Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all parties.

3

SCHEDULE VII

FLEET LIST

VESSEL		Vessel Type	YEAR OF BUILD	DWT	Ownership	Charter Expiry	% INTEREST		Book Value		Encumbered		Lien Amount
	Operating
1	TI OCEANIA	V PLUS	2003	441,585	OWNED	N/A	100.0	%	$	107,167,842	$	—	$	—
2	TI AFRICA	V PLUS	2002	441,655	OWNED	N/A	100.0	%	$	106,911,376	$	—	$	—
3	OVERSEAS ROSALYN	VLCC	2003	317,972	OWNED	N/A	100.0	%	$	65,843,817	$	—	$	—
4	OVERSEAS MULAN	VLCC	2002	318,518	OWNED	N/A	100.0	%	$	64,350,027	$	64,350,027	$	40,909,094
5	TANABE	VLCC	2002	298,561	OWNED	N/A	100.0	%	$	69,662,563	$	—	$	—
6	OVERSEAS ANN	VLCC	2001	309,327	Time Chartered	Apr-12	100.0	%	$	—	$	—	$	—
7	OVERSEAS CHRIS	VLCC	2001	309,285	Time Chartered	Oct-11	100.0	%	$	—	$	—	$	—
8	SAKURA I	VLCC	2001	298,644	OWNED	N/A	100.0	%	$	65,204,295	$	—	$	—
9	OVERSEAS DONNA	VLCC	2000	309,498	OWNED	N/A	100.0	%	$	54,867,367	$	—	$	—
10	RAPHAEL	VLCC	2000	309,614	OWNED	N/A	100.0	%	$	53,837,575	$	—	$	—
11	REGAL UNITY	VLCC	1997	309,966	Time Chartered	Apr-11	100.0	%	$		$	—	$	—
12	EQUATORIAL LION	VLCC	1997	300,349	OWNED	N/A	100.0	%	$	57,528,895	$	—	$	—
13	CROWN UNITY	VLCC	1996	300,482	OWNED	N/A	100.0	%	$	62,845,261	$	—	$	—
14	MAJESTIC UNITY	VLCC	1996	300,549	OWNED	N/A	100.0	%	$	62,319,998	$	—	$	—
15	SOVEREIGN UNITY	VLCC	1996	309,892	OWNED	N/A	100.0	%	$	62,258,942	$	—	$	—
16	V. K. EDDIE	VLCC	2005	305,261	Time Chartered	May-10	40.0	%	$	—	$	—	$	—
17	ARDENNE V	VLCC	2004	318,658	Time Chartered	September-09	40.0	%	$	—	$	—	$	—
18	SEA FORTUNE	VLCC	2003	298,833	Time Chartered	March-06	30.0	%	$	—	$	—	$	—
19	C. DREAM	VLCC	2000	298,570	Time Chartered	March-09	15.0	%	$	—	$	—	$	—
20	MERIDIAN LION	VLCC	1997	300,579	Time Chartered	June-11	100.0	%	$	—	$	—	$	—
21	TI NINGBO	VLCC	1996	298,306	Time Chartered	April-07	50.0	%	$	—	$	—	$	—
22	TI QINGDAO	VLCC	1995	298,306	Time Chartered	May-07	50.0	%	$	—	$	—	$	—
23	OVERSEAS CATHY	AFRAMAX	2004	112,028	Time Chartered	Jan-12	100.0	%	$	—	$	—	$	—
24	OVERSEAS SOPHIE	AFRAMAX	2003	112,045	Time Chartered	Jul-11	100.0	%	$	—	$	—	$	—
26	OVERSEAS PORTLAND	AFRAMAX	2002	112,139	OWNED	N/A	100.0	%	$	31,531,616	$	31,531,616	$	23,238,936
26	OVERSEAS FRAN	AFRAMAX	2001	112,118	OWNED	N/A	100.0	%	$	30,601,640	$	30,601,640	$	23,238,936
27	OVERSEAS JOSEFA CAMEJO	AFRAMAX	2001	112,200	OWNED	N/A	100.0	%	$	29,398,370	$	29,398,370	$	26,363,637
28	OVERSEAS SHIRLEY	AFRAMAX	2001	112,056	OWNED	N/A	100.0	%	$	29,287,221	$	29,287,221	$	26,363,637
29	ANIA	AFRAMAX	1994	94,848	Time Chartered	Oct-10	100.0	%	$	—	$	—	$	—

VESSEL		Vessel Type	YEAR OF BUILD	DWT	Ownership	Charter Expiry	% INTEREST		Book Value		Encumbered		Lien Amount
30	BERYL	AFRAMAX	1994	94,799	OWNED	N/A	100.0	%	$	34,335,889	$	—	$	—
31	ELIANE	AFRAMAX	1994	94,813	OWNED	N/A	100.0	%	$	35,508,457	$	—	$	—
32	PACIFIC RUBY	AFRAMAX	1994	96,358	OWNED	N/A	100.0	%	$	26,152,879	$	—	$	—
33	PACIFIC SAPPHIRE	AFRAMAX	1994	96,173	OWNED	N/A	100.0	%	$	25,961,446	$	—	$	—
34	REBECCA	AFRAMAX	1994	94,873	Time Chartered	Oct-10	100.0	%	$	—	$	—	$	—
35	OVERSEAS KEYMAR	AFRAMAX	1993	95,822	OWNED	N/A	100.0	%	$	40,648,571	$	—	$	—
36	JACAMAR	AFRAMAX	1999	104,024	Bareboat Chartered	January-11	100.0	%	$	—	$	—	$	—
37	TAKAMAR	AFRAMAX	1998	104,024	January-11	January-11	100.0	%	$	—	$	—	$	—
38	CAPE ASPRO	AFRAMAX	1998	105,337	Time Chartered	March-09	50.0	%	$	—	$	—	$	—
39	CAPE AVILA	AFRAMAX	1998	105,337	Time Chartered	March-09	50.0	%	$	—	$	—	$	—
40	OVERSEAS REGINAMAR	PANAMAX	2004	70,313	OWNED	N/A	100.0	%	$	33,510,988	$	—	$	—
41	OVERSEAS REINEMAR	PANAMAX	2004	70,313	OWNED	N/A	100.0	%	$	33,515,244	$	—	$	—
42	CABO SOUNION	PANAMAX	2004	69,636	OWNED	N/A	100.0	%	$	51,394,706	$	—	$	—
43	OVERSEAS REYMAR	PANAMAX	2004	69,636	OWNED	N/A	100.0	%	$	51,415,342	$	—	$	—
44	CABO HELLAS	PANAMAX	2003	69,636	OWNED	N/A	100.0	%	$	49,478,469	$	—	$	—
45	OVERSEAS PEARLMAR	PANAMAX	2002	69,697	OWNED	N/A	100.0	%	$	47,414,107	$	—	$	—
46	OVERSEAS JADEMAR	PANAMAX	2002	69,708	OWNED	N/A	100.0	%	$	47,439,234	$	—	$	—
47	OVERSEAS RUBYMAR	PANAMAX	2002	69,599	OWNED	N/A	100.0	%	$	47,439,787	$	—	$	—
48	OVERSEAS ROSEMAR	PANAMAX	2002	69,629	OWNED	N/A	100.0	%	$	47,446,928	$	—	$	—
49	OVERSEAS GOLDMAR	PANAMAX	2002	69,684	OWNED	N/A	100.0	%	$	47,450,756	$	—	$	—
50	OVERSEAS SILVERMAR	PANAMAX	2002	69,609	OWNED	N/A	100.0	%	$	47,451,893	$	—	$	—
51	OVERSEAS POLYS	PANAMAX	1993	68,623	Bareboat Chartered	September-09	100.0	%	$	—	$	—	$	—
52	OVERSEAS CLELIAMAR	PANAMAX	1993	68,626	Bareboat Chartered	September-09	100.0	%	$	—	$	—	$	—
53	ALCESMAR	HANDYSIZE	2004	46,214	OWNED	N/A	100.0	%	$	47,586,895	$	47,586,895	$	33,939,394

2

VESSEL		Vessel Type	YEAR OF BUILD	DWT	Ownership	Charter Expiry	% INTEREST		Book Value		Encumbered		Lien Amount
54	ALCMAR	HANDYSIZE	2004	46,248	OWNED	N/A	100.0	%	$	47,593,430	$	47,593,430	$	33,939,394
55	ANTIGMAR	HANDYSIZE	2004	46,168	OWNED	N/A	100.0	%	$	47,662,437	$	47,662,437	$	33,939,394
56	ANDROMAR	HANDYSIZE	2004	46,195	OWNED	N/A	100.0	%	$	47,662,437	$	47,662,437	$	33,939,394
57	ARIADMAR	HANDYSIZE	2004	46,205	OWNED	N/A	100.0	%	$	47,628,074	$	47,628,074	$	33,939,394
58	OVERSEAS ATALMAR	HANDYSIZE	2004	46,205	OWNED	N/A	100.0	%	$	47,625,656	$	—	$	—
59	OVERSEAS AMBERMAR	HANDYSIZE	2002	35,970	OWNED	N/A	100.0	%	$	36,993,904	$	—	$	—
60	OVERSEAS PETROMAR	HANDYSIZE	2001	35,768	OWNED	N/A	100.0	%	$	35,046,426	$	—	$	—
61	OVERSEAS AQUAMAR	HANDYSIZE	1998	47,236	OWNED	N/A	100.0	%	$	36,412,016	$	—	$	—
62	OVERSEAS LUXMAR	HANDYSIZE	1998	45,999	OWNED	N/A	100.0	%	$	36,406,382	$	—	$	—
63	OVERSEAS RIMAR	HANDYSIZE	1998	45,999	OWNED	N/A	100.0	%	$	36,415,419	$	—	$	—
64	OVERSEAS MAREMAR	HANDYSIZE	1998	47,225	OWNED	N/A	100.0	%	$	36,429,655	$	—	$	—
65	OVERSEAS ALMAR	HANDYSIZE	1996	46,169	OWNED	N/A	100.0	%	$	32,489,527	$	—	$	—
66	OVERSEAS LIMAR	HANDYSIZE	1996	46,171	OWNED	N/A	100.0	%	$	32,517,890	$	—	$	—
67	OVERSEAS NEDIMAR	HANDYSIZE	1996	46,821	OWNED	N/A	100.0	%	$	32,434,069	$	—	$	—
68	NEPTUNE	HANDYSIZE	1989	40,085	Bareboat Chartered	July-08	100.0	%	$	—	$	—	$	—
69	OVERSEAS ERMAR	HANDYSIZE	1989	39,977	Bareboat Chartered	July-09	100.0	%	$	—	$	—	$	—
70	VEGA	HANDYSIZE	1989	39,711	Bareboat Chartered	January-09	100.0	%	$	—	$	—	$	—
71	DELPHINA	HANDYSIZE	1989	39,674	Bareboat Chartered	January-09	100.0	%	$	—	$	—	$	—
72	OVERSEAS FULMAR	HANDYSIZE	1989	39,521	Bareboat Chartered	July-09	100.0	%	$	—	$	—	$	—
73	OVERSEAS CAMAR	HANDYSIZE	1988	46,100	Bareboat Chartered	July-09	100.0	%	$	—	$	—	$	—
74	OVERSEAS JAMAR	HANDYSIZE	1988	46,100	Bareboat Chartered	July-09	100.0	%	$	—	$	—	$	—
75	OVERSEAS ALLENMAR	HANDYSIZE	1988	41,570	Bareboat Chartered	July-09	100.0	%	$	—	$	—	$	—

