Exhibit 10.2
CHANGE IN
CONTROL AGREEMENT
THIS CHANGE IN
CONTROL AGREEMENT (“Agreement”) is made and entered
into this 5th day of August, 2008, (the “Effective
Date”) by and between HORNBECK OFFSHORE OPERATORS, LLC
, a Delaware limited liability company (“Employer”),
and John S. Cook, residing at 116 Cornerstone Drive, Mandeville, LA
70448 (“Employee”).
WHEREAS, Employee
is currently employed with Employer in the position of Senior Vice
President and Chief Information Officer and may serve (and if
requested by Employer shall serve) as an officer of
Employer’s parent, Hornbeck Offshore Services, Inc., a
Delaware corporation (“Parent”), or any subsidiary or
affiliate of Employer or Parent; and
WHEREAS, Employee
and Employer desire to enter into an Agreement providing for
certain change in control benefits to Employee and certain
restrictive covenants, covering without limitation nondisclosure of
confidential information and non-competition.
NOW, THEREFORE,
in consideration of the premises and mutual covenants contained
herein and for other good and valuable consideration, the receipt
and sufficiency of which is mutually acknowledged, Employer and
Employee agree as follows:
WITNESSETH:
1. Term .
The term of this Agreement shall begin on the Effective Date and
shall continue through December 31, 2009; provided, however,
that beginning on January 1, 2009, and on every January 1
thereafter (each a “Renewal Date”), the then existing
term of this Agreement shall automatically be extended one
(1) additional year unless either party gives the other
written notice of termination at least ninety (90) days prior
to any such Renewal Date. Notwithstanding the foregoing, this
Agreement shall terminate on the earlier of (i) the date that
is six (6) months following the termination of
Employee’s employment with Employer or (ii) the date
that is twelve (12) months following a Change in Control.
Following the date of termination of this Agreement, Employee shall
have no further rights, including but not limited to rights under
Sections 3 and 4 , or obligations hereunder, except
obligations set forth in Sections 6 and 7 .
2.
Definitions . The following terms used in this Agreement
shall have the following meanings:
(a)
“Cause” shall mean:
(i)
Employee’s conviction of either a felony involving moral
turpitude or any crime in connection with his employment by
Employer that causes Employer a substantial detriment, but
specifically shall not include traffic offenses;
(ii) actions or
inactions by Employee that clearly are contrary to the best
interests of Employer;
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(iii)
Employee’s willful failure to take actions permitted by law
and necessary to implement policies of the Board of Directors of
Employer and/or the Board of Directors of Parent (collectively
referred to as the “Board”) that the Board has
communicated to him in writing, provided that such policies that
are reflected in minutes of a Board meeting attended in its
entirety by Employee shall be deemed communicated to
Employee;
(iv)
Employee’s continued failure to devote his full business
time, energy and attention to his duties as an executive officer of
Employer or its affiliates, following written notice from the Board
to Employee of such failure; or
(v) any condition
that either resulted from Employee’s current substantial
dependence on alcohol, or any narcotic drug or other controlled or
illegal substance. If any determination of substantial dependence
is disputed by Employee, the parties hereto agree to abide by the
decision of a panel of three physicians. Employee and the
compensation committee of the Board shall each appoint one member,
and the third member of the panel shall be appointed by the other
two members. Employee agrees to make himself available for and
submit to examinations by such physicians as may be directed by the
compensation committee of the Board. Failure of Employee to submit
to any such examination shall constitute a breach of a material
part of this Agreement.
With respect to
(ii) through (v) above, such circumstances shall not
constitute “Cause” unless Employee has failed to cure
such circumstances within ten (10) business days following
written notice thereof from the Board identifying in reasonable
detail the manner in which Employer believes that Employee has not
performed such duties and indicating the steps Employer requires to
cure such circumstances.
(b) “Change
in Control” shall mean:
(i) the obtaining
by any person or persons acting as a group of fifty percent
(50%) or more of the voting shares of Parent pursuant to a
“tender offer” for such shares as provided under Rule
14d-2 promulgated under the Securities Exchange Act of 1934, as
amended, or any subsequent comparable federal rule or regulation
governing tender offers; or
(ii) a majority
of the members of the Parent’s board of directors is replaced
during any twelve (12) month period by new directors whose
appointment or election is not endorsed by a majority of the
members of the Parent’s board of directors before the date of
such new directors’ appointment or election; or
(iii) any person,
or persons acting as a group, acquires (or has acquired during the
twelve (12) month period ending on the date of the most recent
acquisition by such person or persons) assets from the Parent that
have a total gross fair market value equal to or more than
seventy-five percent (75%) of the total gross fair market
value of all of the assets of the Parent immediately
before
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such acquisition
or acquisitions (other than transfers to related persons as defined
in Section 1.409A-3(i)(5)(vii)(B) of the Treasury
Regulations).
