NOTE 17 — LEASES:

1.	Charters-in:

As of December 31, 2012, the Company had commitments to charter-in 39 vessels. All of the charter-ins are accounted for as operating leases, of which 19 are bareboat charters and 20 are time charters. The future minimum commitments and related number of operating days under these operating leases before taking account of rejections described in Note 3, “Bankruptcy Filing and Going Concern,” above are as follows:

Bareboat Charters-in:

At December 31, 2012	Amount		Operating Days
2013	$	112,887		5,537
2014		116,389		5,475
2015		119,917		5,475
2016		121,200		5,490
2017		120,520		5,475
Thereafter		266,013		10,750
Net minimum lease payments	$	856,926		38,202

Time Charters-in:

At December 31, 2012	Amount		Operating Days
2013	$	112,169		8,314
2014		86,136		5,580
2015		67,388		4,212
2016		51,782		3,163
2017		36,237		2,226
Thereafter		25,652		1,561
Net minimum lease payments	$	379,364		25,056

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 because the Company does not pay time charter hire when time chartered-in vessels are not available for its use. Certain of these charters also provide the Company with renewal and purchase options.

In December 2012, the Bankruptcy Court issued orders permitting the Company to reject bareboat charter-in agreements on two Suezmaxes and three International Flag Handysize Product Carriers, originally scheduled to expire between 2014 and 2017. One Suezmax and one International Flag Handysize Product Carrier were redelivered to owners in December 2012 and the remaining three vessels were redelivered to owners in January 2013. The commitment tables above reflect the reduction in minimum commitments on the three vessels redelivered in January 2013. As of December 31, 2012, the Company recorded an estimate for lease termination costs totaling $30,187 related to the rejected charters that were redelivered in December 2012. The Company’s policy is to calculate estimates for lease termination costs related to the rejected charters using a market-participant’s discount rate. This amount is included in Liabilities Subject to Compromise in the consolidated balance sheet as of December 31, 2012. Refer to Note 24, “Subsequent Events,” for information on additional charter-in agreements rejected subsequent to December 31, 2012.

During the third quarter of 2010, the Company took delivery of the Overseas Kythnos, a newbuild International Flag Handysize Product Carrier, which commenced a bareboat charter-in with a term of approximately five years. In late-October 2010, OSG completed the purchase of the Overseas Kythnos and the bareboat charter-in was canceled.

On December 11, 2009, the Company entered into an agreement with American Shipping Company ASA (“AMSC”) and Aker Philadelphia Shipyard ASA (“APSI”), and certain of their affiliates and other related parties (collectively “Aker”). In connection with such agreement, OSG agreed to purchase two U.S. Flag Handysize Product Carriers (Overseas Cascade and Overseas Chinook), which vessels were previously subject to bareboat charters-in. In addition, the agreement provided that if certain conditions were satisfied by Aker, the charter-in terms of the other ten Product Carriers constructed by APSI would be extended to a period of ten years from December 11, 2009. These conditions were met during 2012 and on July 30, 2012, the Company entered into agreements with AMSC and its affiliates to extend or reduce, as applicable, the fixed term of the ten bareboat charter-in agreements to December 11, 2019.

2. Charters-out:

The future minimum revenues, before reduction for brokerage commissions, expected to be received on noncancelable time charters and certain COAs for which minimum annual revenues can be reasonably estimated 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:

			Revenue
At December 31, 2012	Amount		Days
2013	$	327,544		8,547
2014		200,275		4,140
2015		86,400		1,428
2016		28,783		373
2017		22,347		269
Thereafter		52,085		612
Net minimum lease payments	$	717,434		15,369

Future minimum revenues do not include (1) the Company’s share of time charters entered into by the pools in which it participates, (2) the Company’s share of time charters entered into by the joint ventures, which the Company accounts for under the equity method and (3) COAs for which minimum annual revenues cannot be reasonably estimated. Revenues from those COAs that are included in the table above, $22,254 (2013), $21,375 (2014), $21,699 (2015), $22,023 (2016), $22,347 (2017) and $52,085 (thereafter), are based on minimum annual volumes of cargo to be loaded during the contract periods at a fixed price and do not contemplate early termination of the COAs as provided in the agreements. Amounts that would be due to the Company in the event of the cancellation of the COA contracts have not been reflected in the above table. 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.

Effective September 1, 2012, the Company entered into a termination, settlement and replacement agreement with Sunoco, a core customer of the Company’s Delaware Bay lightering business. The agreement, among other things, provided for (i) a 50% reduction of the required minimum barrel volumes under the long-term lightering contract; (ii) Sunoco’s relinquishment of any right to approximately $27,100 previously paid to the Company and accounted for as deferred revenues, which otherwise would have been carried forward and applied toward the cost of lightering barrels for Sunoco in excess of the minimum barrel volumes stated in the original lightering contract; and (iii) the payment by Sunoco of $13,300 as additional compensation for the reduction in the minimum barrels under the replacement agreement. A total of $40,400 was recognized in shipping revenues during the third quarter of 2012 related to this termination, settlement and replacement agreement. The new agreement runs through April 2020.

3.	Office space:

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

At December 31, 2012
2013	$	4,648
2014		4,160
2015		3,564
2016		3,704
2017		3,599
Thereafter		9,286
Net minimum lease payments	$	28,961

The rental expense for office space, which is included in general and administrative expenses in the consolidated statements of operations, amounted to $4,550 in 2012, $4,614 in 2011 and $5,013 in 2010. Refer to Note 24, “Subsequent Events,” for information on a lease agreement for office space rejected subsequent to December 31, 2012.