3

VESSEL		Vessel Type	YEAR OF BUILD	DWT	Ownership	Charter Expiry	% INTEREST		Book Value		Encumbered		Lien Amount
76	URANUS	HANDYSIZE	1988	40,085	Bareboat Chartered	July-08	100.0	%	$	—	$	—	$	—
77	OVERSEAS PRIMAR	HANDYSIZE	1988	39,539	Bareboat Chartered	July-09	100.0	%	$	—	$	—	$	—
78	OVERSEAS ATHENS	HANDYSIZE	1987	39,729	Bareboat Chartered	July-09	100.0	%	$	—	$	—	$	—
79	OVERSEAS COLMAR	HANDYSIZE	1987	39,729	Bareboat Chartered	July-09	100.0	%	$	—	$	—	$	—
80	OVERSEAS CAPEMAR	HANDYSIZE	1987	37,615	Bareboat Chartered	July-09	100.0	%	$	—	$	—	$	—
81	CHRISMIR	CAPESIZE	1997	159,830	Time Chartered	December-10	100.0	%	$	—	$	—	$	—
82	MATILDE	CAPESIZE	1997	160,013	Time Chartered	December-10	100.0	%	$	—	$	—	$	—
83	OVERSEAS NEW ORLEANS	HANDYSIZE	1983	43,643	Bareboat Chartered	October-11	100.0	%	$	—	$	—	$	—
84	PUGET SOUND	HANDYSIZE	1983	50,860	OWNED	N/A	100.0	%	$	17,509,819	$	—	$	—
85	S/R GALENA BAY	HANDYSIZE	1982	50,920	OWNED	N/A	100.0	%	$	14,778,609	$	—	$	—
86	OVERSEAS PHILADELPHIA	HANDYSIZE	1982	43,387	Bareboat Chartered	November-11	100.0	%	$	—	$	—	$	—
87	OVERSEAS HARRIETTE	HANDYSIZE	1978	25,951	Bareboat Chartered	November-06	100.0	%	$	—	$	—	$	—
88	OVERSEAS MARILYN	HANDYSIZE	1978	25,951	Bareboat Chartered	November-07	100.0	%	$	—	$	—	$	—
89	OVERSEAS JOYCE	CAR CARRIER	1987	16,141	OWNED	N/A	100.0	%	$	10,007,461	$	—	$	—
									$	2,263,381,607	$	423,302,147	$	309,811,210
	On Order
1	HULL 005	HANDYSIZE	2006	46,000	Bareboat Chartered	November-13	100.0	%	$	—	$	—	$	—
2	HULL 006	HANDYSIZE	2007	46,000	Bareboat Chartered	May-14	100.0	%	$	—	$	—	$	—
3	HULL 007	HANDYSIZE	2007	46,000	Bareboat Chartered	November-15	100.0	%	$	—	$	—	$	—
4	HULL 1605	LNG	2007	216,200 cbm	OWNED	N/A	49.9	%	$	—	$	—	$	—
5	HULL 1791	LNG	2007	216,200 cbm	OWNED	N/A	49.9	%	$	—	$	—	$	—

4

VESSEL		Vessel Type	YEAR OF BUILD	DWT	Ownership	Charter Expiry	% INTEREST		Book Value		Encumbered		Lien Amount
6	HULL 008	HANDYSIZE	2008	46,000	Bareboat Chartered	April-15	100.0	%	$	—	$	—	$	—
7	HULL 009	HANDYSIZE	2008	46,000	Bareboat Chartered	September-15	100.0	%	$	—	$	—	$	—
8	HULL 1606	LNG	2008	216,200 cbm	OWNED	N/A	49.9	%	$	—	$	—	$	—
9	HULL 1792	LNG	2008	216,200 cbm	OWNED	N/A	49.9	%	$	—	$	—	$	—
10	HULL 010	HANDYSIZE	2009	46,000	Bareboat Chartered	January-14	100.0	%	$	—	$	—	$	—
11	HULL 011	HANDYSIZE	2009	46,000	Bareboat Chartered	May-14	100.0	%	$	—	$	—	$	—
12	HULL 012	HANDYSIZE	2009	46,000	Bareboat Chartered	September-14	100.0	%	$	—	$	—	$	—
13	HULL 013	HANDYSIZE	2010	46,000	Bareboat Chartered	January-15	100.0	%	$	—	$	—	$	—
14	HULL 014	HANDYSIZE	2010	46,000	Bareboat Chartered	May-15	100.0	%	$	—	$	—	$	—
15	PARAKOU TC1	HANDYSIZE	2006	51,000	Time Chartered	November-16	100.0	%	$	—	$	—	$	—
16	PARAKOU TC2	HANDYSIZE	2006	51,000	Time Chartered	November-16	100.0	%	$	—	$	—	$	—
17	PARAKOU TC3	HANDYSIZE	2007	51,000	Time Chartered	November-17	100.0	%	$	—	$	—	$	—
18	PARAKOU TC4	HANDYSIZE	2007	51,000	Time Chartered	November-17	100.0	%	$	—	$	—	$	—
									$	2,263,381,607	$	423,302,147	$	309,811,210

5

CLOSING DATE ASSETS

	12/31/05
Assets
Cash & Cash Equivalents	$	188,588,485
Marketable Securities	0
Voyage Receivables	157,334,258
Other Receivables	15,402,091
Insurance Claims Receivable	11,800,346
Total Inventory	1,855,013
Prepaid Expenses & Other Current Assets	14,907,418
Total Current Assets	389,887,610
Capital Construction Fund	296,125,620
Vessels & Other Property, net	2,283,481,535
Deferred Drydock	19,804,736
Vessels under Capital Lease, net	36,266,847
Investments & Advances in Affiliates	269,656,761
Other Non-Current Assets	53,457,178
Intercompany	0
Total Assets	3,348,680,287
Less Investments & Advances in Affiliates	269,656,761
Less Intangible Assets	21,475,349
Closing Date Assets	3,057,548,177

6

EX-10.(III)(V)

Exhibit 10(iii)(v)

CODIFICATION OF CONTRACT OF EMPLOYMENT

In Vouliagmeni, Greece this day the 20^th of January 2005,

BETWEEN

The corporation styled “OSG SHIP MANAGEMENT (GR) LTD” of Ajeltake Island, Majuro, Marshall Islands having offices, at 2A, Areos Street, 166 71 Vouliagmeni, Athens, Greece, hereinafter called “the Employer” or “the Company” formerly named “STELMAR TANKERS (MANAGEMENT) LTD (“Stelmar”), lawfully represented by Olga Lambrianidou

AND

(Name) George Dienis son of Alexander of 26 Aristofanous Street, Alimos 17456, Athens, Greece, Identity Card No 041842/28-6-79, hereinafter called “the Employee”

The Company and the Employee are hereinafter jointly referred to as “the Parties”.

1.START-DURATION

1.1The Employee was hired on 20 February 1993 (“Initial Employment Date”) by “Stelmar” under a contract of employment for an indefinite period of time contract, which contract was restated on August 12, 2004 (hereinafter “the Contract”). On 20 January 2005 Stelmar’s beneficial ownership changed and consequently the Company has taken upon it the rights and obligations of the employer

The Parties do hereby codify the terms set forth in the Contract as follows:

2.CAPACITY-POSITION-PLACE OF EMPLOYMENT-OBJECTIVES

2.1The Employee was hired and continues to work as Chief Operating Officer.

2.2The Employee, as a high-ranking officer of the Company (Manager, Supervisor, Officer, etc.) has been assigned by the Company to hold and exercise managing, supervising and confidential authorities and duties or significant part of its matters or personnel supervision, etc.). As such high-ranking officer, he belongs to the category of employees on whom standard working hours provisions (from time to time in force) do not apply, as, according to art. 2 of Law 2269/1920, standard working hours provisions do not apply to employees engaged in duties of management or significant trust.

2.3The Employee’s position and capacity is clearly described in the relevant job description and supplemented by OSG’s corporate policies, programs and procedures. The Employee must comply with his job description, responsibilities, duties policies and procedures in observance of these requirements and in support of OSG’s corporate policies

and procedures. . The parties agree that OSG’s policies and procedures are an integral part hereof. The Employee herein declares that he is fully aware of his job description, responsibilities and duties as well as of OSG’s corporate policies and procedures.