The determination
of whether a Change in Control has occurred shall be made in
accordance with Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), and the Treasury
Regulations and other guidance issued thereunder.
(c)
“Constructive Termination” shall mean
Employer:
(i) has reduced
Employee’s annual base salary or potential bonus level or any
incentive compensation or equity incentive compensation plan
benefit (as in effect immediately before such Change in
Control);
(ii) has
relocated Employee’s office to a location that is more than
fifty (50) miles from the location in which Employee
principally works for Employer or Parent immediately before such
Change in Control;
(iii) has
relocated the principal executive office of Parent, Employer or the
office of Employer’s operating group for which Employee
performed the majority of his services for Employer during the year
before the Change in Control to a location that is more than fifty
(50) miles from the location of such office immediately before
such Change in Control;
(iv) has required
Employee, in order to perform duties of substantially equal status,
dignity and character to those duties Employee performed
immediately before the Change in Control, to travel on
Employer’s business to a substantially greater extent than is
consistent with Employee’s travel obligations immediately
before such Change in Control;
(v) has failed to
continue to provide Employee with benefits substantially equivalent
to those enjoyed by Employee under any of Employer’s life
insurance, medical, health and accident or disability plans and
incentive compensation or equity incentive compensation plans in
which Employee was participating immediately before the Change in
Control;
(vi) has taken
any action that would directly or indirectly materially reduce any
of such benefits or deprive Employee of any material fringe benefit
enjoyed by Employee immediately before the Change in Control;
or
(vii) has failed
to provide Employee with at least the number of paid vacation days
to which Employee is entitled on the basis of years of service
under Employer’s normal vacation policy in effect immediately
before the Change in Control giving credit for time served at prior
employers.
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3. Change in
Control Payment . If a Change in Control occurs,
and:
(a) Employee
voluntarily terminates his employment within one (1) year
following such Change in Control and such termination is a result
of a Constructive Termination;
(b) Employee
voluntarily terminates his employment within one (1) year
following such Change in Control and such termination is a result
of Employee’s good faith determination that as a result of
the Change in Control and a change in circumstances thereafter
significantly affecting his position other than those constituting
Constructive Termination, he can no longer adequately exercise the
authorities, powers, functions or duties attached to his position
as an executive officer of Employer, Parent or any of their
affiliates;
(c) Employee
voluntarily terminates his employment within one (1) year
following such Change in Control, and such termination is a result
of Employee’s good faith determination that he can no longer
perform his duties as an executive officer of Employer, Parent or
any of their affiliates by reason of a substantial diminution in
his responsibilities, status, title or position; or
(d) Employer
terminates Employee’s employment for reasons other than for
Cause within one (1) year following or six (6) months
prior to such Change in Control;
then in any of
the above four cases, Employee shall have the right to receive from
Employer, within fifteen (15) business days following the date
Employee notifies Employer of his voluntary termination pursuant to
Section 3(a), (b) or (c) or within three
(3) business days of the later of the Change in Control or
having his employment terminated pursuant to
Section 3(d) , (A) a lump sum cash payment equal
to one and one-half (1 1
/
2
) times
the greater of (i) the amount of Employee’s then-current
annual base salary or (ii) the amount of Employee’s
annual base salary in effect immediately preceding the Change in
Control; plus one and one-half (1 1
/
2
) times
the greater of (x) the amount equal to the total bonus paid
for the last completed year for which bonuses have been paid or
(y) the amount equal to the bonuses that would have been
payable for the then current year (or, in the case of termination
date that occurs between January 1 of any year and the date
that bonuses are paid based on the previous year), such previous
year determined on a basis consistent with the last completed year
for which bonuses have been paid but using the projected bonus
amounts for the then current year (or, in the case of a termination
date that occurs between January 1 of any year and the date
that bonuses are paid based on the previous year, such previous
year), determined by extrapolating the information as of the
termination date based on the best information available at the
time of the calculation; provided, however, that if Employee for
any reason did not receive a bonus in the immediately preceding
year and would not have been eligible for a bonus under (y) of
the previous clause, Employee shall be deemed for purposes of this
Section 3 to have received a bonus in the amount of
one-fourth of his annual base salary for such year, and
(B) medical plan coverage and other insurance benefits
provided for himself and his spouse and dependents (to the extent
his spouse and dependents are covered under the medical plan and
other insurance benefits as of the date of Employee’s
termination of employment) for a period of eighteen
(18) months following the date of Employee’s termination
of employment (provided, however, that if such benefits are
not
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available under
Employer’s benefit plans or applicable laws, Employer shall
be responsible for the cost of providing equivalent benefits), and
(C) any and all options, rights or awards granted in
conjunction with Parent’s or Employer’s incentive
compensation and stock option plans shall immediately vest;
provided that, with respect to restricted stock awards or
restricted stock unit awards that contain performance criteria for
vesting, the greater of (x) the Base Shares (as such term is
used in the restricted stock awards and restricted stock unit
awards) or (y) the number of shares that would have vested on
the date of the death or determination of permanent disability as
if such date were the end of the Measurement Period (as such term
is used in the restricted stock awards and the restricted stock
unit awards) shall vest and all other shares covered by such awards
shall be forfeited. Employee shall not be required to mitigate the
amount of any payment provided for in this Section 3 by
seeking other employment or otherwise. Without duplication with the
provisions under Section 4 , to the extent the
provision of any such medical benefits are taxable to Employee or
his spouse or dependents, Employer shall “gross up”
Employee for such taxes based on Employee’s actual tax rate
(certified to Employer by Employee), up to 35% (without a
“gross up” on the initial gross up). The obligation to
provide this medical plan coverage shall terminate in the event
Employee becomes employed by another employer that provides a
medical plan that fully covers Employee and his dependents without
a preexisting condition limitation. Employee shall be eligible for
payments pursuant to this Section 3 if Employee
complies with the terms of Sections 6 and 7 of this
Agreement.