2.4The Company manages and operates ocean-going vessels on a worldwide basis. The Employee shall offer his services in the Company’s headquarters in Vouliagmeni, Greece (or at any other place of business in the greater area of Attica in case the Company changes its address) or at any other location in Greece or at any other place in the world where its vessels may sail or the Company may conduct its business, according to the needs of the Company at its absolute discretion. In case the Employee is engaged in the Company’s business in any other place than the offices of the Company, such employment may not be deemed as detrimental alteration of the employment terms and shall not vest the Employee with the right for a salary raise or for any other benefit over and above those mentioned in this contract In case of permanent change of the place of employment, the terms and conditions thereof shall be mutually agreed upon between the Parties.

2.5Due to the Company’s engagement in the international trade, all operational procedures are held in English. Therefore, the Employee is obliged to have a good command of English. His knowledge thereof is fully evidenced by signing this contract. A translation into Greek is hereto attached.

3.WORKING HOURS

3.1The Company’s normal daily working hours are from 09.00 h. to 17.00 h. from Monday to Friday (with a compulsory 20-minute break between 13.00 h. and 13.20 h.) i.e. the normal working hours are 8 hours per day and totally 40 hours per week.

3.2The Employee as a high-ranking officer holding a position of supervision, management and trust, as provided by art. 2 of Law 2269/1920, belongs to the category of employees on who the standard working hours provisions from time to time in force do not apply, and, therefore, shall not be entitled to any extra-pay or remuneration whatsoever for any overtime work or engagement i.e. in excess of the normal working hours (as described hereinabove) or work during Saturdays, Sundays, Public or National Holidays and for work during the night or any extra payment or remuneration for work or overtime work or temporary engagement away from home in Greece or abroad.

4.LEAVE

4.1Annual leave, sick leave, maternity leave and any other kind of leave are given, according to the Greek Labour Laws from time to time in force. Due to the nature of the Company’s activities it is hereby agreed that the Employee cannot take as a whole the total number of days of annual leave of each calendar year. Therefore, the Company has developed the following policy:

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4.2From the 1^st of May until the 30^th of September of each year the Employee shall have to take at least 50% of the annual leave he is entitled to (according to the National Employment Legislation). If the Company’s needs so dictate the Employee cannot take more than 10 continuing working days each time, except for very serious or extraordinary reasons.

4.3The total number of days of annual leave must be taken until 31^st of December of each calendar year. Holiday entitlement may only be taken in subsequent calendar years with the Company’s prior written approval, which may be granted only in exceptional circumstances. If the Employee has not taken all the days of annual leave he is entitled to within the corresponding calendar year, the days of leave my not be transferred to the next calendar year.

5.SALARY

5.1It is hereby agreed that the Employee’s total monthly salary shall be calculated pursuant to the provisions of the Collective Labour Agreement of Employment for the personnel of the Shipping Companies and the Shipping Agencies in Greece from time to time in force. In case the above Collective Labour Agreement does not cover the capacity of the Employee, the Employee’s total monthly salary shall be calculated pursuant to the provisions of the National General Collective Labour Agreement of Employment.

5.2The salary shall be deposited in the National Bank of Greece (Ethniki Trapeza tis Hellados) at the end of each calendar month after the deduction of any advance payments that the Employee has received against the monthly salary as well as the legal withholdings and percentages of contributions to the social security funds that burden the Employee.

5.3The total monthly salary of the Employee is agreed to Euro 3,000.00. It is hereby agreed that in this salary are included and computed any and all Employee’s claims for allowances, or increment or remuneration or for other extra benefits, augmentations, prim, bonuses payable either as a percentage of the basic salary or as a lump sum, annually or periodically, which is provided for by law, collective labour agreement, regulations of the Employer etc. (for the sake of clarity bonuses, benefits and/or other amounts provided for in Clauses 5.4, 6.1, 7.1 and 8.1 are not included in the above salary). Therefore in case any subsequent Collective Labour Agreement provides for an increase of the salaries, wages, allowances etc., the Employee shall not be entitled to such increase, provided that his above mentioned salary (allowances, benefits, etc.) is considerably higher than the one provided by the Collective Labour Agreements from time to time in force. Therefore, all future increases provided by the Collective Labour Agreements from time to time in force shall be counterbalanced ipso jure with the higher wages hereby agreed. Any other relevant claim (i.e. arising from the increases of the Collective Labour Agreements from time to time in force) shall be also counterbalanced with the higher salary hereby agreed.

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5.4The Company may also voluntarily and at its absolute discretion offer to the Employee additional monetary payments (performance bonus, bonus for productivity, etc.). The Company reserves the right to at any time and at its absolute discretion revoke all the above additional monetary payments. All these additional monetary payments or extra salaries are given to the Employee at the Company’s absolute discretion and they cannot, under any circumstances, be considered as normal part of the Employee’s monthly salary even in case the Employee receives them frequently, periodically and uniformly, nor shall they be taken into consideration for the calculation of Christmas, Easter or vacation allowances nor for the calculation of the severance pay due in case of termination of the employment.

6.HEALTH INSURANCE

6.1Further to the compulsory social security (IKA, TSMEDE, TANPY, NAT, etc.), the Company at its absolute discretion provides additional private Health Insurance coverage to the Employee or other Pension Program after the completion of 6 months from the Initial Employment Date. The Company reserves the right to at any time and at its absolute discretion cease the provision of this benefit. The corresponding annual premiums shall not be considered as part of the above mentioned standard salary of the Employee and shall not be taken into consideration for the calculation of Christmas, Easter or vacation allowances nor for the calculation of the severance pay due in case of termination of the employment.

7.TRAVELLING-PROTECTION

7.1Further to the above mentioned (Clause 6.1) social security, the Company shall provide to the Employee additional insurance coverage for Accident and Health in case the Employee is traveling on Company business. All reasonably incurred traveling expenses, hotel accommodation and other reasonably incurred related expenses shall be covered by the Company against receipts and invoices, according to the Company’ s policy from time to time in force.

7.2The Employee as high ranking officer of the Company holding duties of management, supervision and trust, further to his/her travelling expenses (as described hereinabove), shall not be entitled to any extra pay or remuneration whatsoever for work or overtime work performed away from home in Greece or abroad.

8.LUNCH

8.1The Company shall offer to the Employee a free lunch during his compulsory lunch break. It is hereby agreed that this benefit may not be considered as part of the monthly salary and shall not be taken into consideration for the calculation of Christmas, Easter or vacation allowances nor for the calculation of the severance pay due in case of

4

termination of employment. The Company reserves the right to at any time revoke this benefit.

9.OBLIGATIONS

9.1The Employee shall obey to the lawful orders of all his superiors or the bodies of the Company and for each matter related to his work shall have to refer to his superiors.

9.2.The Employee shall faithfully and diligently perform such duties and exercise such powers consistent with his position as may from time be assigned to or vested in him by the Company.

9.3The Employee shall keep his superiors at all times promptly and fully informed (in writing if so requested) of his conduct of the business of the Employer or the course of business of the Employer and provide such information or explanations in connection therewith as his superiors may require from time to time.

9.4           The Employee shall devote as much of his time, attention and ability as is required to the duties specified in this Contract.

10.CONFIDENTIALITY-COMPETITION

RESTRICTIVE COVENANTS

10.1Throughout the duration of this Contract, the Employee agrees to respect the confidential nature of any confidential information directly or indirectly related to his work or the Company or any other company belonging to the same group of interests with the Company such as any parent or subsidiary or affiliated company as same are defined in article 42E of Law 2190/1920 (hereinafter “Group Company”).

10.1.1“Confidential Information” shall mean the names or addresses or other sensitive personal or family data, terms of business and/or requirementsof any employee, officer, customer, agent, counsel or supplier of the Employer, OVERSEAS SHIPHOLDING GROUP, INC. (hereinafter “OSG”), or any Group Company, any pricing or scheduling information, business plans or information relating to its business model, marketing and sales information, business dealings, information, management, codes, invention practices and procedures and programs, financial information, designs, structures research activity information, invention, innovation information which is marked “confidential” or which the Employee is told is confidential or which the Employee might reasonably expect the Employer and OSG, or any Group Company would regard as confidential and any information which has been given to the Employer and OSG, or any Group Company in confidence by customers, suppliers or other persons.

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10.1.2All notes, memoranda, records, lists of customers and suppliers and employees, correspondence, documents, computer and other discs and tapes, data listings, codes, designs and drawings and other documents and material whatsoever (whether made or created by the Employee or otherwise) relating to the business of the Employer and OSG or any Group Company (and any copies of the same):

10.1.2.1shall be and remain the property of the Employer and OSG or any Group Company; and

10.1.2.2shall be handed over by the Employee (who shall not keep copies or duplicates of any nature) to the Employer and OSG or any Group Company, on demand and in any event on the termination of the Employment.

10.1.3The Employee shall neither during the Employment nor at any time (without limit) after the termination of the Employment directly or indirectly use for his or her own purposes or for any purposes other than those of the Employer and OSG or any Group Company any trade secrets or Confidential Information.

10.2         As regards the shares, stocks, contracts or any other matter related to OSG, a corporation listed in the New York Stock Exchange since 1969, the Employee is obliged, according to art. 30 of Law 1806/88 (as amended by art. 2 No1 of Presidential Decree 53/92) to keep absolute discretion and secrecy and to abstain from giving or using (himself or through any other person) any not publicized or confidential information which, if became known to the public, would affect considerably the price of the shares or stocks.

10.3         This secrecy obligation shall not cease to exist even after the termination of this Contract for any reason whatsoever.

10.4         The Employee must refrain from any act that may be considered to be in competition to the business objectives of the Employer and OSG or any Group Company. Throughout the duration of this Contract the Employee is also prohibited to work or hold any other business relation (or position) on pay or not with competitors from the same business field. Any breach of these confidentiality and competition clauses by the Employee, gives the right to the Employer to terminate immediately this Contract, without paying to him any severance pay. The Employer may also claim compensation for any damages suffered thereby.

10.5         All rights and authorities on the works, research, programs, projects, discoveries, copyrights, patents, inventions, including computer programs, etc., developed, invented, discovered or deposited by the Employee throughout the duration of this Agreement (whether or not made or discovered in the course of employment) and for any other Intellectual Property are ipso iure assigned to the Employer and the Employee shall not have thereon any claim whatsoever.

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10.6         The Employee recognises that, whilst performing his duties for the Employer, he will have access to and come into contact with trade secrets and confidential information belonging to the Employer and OSG and/or any Group Company and will obtain personal knowledge of and influence over its or their customers and/or employees. The Employee therefore agrees that the restrictions set out herein are reasonable and necessary to protect the legitimate business interests of the Employer and OSG and/or any Group Company both during and after the termination of the Employment.

10.7         The Employee hereby undertakes that he will not either during the Employment nor during the 12 months following the date of termination of the Employment (“Termination Date”) without the prior written consent of the Employer whether by himself, through his employees or agents or otherwise howsoever and whether on his own behalf or on behalf of any other person, firm, company or other organisation, directly or indirectly, solicit or induce or endeavour to solicit or induce any employee to cease working for or providing services to the Employer and OSG and/or any Group Company, whether or not any such person would thereby commit a breach of contract.

10.7.1      For the purposes of this clause, “employee” means any employee of the Employer and OSG and/or any Group Company, with whom the Employee (i.e. the party hereof) had dealings during any part of the 12 months immediately preceding the Termination Date.

10.8         The Employee hereby undertakes that he will not at any time:

10.8.1      During the continuance of the Employment or after the Termination Date engage in any trade or business or be associated with any person, firm or company engaged in any trade or business using the name(s) OSG or incorporating the word OSG.

10.8.2      After the Termination Date in the course of carrying on any trade or business, claim, represent or otherwise indicate any present association with the Employer and OSG and/or any Group Company or for the purpose of carrying on or retaining any business or custom, claim, represent or otherwise indicate any past association with the Employer and OSG and/or any Group Company to its detriment.

10.9         While the restrictions in this clause are considered by the parties to be reasonable in all the circumstances, it is agreed that if any such restrictions, by themselves, or taken together, shall be adjudged to go beyond what is reasonable in all the circumstances for the protection of the legitimate interests of the Employer and OSG and/or any Group Company but would be adjudged reasonable if part or parts of the wording thereof were deleted, the relevant restriction or restrictions shall apply with such deletion(s) as may be necessary to make it or them valid and effective.

11.TERMINATION

11.1         Any issue related to the termination of this contract shall be governed by the Greek

7

Labour Law provisions from time to time in force. In case of notice of termination given from the part of the Company, the Employee shall be entitled to severance pay calculated on the basis of the total monthly salary of the last month in full employment. The time of employment shall be calculated from the Initial Employment Date as described in clause 1.1 hereinabove.

11.2In case of change of the entity of the Employer, the provisions of the Greek Law referring to the protection of the employees shall apply.

12.RESIGNATION

12.1In case the Employee wishes to resign, he shall have to give to the Company at least one month prior notice. In case of resignation, the Employee shall not be entitled to any severance pay whatsoever.

13.GOVERNING LAW-JURISDICTION

13.1This contract is exclusively subject and shall be interpreted according to Greek Law.

13.2         It is also hereby agreed pursuant to the provisions of the Greek Code of Civil Procedure that any dispute of any nature arising out of the interpretation of the terms or the performance of this Contract shall be referred to the Courts of Piraeus, Greece which are exclusively competent to adjudicate these disputes to the exclusion of the Courts of any other country or jurisdiction.

This Contract stands for notification of the basic terms of the employment pursuant to Presidential Decree 154/1994.

In faith and testimony whereof the present Agreement was drawn and signed by the Parties and each party received an original copy of the Agreement (and its Greek translation).

THE PARTIES
Signed
FOR THE COMPANY	THE EMPLOYEE
/s/Olga Lambrianidou	/s/George Dienis
Date March 9, 2005

8

EX-10.(III)(W)

Exhibit 10(iii)(w)

Private & Confidential

Dated 12/8/2004

S.S.L. Services Limited	(1)
and
George Dienis	(2)

SERVICE AGREEMENT

Contents

Clause		Page
1	Definitions	3
2	Appointment	4
3	Duration of the Employment	5
4	Scope of the Employment	5
5	Hours and place of work	6
6	Remuneration	6
7	Expenses	7
8	Holidays	7
9	Sickness benefits	8
10	Employment Benefits	8
11	Restrictions on other activities by the Executive	8
12	Confidential Information and Company Documents	9
13	Inventions and other Intellectual Property	10
14	Termination	11
15	Restrictive Covenants	15
16	Notices	16
17	Former Service Agreements	17
18	Choice of law, submission to jurisdiction and address for service	17

THIS AGREEMENT is dated 12/8/2004 and is made BETWEEN:

(1)S.S.L. Services Limited (No. 34839), whose registered office is at 3rd Floor, 14 Par-la-Ville Place, Par-la-Ville Road, Hamilton, Bermuda (“the Company”); and

(2)George Dienis of 26 Aristofanous Street, Alimos, 17456, Athens, Greece(“the Executive”)

WHEREAS:

(A)  The Executive has been employed as Chief Operating Officer of Stelmar Shipping Ltd since 20 February 1993by the Group, pursuant to terms and conditions of employment set out in various contractual documents.

(B)  The Executive shall continue to carry out his role as Chief Operating Officer of Stelmar Shipping Ltd, performing employment duties both in Greece and elsewhere in the world.

(C)  The terms and conditions governing the Executive’s work in Greece shall be set out in a Greek Service Agreement (hereafter “the GSA”).

(D)  The terms and conditions governing the Executive’s work outside Greece shall be set out in this Agreement.

NOW IT IS HEREBY AGREED as follows:

1Definitions

1.1In this Agreement unless the context otherwise requires:

1.1.1the following expressions have the following meanings:

“Affiliate” means any Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified Person;

“Beneficial Owner” has the meaning set forth in Rule 13d-3 under the Exchange Act (it being understood that Stelshi Holding Ltd., Stelphi Holding Ltd. and Stelchi Holding Ltd. shall be deemed a “group” within the meaning of Rule 13d-5(b)(1) under the Exchange Act for purposes of this Agreement);

“the Board” means the Board of Directors of Stelmar Shipping Ltd or its successors, as composed from time to time;

“the Employment” means the Executive’s employment hereunder;

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

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“the Group” means Stelmar Shipping Ltd and the Group Companies;

“Group Company” means any Subsidiary of Stelmar Shipping Ltd;

“Intellectual Property” means copyrights, (including rights in computer software), patents, trade marks, trade names, service marks, business names (including internet domain names), design rights, database rights, semi-conductor topography rights, rights in undisclosed or confidential information (such as know-how, trade secrets and inventions (whether patentable or not)), and all other intellectual property or similar proprietary rights of whatever nature (whether registered or not and including applications to register or rights to apply for registration) which may now or in the future subsist anywhere in the world;

“Person” means any person, entity or “group” within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company or (v) a person or group as used in Rule 13d-1(b) under the Exchange Act;

“Stelmar Shipping Ltd” means the Liberian company whose registered office is at 80 Broad Street, Monrovia, Liberia; and

“Subsidiary” means, with respect to any Person, any corporation, general or limited partnership, limited liability company, joint venture or other legal entity of any kind of which such Person (either alone or through or together with one or more of its other subsidiaries) owns, directly or indirectly, more than 50% of the stock or other equity interests, the holders of which are (a) generally entitled to vote for the election of the board of directors or other governing body of such legal entity or (b) generally entitled to share in the profits or capital of such legal entity.

1.1.2references to clauses, sub-clauses and schedules are unless otherwise stated to clauses and sub-clauses of and schedules to this Agreement;

1.1.3the headings to the clauses are for convenience only and shall not affect the construction or interpretation of this Agreement.

2Appointment

2.1The Company shall continue to employ the Executive and the Executive agrees to continue to act as Chief Operating Officerof the Company on and subject to the terms and conditions specified herein.

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3Duration of the Employment

3.1The Employment shall commence on 19 July 2004 and, except as expressly otherwise provided in clause 14, shall continue until terminated by the Company giving to the Executive not less than 12 months’ notice in writing and by the Executive giving to the Company not less than six months’ notice in writing.

3.2Notwithstanding clause 3.1, the Employment shall automatically terminate when the Executive reaches the age of 60 unless the Executive is notified otherwise in writing by the Board.

3.3The Executive’s period of continuous employment began on 20 February 1993. The Employment is continuous with the Executive’s previous employment with the Group and the execution of this Agreement shall not cause an interruption in service.

3.4The Executive represents and warrants that he is not bound by or subject to any court order, agreement, covenant, arrangement, regulatory code or undertaking or has any other interest or obligation which in any way restricts or prohibits him from entering into this Agreement or from performing his duties hereunder.

4Scope of the Employment

4.1The Executive shall be employed as Chief Operating Officer, in which position he shall:

4.1.1report directly to the Chief Executive Officer of the Company;

4.1.2devote the whole of his time, attention and skill to his duties under this Agreement and under the GSA;

4.1.3faithfully and diligently perform such duties and exercise such powers consistent with his position as may from time to time be assigned to or vested in him by the Board;

4.1.4obey the reasonable and lawful directions of the Board;

4.1.5comply with all the Company’s rules, regulations, policies and procedures from time to time in force and especially with Stelmar Management System Policy Manual (“the Manual”) the contents of which the Executive accepts and is fully aware of; and

4.1.6keep the Board at all times promptly and fully informed (in writing if so requested) of his conduct of the business of the Company and any Group Company and provide such explanations in connection therewith as the Board may require from time to time.

4.2The Executive shall if and so long as the Company requires and without any further remuneration therefore (except as otherwise agreed):

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4.2.1carry out his duties on behalf of any Group Company; and

4.2.2act as a director or officer of any Group Company.

4.3The Company may, if necessary, at its sole discretion transfer this Agreement to any Group Company at any time on the same terms and conditions as set out herein, subject to such Group Company’s express assumption of the Company’s obligations hereunder and subject to such transfer being effected for the best interests of the Company and not as a punitive or detrimental measure against the Executive.

4.4The Executive agrees that he will provide a copy of clauses 12 and 15 of this Agreement (and a copy of any clause of the GSA relating to the same) to any person, firm, company or other entity making an offer of employment, agency, consultancy, partnership or joint venture to him/her during the Employment or thereafter whilst any restrictions in clauses 12 and/or 15 and/or the GSA remain in force immediately upon receiving any such offer.

5Hours and place of work

5.1The Executive’s principal place of work will be as set out in the GSA,but the Company may from time to time during the Employment require the Executive to work at any place outside Greeceon either a temporary or an indefinite basis. Where the place of work does change such change shall not be considered a detrimental amendment to the Executive’s terms and conditions of service and shall not give the Executive the right to terminate this Agreement claiming severance pay or extra compensation or additional wages or any other remuneration. In the performance of his duties hereunder, it is acknowledged and agreed by the parties that the Executive may be required to travel worldwide.

6Remuneration

6.1The Company shall pay to the Executive a salary at the rate of Euros 160,520 per annum (which for the avoidance of doubt, does not include the remuneration payable under the GSA) which shall accrue day to day and be payable by equal monthly instalments in arrears on or about the last dayof each calendar month. The Board will review the Executive’s salary annually towards the end of the calendar year. There is no obligation on the Company to increase the Executive’s salary.

6.2The remuneration specified in clause 6.1 shall be inclusive of any fees to which the Executive may be entitled as a director of the Company or any Group Company.

6.3The Executive hereby authorises the Company to deduct from his remuneration hereunder any sums due from him to the Company including, without limitation, any overpayments made to him by the Company, the cost of repairing any damage or loss to the Company’s property caused by him (and of recovering such costs) and any losses suffered by the Company as a result of any

6

negligence or breach of duty by the Executive or sums in respect of sub-clause 9.2 of this Agreement. In addition, the Company may deduct any required withholding taxes, social insurance contributions and other amounts in accordance with its normal payroll practices.

6.4The Executive shall be entitled to an annual bonus in accordance with the terms and conditions of the Company’s bonus scheme from time to time in force. The Executive shall be notified of the details of the bonus scheme under a separate cover which shall be considered an integral part hereof.

7Expenses

7.1The Company shall reimburse the Executive in respect of all expenses reasonably incurred by him in the proper performance of his duties, subject to the Executive providing such receipts or other evidence as the Company may require and subject to the Company’s rules and policies from time to time relating to expenses.

7.2All travel must be at the most economical rate, although the Board may, in its absolute discretion, authorise business class travel for long-haul flights.

8Holidays

8.1The Executive shall be entitled to 25 working days’ paid holiday in each calendar year, it being understood that this is the Executive’s total holiday entitlement in respect of the Employment under this Agreement and also his employment under the GSA (subject only to the Executive’s right to receive his normal remuneration for all bank and public holidays normally observed in Greece). The Executive may only take his holiday at such times as are agreed with the Board.

8.2In the respective calendar years in which the Employment commences or terminates, the Executive’s entitlement to holiday shall accrue on a pro rata basis for each complete month of service during the relevant year.

8.3If, on the termination of the Employment, the Executive has exceeded his accrued holiday entitlement, the excess may be deducted from any sums due to him and the Executive hereby authorises the Company to make such deduction. If the Executive has any unused holiday entitlement, the Company may either require the Executive to take such unused holiday during any notice period or make payment in lieu thereof.

8.4The Executive must take his full holiday entitlement in the relevant calendar year. Holiday entitlement can only be taken in subsequent calendar years with the Board’s prior written approval and the Board will only grant approval in exceptional circumstances. Failure to take holiday entitlement in the appropriate calendar year will lead to forfeiture of any accrued holiday not taken, without any right to payment in lieu thereof.

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9Sickness benefits

9.1The Company shall continue to pay the Executive’s salary during any period of absence on medical grounds up to a maximum of 180 days in any period of 12 months, provided that the Executive shall from time to time if requested:

9.1.1supply forthwith the Company with medical certificates covering any period of sickness or incapacity exceeding seven days (including weekends); and

9.1.2undergo, at the Company’s expense, a medical examination by a doctor appointed by the Company.

9.2Payment of the Executive’s salary pursuant to clause 9 shall be inclusive of any State sickness benefit to which the Executive may be entitled. The Company will deduct any other benefit contributions due from the Executive, together with normal deductions for tax and social security.

9.3The Company reserves the right to terminate the Employment in accordance with the terms of this Agreement when the Executive is absent through sickness or injury at any time, notwithstanding any outstanding or prospective entitlement to pay in accordance with clause 9.1 medical insurance or disability benefit provided for under clause 10.1 below. Except as required by law, the Company shall not be liable for any loss arising from such termination.

10Employment Benefits

10.1During the Employment, the Executive shall participate in such employment benefit plans as the Company shall from time to time maintain for the benefit of senior executives subject to their terms and conditions from time to time in force. The Company reserves the right to withdraw or amend such plans including the level of benefits, and reserves the right to terminate the Executive’s participation in such plans. The Company shall not be liable to provide any benefits or any compensation in lieu thereof in circumstances where the plan provider refuses for any reason whatsoever, to provide any benefits to the Executive.

11Restrictions on other activities by the Executive

11.1The Executive shall not (except with the prior sanction of a resolution of the Board) be directly or indirectly either on his own account or on behalf of any other person, company, business entity or other organisation be employed, engaged, concerned or interested in any other business or undertaking, provided that this shall not prohibit the holding (directly or through nominees) of investments listed on any recognised investment exchange(including but not limited to the New York Stock Exchange)as long as not more than 3per cent of the issued shares or other securities of any class of any one company shall be so held without the prior sanction of a resolution of the Board.

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11.2The Executive shall comply with:

11.2.1every rule of law;

11.2.2the Rules and Regulations of the New York Stock Exchange and the U.S. Securities and Exchange Commission; and

11.2.3every regulation of the Company in force from time to time in relation to dealings in shares or other securities of the Company or any Group Company.

11.3The Executive (on behalf of himself and his Affiliates) covenants that he shall not deal or become or cease to be interested in any securities of the Company, except in accordance with all applicable law and the Company’s code for securities transactions by directors, as amended from time to time.

11.4Subject to any regulations issued by the Company, the Executive and his Affiliates shall not be entitled to receive or obtain directly or indirectly any discount, rebate or commission in respect of any sale or purchase of goods effected or other business transacted (whether or not by him) by or on behalf of the Company or any Group Company and if he (or any firm or company in which he or any Affiliate is interested) shall obtain any such discount, rebate or commission he shall account to the Company or the relevant Group Company for the amount received by him (or a due proportion of the amount received by such company or firm having regard to the extent of his interest therein).

12Confidential Information and Company Documents

12.1The Executive recognises that, whilst performing his duties for the Company he will have access to and come into contact with trade secrets and confidential information belonging to the Company and/or any Group Company and will obtain personal knowledge of and influence over its or their customers and/or employees. The Executive therefore agrees that the restrictions set out in this clause 12 are reasonable and necessary to protect the legitimate business interests of the Company and the Group both during and after the termination of the Employment. The Executive shall neither during the Employment (except in the proper performance of his duties) nor at any time (without limit) after the termination of the Employment directly or indirectly:

12.1.1divulge or communicate to any person, company, business entity or other organisation;

12.1.2use for his own purposes or for any purposes other than those of the Company or any Group Company; or

12.1.3through any failure to exercise due care and diligence, cause any unauthorised disclosure of

any trade secrets or Confidential Information (as defined below) relating to the Company or any Group Company, provided that these restrictions shall cease to apply to any information

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which shall become available to the public generally otherwise than through the default of the Executive.

12.2“Confidential Information” shall mean the names or addresses or other sensitive personal or family data, terms of business and/or requirementsof any employee, officer, customer, agent, counsellor or supplier of the Company or Group Company, any pricing or scheduling information, business plans or information relating to its business model, marketing and sales information, business dealings information, codes, invention practises and procedures and programs, financial information, designs, structures research activity information, invention, innovation information which is marked “confidential” or which the Executive is told is confidential or which the Executive might reasonably expect the Company or Group Company would regard as confidential and any information which has been given to the Company or any Group Company in confidence by customers, suppliers or other persons.

12.3All notes, memoranda, records, lists of customers and suppliers and employees, correspondence, documents, computer and other discs and tapes, data listings, codes, designs and drawings and other documents and material whatsoever (whether made or created by the Executive or otherwise) relating to the business of the Company or any Group Company (and any copies of the same):

12.3.1shall be and remain the property of the Company or the relevant Group Company; and

12.3.2shall be handed over by the Executive (who shall not keep copies or duplicates of any nature) to the Company or to the relevant Group Company on demand and in any event on the termination of the Employment.

13Inventions and other Intellectual Property

13.1The parties foresee that the Executive may make inventions or create other industrial or intellectual property in the course of his duties hereunder and agree that in this respect the Executive has a special responsibility to further the interests of the Company and the Group Companies.

13.2Any Intellectual Property made, created or discovered or registered by the Executive during the Employment (whether or not made or discovered in the course of the Employment) in conjunction with or in any way affecting or relating to the business of any company in the Group or capable of being used or adapted for use therein or in connection therewith or exploited thereby shall forthwith be disclosed to the Company and shall belong to and be the absolute property of the Company or such Group Company as the Company may direct.

13.3The Executive if and whenever required so to do by the Company (whether during the Employment or thereafter) shall at the expense of the Company or such Group Company as the Company may direct:

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13.3.1apply or join with the Company or such Group Company in applying for any protection or registration in any part of the world for any such Intellectual Property as aforesaid;

13.3.2execute all instruments and/or documents and do all things necessary to vest (with full title guarantee) all right title and interest to and in such Intellectual Property absolutely in the Company or such Group Company or in such other person as the Company may specify.

13.3.3provide to the Company or such Group Company or such other person as the Company may specify all such assistance, at the Company’s cost, as the Company may request in connection with any proceedings or actions relating to such Intellectual Property.

13.4The Executive hereby irrevocably and unconditionally waives all rights in connection with his authorship of any existing or future copyright work in the course of the Employment, in whatever part of the world such rights may be enforceable.

13.5The Executive hereby irrevocably appoints the Company to be his Attorney in his name and on his behalf to execute and do any such instrument or thing and generally to use his name for the purpose of giving to the Company the full benefit of this clause. A certificate in writing signed by any Director or by the Secretary of the Company in favour of any third party shall be conclusive evidence that an instrument or act falls within the authority hereby conferred.

14Termination

14.1The Employment shall be subject to termination by the Company:

14.1.1automatically upon the Executive’s death;

14.1.2by not less than 3months’ notice in writing given at any time while the Executive shall have been incapacitated by reason of ill health or accident from performing his duties hereunder for a period of or periods aggregating 180days in the preceding 12months, provided that if at any time during the notice period the Executive shall provide a medical certificate satisfactory to the Board to the effect that he has fully recovered his physical and/or mental health and that no recurrence of illness or incapacity can reasonably be anticipated, the Company shall withdraw the notice;

14.1.3by summary notice in writing if the Executive shall have:

(a)committed any serious breach or repeated or continued any material breach of his obligations hereunder; or

(b)been guilty of conduct (whether in the course of his duties or otherwise) tending to bring himself or the Company or any Group Company into disrepute; or

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(c)become bankrupt or had an interim order made against him under an enactment or compounded with his creditors generally; or

(d)failed to perform his duties to a satisfactory standard, after having received a written warning from the Company relating to the same; or

(e)been disqualified from being a director by reason of any order made under any other enactment; or

(f)been convicted of an offence under any statutory enactment or regulation other than a minor road traffic offence; or

(g)resigned as a Director of the Company otherwise than at the request of the Company.

Any delay by the Company in exercising such right of termination shall not constitute a waiver thereof.

14.2The Company reserves the right in its absolute discretion to give the Executive pay in lieu of any notice of termination (whether given by the Company or by the Executive) which may, at the Company’s absolute discretion, be paid in instalments. A dismissal without notice per se shall not constitute or imply an election under this clause 14.2. For this purpose, the Executive agrees that pay in lieu will consist of (i) the Executive’s basic salary for the remainder of the relevant period of notice, (ii) a bonus payment equal to 50 per cent. of the Executive’s annual basic salary for the remainder of the relevant period of notice and (iii) a lump-sum cash payment equal to € 20,000 in lieu of any benefits (including accruals of retirement benefits) for the remainder of the relevant period of notice (in each case after deducting income tax and social security contributions).

14.3In the event of a Change of Control at any time during the Employment and notwithstanding any other provisions of this Agreement:

14.3.1if the Company serves notice on the Executive to terminate this Agreement within the period of 6months following the Change of Control for any reason (save for instances of summary dismissal under clause 14.1.3) then the period of notice which must be given by the Company under clause 3.1 will increase to 18 months;

14.3.2if the Company terminates this Agreement within the period of 6months following a Change of Control with immediate effect for any reason (save for instances of summary dismissal under clause 14.1.3) the Company shall pay the Payment (as defined below) to the Executive;

14.3.3the Executive may within the period of 6 months following a Change of Control constructively terminate this Agreement as contemplated in the Bermuda Employment Act of 2000 without notice and the Company shall pay the Payment to the Executive; and

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14.3.4the Company shall take all necessary action to ensure that any unexercised stock options and/or unexercised rights to restricted shares shall crystallise immediately upon a Change of Control, so far as the rules of the relevant stock option or share plan permit.

14.3.5The Company shall reimburse the Executive for all reasonable legal fees reasonably incurred by the Executive in recovering the amounts lawfully payable in accordance with clauses 14.2 and 14.3 of this Agreement or damages in lieu thereof.

A “Change in Control” shall be deemed to have occurred when:

(i)After the date hereof, any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of Stelmar Shipping Ltd representing more than fifty per cent of the combined voting power of Stelmar Shipping Ltd’s then outstanding securities; or

(ii)The following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date of this Agreement, constitute the Board and any new director (other than a director whose initial assumption of office is a result of an actual or threatened election contest, including, but not limited to, a consent solicitation, relating to the election of directors of Stelmar Shipping Ltd) whose appointment or election by the Board or nomination for election by Stelmar Shipping Ltd’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or

(iii)There is consummated a merger or consolidation of Stelmar Shipping Ltd or any direct or indirect Subsidiary of Stelmar Shipping Ltd with any other corporation, other than (A) a merger or consolidation that would result in the voting securities of Stelmar Shipping Ltd outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of Stelmar Shipping Ltd or any Subsidiary of Stelmar Shipping Ltd, at least fifty per cent of the combined voting power of the securities of Stelmar Shipping Ltd or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of Stelmar Shipping Ltd (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of Stelmar Shipping Ltd representing more than fifty per cent of the combined voting power of Stelmar Shipping Ltd’s then outstanding securities; or

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(iv)The shareholders of Stelmar Shipping Ltd approve a plan of complete liquidation or dissolution of Stelmar Shipping Ltd or there is consummated an agreement for the sale or disposition by Stelmar Shipping Ltd of all or substantially all of Stelmar Shipping Ltd’s assets, other than a sale or disposition by Stelmar Shipping Ltd of all or substantially all of Stelmar Shipping Ltd’s assets to an entity, at least fifty per cent of the combined voting power of the voting securities of which are owned by shareholders of Stelmar Shipping Ltd in substantially the same proportions as their ownership of Stelmar Shipping Ltd immediately prior to such sale.

In this Agreement, “Payment” means the Executive’s (i) basic salary for the period of notice specified in clause 14.3.1, (ii) a bonus payment equal to 50 per cent. of the Executive’s annual basic salary for the relevant notice period and (iii) a lump-sum cash payment equal to €20,000 in lieu of any benefits (including accruals of retirement benefits) for the period of notice specified in clause 14.3.1

14.4During any period of notice of termination not exceeding 12 months (whether given by the Company or the Executive), the Company shall be under no obligation to assign any duties to the Executive and shall be entitled to exclude him from its premises and to direct that the Executive refrains from contacting any customers, clients, suppliers, agents, professional advisers or employees of the Company or any Group Company, provided that this shall not affect the Executive’s entitlement to receive his normal salary and other contractual benefits.

14.5If (a) the Company in general meeting shall remove the Executive from the office of Director of the Company or (b) under the Articles of Association for the time being of the Company the Executive shall be obliged to retire by rotation or otherwise and the Company in general meeting shall fail to re-elect the Executive as a Director of the Company (either such case being referred to in this clause 14.5 as an “Event”), the Board shall be permitted to terminate the Employment with effect from the date of the Event, provided always that:

14.5.1the Board notifies the Executive in writing of its decision to terminate the Employment within ten working days of the Event; and

14.5.2the Executive shall be entitled to a payment in lieu of any notice of termination calculated in accordance with clause 14.2 above.

For the avoidance of doubt, if the Board does not exercise its discretion to terminate the Employment under this clause 14.5, the Employment shall continue pursuant to the applicable clauses of this Agreement and no payments shall be due to the Executive by reason of his removal or retirement from the office of Director.

14.6The receipt of the payments referred to in clauses 14.2, 14.3 and 14.5 above will be conditioned on the Executive’s execution and non-revocation of a release of claims in favour of the Company Group in a form that is reasonably satisfactory to the Company and its counsel.

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14.7On the termination of the Employment (howsoever arising) or on either the Company or the Executive having served notice of such termination, the Executive shall:

14.7.1at the request of the Company resign from office as a Director of the Company and all offices held by him in any Group Company and shall transfer without payment to the Company or as the Company may direct any qualifying shares provided by it, provided however that such resignation shall be without prejudice to any claims which the Executive may have against the Company or any Group Company arising out of the termination of the Employment; and

14.7.2forthwith deliver to the Company all Confidential Information and all materials within the scope of clause 12.3 and all credit cards, keys and other property of or relating to the business of the Company or of any Group Company which may be in his possession or under his power or control,

and if the Executive should fail to do so the Company is hereby irrevocably authorised to appoint some person in his name and on his behalf to sign any documents and do any things necessary or requisite to give effect thereto.

14.8If the Executive shall have been offered but shall unreasonably have refused to agree to the transfer of this Agreement by way of novation to a company which has acquired or agreed to acquire the whole or substantially the whole of the undertaking and assets of or of the equity share capital of the Company, the Executive shall have no claim against the Company in respect of the termination of the Employment hereunder by reason of the subsequent voluntary winding-up of the Company or of the disclaimer of this Agreement by the Company within one month after such acquisition.

15Restrictive Covenants

15.1The Executive recognises that, whilst performing his duties for the Company, he will have access to and come into contact with trade secrets and confidential information belonging to the Company and/or any Group Company and will obtain personal knowledge of and influence over its or their customers and/or employees. The Executive therefore agrees that the restrictions set out in this clause 15 are reasonable and necessary to protect the legitimate business interests of the Company and the Group Company both during and after the termination of the Employment.

15.2The Executive hereby undertakes with the Company that he will not either during the Employment nor during the 12 months following the date of termination of the Employment (“Termination Date”) without the prior written consent of the Company whether by himself, through his employees or agents or otherwise howsoever and whether on his own behalf or on behalf of any other person, firm, company or other organisation, directly or indirectly, solicit or induce or endeavour to solicit or induce any Employee to cease working for or providing services

15

to the Company or any Group Company, whether or not any such person would thereby commit a breach of contract.

For the purposes of this clause, “Employee” means any employee of the Company or any Group Company with whom the Executive had dealings during any part of the 12months immediately preceding the Termination Date.

15.3The Executive hereby undertakes with the Company that he will not at any time:

15.3.1during the continuance of the Employment or after the Termination Date engage in any trade or business or be associated with any person, firm or company engaged in any trade or business using the name(s) Stelmar or incorporating the word Stelmar;

15.3.2after the Termination Date in the course of carrying on any trade or business, claim, represent or otherwise indicate any present association with the Company or any Group Company or for the purpose of carrying on or retaining any business or custom, claim, represent or otherwise indicate any past association with the Company or any Group Company to its detriment.

15.4While the restrictions in this clause 15 (on which the Executive has had the opportunity to take independent advice, as the Executive hereby acknowledges) are considered by the parties to be reasonable in all the circumstances, it is agreed that if any such restrictions, by themselves, or taken together, shall be adjudged to go beyond what is reasonable in all the circumstances for the protection of the legitimate interests of the Company or a Group Company but would be adjudged reasonable if part or parts of the wording thereof were deleted, the relevant restriction or restrictions shall apply with such deletion(s) as may be necessary to make it or them valid and effective.

16Notices

16.1Any notice or other document to be given under this Agreement shall be in writing and may be given personally to the Executive or to the Secretary of the Company (as the case may be) or may be sent by first class post or other fast postal service or by facsimile transmission to, in the case of the Company, its registered office for the time being and in the case of the Executive either to his address shown on the face hereof or to his last known place of residence.

16.2Any such notice shall be deemed served when in the ordinary course of the means of transmission it would first be received by the addressee in normal business hours.

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17Former Service Agreements

17.1This Agreement and the GSA constitute the entire agreement of the parties with respect to the subject matter hereof, and supersede all prior letters of appointment, agreements or arrangements, whether written, oral or implied, relating to the employment of the Executive.

17.2The Executive hereby acknowledges that he has no outstanding claims of any kind against the Company/any Group Company (otherwise than in respect of remuneration and expenses accrued due to 19 July 2004 but not yet paid).

18Choice of law, submission to jurisdiction and address for service

18.1This Agreement shall be governed by and interpreted in accordance with Bermuda law (and for the avoidance of doubt the parts of the Executive’s duties undertaken pursuant to the GSA shall be governed by Greek law).

18.2The Executive hereby submits to the jurisdiction of the courts in Bermuda, but this Agreement may be enforced by the Company in any court of competent jurisdiction.

IN WITNESS whereof this Agreement has been executed the day and year first above written.

EXECUTED AS A DEED by	)
the Company in the presence of:	)	/s/ Peter Goodfellow
		/s/ Olga Lambrianidou
EXECUTED AS A DEED by	)
the Executive	)	/s/ George Dienis
in the presence of:	)	/s/ Olga Lambrianidou

17

Amendment No. 1

to Service Agreement

Agreement dated as of January 20, 2005 (the “Amendment”) between S.S.L. Services Limited, a Bermuda corporation (the “Company”), and George Dienis (the “Executive”), amending the Agreement dated August 12, 2004 between the Company and the Executive (the “Service Agreement”).

The Company employs the Executive as its Chief Operating Officer pursuant to the Service Agreement. The Company is a subsidiary of Overseas Shipping (GR) Ltd., a Marshall Islands corporation formerly named Stelmar Shipping Ltd. and formerly incorporated in Liberia (“Stelmar”). On January 20, 2005, Stelmar was acquired through merger by Overseas Shipholding Group, Inc. (“OSG”) and the Company became an indirect, wholly-owned subsidiary of OSG. The Company and the Executive desire to amend certain provisions of the Service Agreement as a result of OSG’s acquisition of Stelmar on the terms set forth in this Amendment. Capitalized terms used in this Amendment without definition herein have the meanings assigned them in the Service Agreement.

The parties hereby agree as follows:

1.Clause 3.2 of the Service Agreement

Clause 3.2 of the Service Agreement is hereby amended to read in its entirety as follows:

“3.2Notwithstanding clause 3.1, the Employment shall automatically terminate when the Executive reaches the age of 65 unless the Executive is notified otherwise in writing by the Board.”

2.Clause 6.1 of the Service Agreement

The first sentence of clause 6.1 of the Service Agreement is hereby amended to read in its entirety as follows:

“6.1The Company shall pay to the Executive a salary of the rate of Euros 242,998 per annum (which for the avoidance of doubt, does not include the remuneration payable under the GSA) which shall accrue day to day and be payable by equal monthly installments in arrears on or about the last day of each calendar month.”

3.Clause 14.3 of the Service Agreement

(a)The first sentence of clause 14.3 of the Service Agreement is hereby amended to read in its entirety as follows:

“14.3In the event of a Change in Control occurring on or before January 20, 2005 during the Employment and notwithstanding any other provisions of this Agreement:”

(b)The following Clause 14.3.6 is hereby added to the Service Agreement immediately after Clause 14.3.5 of the Service Agreement:

“14.3.6Notwithstanding any other provision of this Agreement, the provisions of this Agreement concerning a Change in Control, including the provisions of clauses 14.3.1 through 14.3.5, shall have no effect and be deemed void with respect to any Change in Control that occurs after January 20, 2005.”

4.Governing Law; Continuing Effectiveness of Service Agreement

(a)This Amendment shall be governed by and interpreted in accordance with Bermuda law.

(b)Except as amended by this Amendment, the Service Agreement shall remain in full force and effect.

In Witness Whereof, this Agreement has been executed as of the day and year first above written.

	S.S.L. Services Limited
	By:	/s/Morten Arntzen
Witnessed by:		Name:Morten Arntzen
		Title:  Authorized Signatory
/s/James I. Edelson
Witnessed by:
/s/James I. Edelson		/s/George Dienis
		George Dienis

EX-12

EXHIBIT 12

Overseas Shipholding Group, Inc.

Ratio of Earnings to Fixed Charges

(In thousands, except ratios)

	Year ended December 31,
	2005			2004			2003
Earnings:
Income before federal income taxes	$	463,719		$	481,014		$	168,153
Less: equity in (earnings) of 50%–or-less-owned companies	(43,807		)	(45,599		)	(33,965		)
Pretax income from continuing operations	419,912			435,415			134,188
Add: fixed charges	106,306			78,662			68,746
Less: interest capitalized during the period	(3,885		)	(201		)	(3,987		)
Add: amortization of capitalized interest	3,000			3,000			3,000
Total Earnings	$	525,333		$	516,876		$	201,947
Fixed charges:
Interest expense, including amortization of deferred finance costs	$	89,489		$	74,146		$	62,124
Add: interest capitalized during the period	3,885			201			3,987
Add: interest portion of rental expense	12,932			4,315			2,635
Total Fixed Charges	$	106,306		$	78,662		$	68,746
Ratio of earnings to fixed charges	4.9		x	6.6		x	2.9		x

EX-21

EXHIBIT 21

As of 2/16/06

SUBSIDIARIES OF OVERSEAS SHIPHOLDING GROUP, INC.

The following table lists all subsidiaries of the registrant and all companies in which the registrant directly or indirectly owns at least a 49% interest, except for certain companies which, if considered in the aggregate as a single entity, would not constitute a significant entity.  All of the entities named below are corporations, unless otherwise noted.

Name	Where Incorporated, Organized or Domiciled
Africa Tanker Corporation	Marshall Islands
Alcesmar Limited	Marshall Islands
Alcmar Limited	Marshall Islands
Allenmar Limited	Marshall Islands
Almar Limited	Marshall Islands
Ambermar Limited	Marshall Islands
Ambermar Tanker Corporation	Delaware
Ambrit Holdings, Inc.	Delaware
American Shipholding Group, Inc.	New York
Amity Products Carriers, Inc.	Delaware
Andromar Limited	Marshall Islands
Ania Tanker Corporation	Marshall Islands
Antigmar Limited	Marshall Islands
Antilles Bulk Holdings N.V.	Netherlands Antilles
Aquamar Shipping Limited	Marshall Islands
Aquarius Tanker Corporation	Marshall Islands
Ariadmar Limited	Marshall Islands
Ariel Shipping Corporation	Marshall Islands
Aspro Tanker Corporation	Marshall Islands
Atalmar Limited	Marshall Islands
Aurora Shipping Corporation	Marshall Islands
Avila Tanker Corporation	Marshall Islands
Bravery Tanker Corporation	Marshall Islands
Cabo Hellas Limited	Marshall Islands
Cabo Sounion Limited	Marshall Islands
Camar Limited	Marshall Islands
Cambridge Tankers, Inc.	New York
Capemar Limited	Marshall Islands
Caribbean Tanker Corporation	Marshall Islands
Chrismir Cape Corporation	Marshall Islands

Name	Where Incorporated, Organized or Domiciled
Cleliamar Ltd.	Marshall Islands
Cleliamar Product Carrier Corporation	Marshall Islands
Colmar Ltd	Marshall Islands
Concept Tanker Corporation	Marshall Islands
Delphina Product Carrier Corporation	Marshall Islands
Delphina Tanker Corporation	Delaware
DHT Ania Aframax Corp.	Marshall Islands
DHT Ann VLCC Corp.	Marshall Islands
DHT Cathy Aframax Corp.	Marshall Islands
DHT Chris VLCC Corp.	Marshall Islands
DHT Rebecca Aframax Corp.	Marshall Islands
DHT Regal Unity VLCC Corp.	Marshall Islands
DHT Sophie Aframax Corp.	Marshall Islands
Diane Tanker Corporation	Marshall Islands
Dorado Tanker Corporation	Marshall Islands
Dundee Navigation S.A.	Marshall Islands
East Coast Gaugings Limited	England
Edindun Shipping Corporation	Marshall Islands
Eight Product Tankers Corporation	Delaware
Eighth Aframax Tanker Corporation	Marshall Islands
Ermar Limited	Marshall Islands
ERN Holdings Inc.	Panama
Fifth Aframax Tanker Corporation	Marshall Islands
First Pacific Corporation.	Marshall Islands
First Products Tankers, Inc.	Marshall Islands
First Shipco Inc.	Marshall Islands
First Union Tanker Corporation	Marshall Islands
Five Product Tankers Corporation	Delaware
400 Equity Corporation	Delaware
401 Equity Corporation	Delaware
Four Product Tankers Corporation	Delaware
Fourth Aframax Tanker Corporation	Marshall Islands
Fourth Products Tankers, Inc.	Marshall Islands
Fourth Spirit Holding N.V.	Netherlands Antilles
Friendship Marine Inc.	Liberia
Front Tobago, Inc.	Liberia
Galena Tanker Corporation	Delaware
Goldmar Limited	Marshall Islands
Hyperion Shipping Corporation	Marshall Islands
Imperial Tankers Corporation	Marshall Islands
International Seaways, Inc.	Marshall Islands
Jacamar Ltd	Marshall Islands
Jademar Limited	Marshall Islands

2

Name	Where Incorporated, Organized or Domiciled
Jamar Limited	Marshall Islands
Juneau Tanker Corporation	New York
Keymar Ltd	Marshall Islands
Kliomar Ltd	Marshall Islands
Leo Tanker Corporation	Marshall Islands
Limar Limited	Marshall Islands
Lion Tanker Corporation	Marshall Islands
Loucamar Ltd.	Liberia
Luxmar Limited	Marshall Islands
Luxmar Tanker Corporation	Delaware
Majestic Tankers Corporation	Marshall Islands
Maremar Limited	Marshall Islands
Maremar Tanker Corporation	Delaware
Marina Tanker Corporation.	Marshall Islands
Marship Tankers (Holdings) Ltd.	British Virgin Islands
Martank Shipping (Holdings) Ltd.	British Virgin Islands
Matilde Cape Corporation	Marshall Islands
Meridian Tanker Corporation	Marshall Islands
Nedimar Limited	Marshall Islands
Neptune Product Carrier Corporation	Marshall Islands
New Orleans Tanker Corporation	Delaware
Nine Product Tankers Corporation	Delaware
Ninth Aframax Tanker Corporation	Marshall Islands
Northam Carriers Ltd.	Marshall Islands
Northanger Shipping Corporation	Marshall Islands
Northwestern Tanker Corporation	Marshall Islands
Ocean Bulk Ships, Inc.	Delaware
Oceania Tanker Corporation	Marshall Islands
Oleron Tanker S.A.	Panama
Olympia Tanker Corporation	Marshall Islands
One Product Tankers Corporation	Delaware
OSG Bulk Ships, Inc.	New York
OSG Car Carriers, Inc.	New York
OSG Financial Corp.	Delaware
OSG Foundation	New York
OSG Group Purchasing Limited	England
OSG International Partners (partnership)	Liberia
OSG International, Inc.	Marshall Islands
OSG Nakilat Corporation	Marshall Islands
OSG New York, Inc.	Marshall Islands
OSG Product Tankers Corporation	Delaware
OSG Product Tankers I, LLC	Delaware
OSG Product Tankers II, LLC	Delaware

3

Name	Where Incorporated, Organized or Domiciled
OSG Product Tankers, LLC	Delaware
OSG Ship Management (GR) Ltd.	Marshall Islands
OSG Ship Management (London) Limited	England
OSG Ship Management (UK) Ltd.	England
OSG Ship Management Asia Pacific Pte Ltd.	Singapore
OSG Ship Management, Inc.	Delaware
OSG Tankers (UK) Ltd.	Marshall Islands
OSG ULCC Corporation	Delaware
Overseas LNG H1 Corporation	Marshall Islands
Overseas LNG H2 Corporation	Marshall Islands
Overseas LNG S1 Corporation	Marshall Islands
Overseas LNG S2 Corporation	Marshall Islands
Overseas Shipping (GR) Ltd.	Marshall Islands
Palmar Maritime Ltd.	Marshall Islands
Panamax International Ltd.	Marshall Islands
Pearlmar Limited	Marshall Islands
Petromar Limited	Marshall Islands
Philadelphia Tanker Corporation	Delaware
Polmar Ltd	Marshall Islands
Polys Product Carrier Corporation	Marshall Islands
Primar Shipping Limited	Marshall Islands
Promar Ltd	Liberia
Puget Carrier Corporation	Delaware
Regency Tankers Corporation	Marshall Islands
Reginamar Limited	Marshall Islands
Reinemar Limited	Marshall Islands
Reliance Shipping B.V.	Netherlands
Rex Shipholdings Inc. .	Liberia
Reymar Limited	Marshall Islands
Rich Tanker Corporation	Marshall Islands
Rimar Limited	Marshall Islands
Rio Grande Bulk Carriers, Inc.	Marshall Islands
Rosalyn Tanker Corporation	Marshall Islands
Rosemar Limited	Marshall Islands
Royal Tankers Corporation	Marshall Islands
Ruby Tanker Corporation	Marshall Islands
Rubymar Limited	Marshall Islands
Sakura Transport Corp.	Marshall Islands
Sapphire Tanker Corporation	Marshall Islands
Sargasso Tanker Corporation	Marshall Islands
Second Products Tankers, Inc.	Marshall Islands
Seven Product Tankers Corporation	Delaware
Seventh Aframax Tanker Corporation	Marshall Islands

4

Name	Where Incorporated, Organized or Domiciled
Ship Paying Corporation No. 1	Delaware
Ship Paying Corporation No. 3	Liberia
Silvermar Limited	Marshall Islands
Six Product Tankers Corporation	Delaware
Sixth Aframax Tanker Corporation	Marshall Islands
Souter Shipping (Bermuda) Ltd.	Bermuda
Spirit Shipping B.V.	Netherlands
SSL Services Ltd.	Bermuda
Takamar Ltd.	Marshall Islands
Tanker Management Ltd.	England
Ten Product Tankers Corporation	Delaware
Tenth Aframax Tanker Corporation	Marshall Islands
Third Aframax Tanker Corporation	Marshall Islands
Third Products Tankers, Inc.	Marshall Islands
Third United Shipping Corporation	Marshall Islands
1395 Tanker Corporation	Marshall Islands
1372 Tanker Corporation	Marshall Islands
1320 Tanker Corporation	Marshall Islands
1321 Tanker Corporation	Marshall Islands
398 Equity Corporation	Delaware
399 Equity Corporation	Delaware
Three Product Tankers Corporation	Delaware
Timor Navigation Ltd.	Marshall Islands
Tokyo Transport Corp.	Marshall Islands
Trader Shipping Corporation.	Marshall Islands
Transbulk Carriers, Inc. .	Delaware
Tubarao Bulk Carriers, Inc.	Marshall Islands
Two Product Tankers Corporation	Delaware
U.S. Shipholding Group, Inc.	New York
Uranus Product Carrier Corporation	Marshall Islands
Urban Tanker Corporation	Marshall Islands
Vega Product Carrier Corporation	Marshall Islands
Vega Tanker Corporation	Delaware
Venus Tanker Corporation	Marshall Islands
View Tanker Corporation	Marshall Islands
Vivian Tankships Corporation	New York
V-Plus N.V.	Belgium
Western Ship Agencies Limited	England

5

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-88581, Form S-8 No. 333-95029, Form S-8 No. 333-40204, Form S-8 No. 333-121188 and Form S-3 No. 333-111890) of Overseas Shipholding Group, Inc. of our reports dated February 23, 2006 with respect to the consolidated financial statements of Overseas Shipholding Group, Inc. and subsidiaries, and Overseas Shipholding Group, Inc. management’s assessment of the effectiveness of internal control over financial reporting of Overseas Shipholding Group, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2005.

ERNST & YOUNG LLP

New York, New York

February 28, 2006

EX-31.1

EXHIBIT 31.1

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) AND 15d-14(a), AS AMENDED

I, Morten Arntzen, certify that:

1.I have reviewed this annual report on Form 10-K of Overseas Shipholding Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: February 28, 2006	/s/ Morten Arntzen
	Morten Arntzen
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) AND 15d-14(a), AS AMENDED

I, Myles R. Itkin, certify that:

1.I have reviewed this annual report on Form 10-K of Overseas Shipholding Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: February 28, 2006	/s/ Myles R. Itkin
	Myles R. Itkin
	Chief Financial Officer

EX-32

EXHIBIT 32

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Each of the undersigned, the Chief Executive Officer and the Chief Financial Officer of Overseas Shipholding Group, Inc. (the “Company”), hereby certifies, to the best of his knowledge and belief, that the Form 10-K of the Company for the annual period ended December 31, 2005 (the “Periodic Report”) accompanying this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.  This certification is provided solely for purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act and is not intended to be used for any other purpose.

Date: February 28, 2006	/s/ Morten Arntzen
	Morten Arntzen
	Chief Executive Officer
Date: February 28, 2006	/s/ Myles R. Itkin
	Myles R. Itkin
	Chief Financial Officer