4. Gross-Up
Payment .
(a) In the event
that it shall be determined (as hereafter provided) that any
payment by Employer to or for the benefit of Employee, whether paid
or payable pursuant to the terms of this Agreement or otherwise
pursuant to or by reason of any other agreement, policy, plan,
program or arrangement, including without limitation any equity
incentive compensation plan, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the
foregoing (collectively, a “Payment”), would be subject
to the excise tax imposed by Section 4999 of the Code, or any
successor provision thereto, by reason of being considered
“contingent on a change in ownership or control” of
Employer, within the meaning of Section 280G of the Code, or
any successor provision thereto, or to any similar tax imposed by
state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and
penalties, being hereafter collectively referred to as the
“Excise Tax”), then Employee shall be entitled to
receive an additional payment or payments (collectively, the
“Gross-Up Payment”). The Gross-Up Payment shall be in
an amount such that after payment by Employee of all taxes
including any Excise Tax (and including any interest or penalties
imposed with respect to such taxes and the Excise Tax, other than
interest and penalties imposed by reason of Employee’s
failure to file timely a tax return or pay taxes shown due on
Employee’s return) imposed upon the Gross-Up Payment, the
amount of the Gross-Up Payment retained by Employee is equal to the
Excise Tax imposed upon the Payment.
(b) All
determinations required to be made under this Section, including
whether an Excise Tax is payable by Employee and the amount of such
Excise Tax and whether a Gross-Up Payment is required to be paid by
Employer to Employee and the amount of such Gross-Up Payment, if
any, shall be made in good faith by a nationally
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recognized
accounting firm (the “Accounting Firm”) selected by
Employer at Employer’s expense. For purposes of determining
the amount of the Gross-Up Payment the Accounting Firm may use
reasonable assumptions and approximations with respect to
applicable taxes and may rely on reasonable good faith
interpretations of the Code for such purposes. Notwithstanding the
foregoing, for purposes of determining the amount of the Gross-Up
Payment Employee shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the
state and locality of Employee’s residence on the date on
which the Gross-Up Payment is calculated for purposes of this
section, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes. The
Accounting Firm will provide its determination (the
“Determination”), together with detailed supporting
calculations and documentation, to Employer and Employee within
five (5) days of the date Executive terminates employment, if
applicable, or such other time as requested by Employer or by
Employee (provided Employee reasonably believes that any of the
Payments may be subject to the Excise Tax). If the Accounting Firm
determines that there is substantial authority, within the meaning
of Section 6662 of the Code, or appropriate authority under
any successor provisions, that no Excise Tax is payable by
Employee, the Accounting Firm shall furnish Employee with a written
opinion that failure to disclose or report the Excise Tax on
Employee’s federal income tax return will not constitute a
substantial understatement of tax or be reasonably likely to result
in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon
Employer, absent manifest error. Within ten (10) days of the
delivery of the Determination to Employee, Employee will have the
right to dispute the Determination (the “Dispute”). The
Gross-Up Payment, if any, as determined pursuant to this Section
will be paid by Employer to Employee within five (5) days of
the receipt of the Determination. The existence of the Dispute will
not in any way affect Employee’s right to receive the
Gross-Up Payment in accordance with the Determination. If there is
no Dispute, the Determination will be binding, final and conclusive
upon Employer and Employee, subject to the application of
Section 4(c) .
(c) As a result
of the uncertainty in the application of Section 4999 of the
Code, at the time of the initial determination by the Accounting
Firm hereunder it is possible that part or all of the Gross-Up
Payment that should have been made by Employer to Employee will not
have been made (“underpayment”), or that part or all of
the Gross-Up Payment that has been made by Employer to Employee
should not have been made (“overpayment”). If a claim
regarding an underpayment is made by Employee, Employer may either
increase the Gross-Up Payment by the amount of the claimed
underpayment, or Employer may contest such claim subject to the
provisions of this Agreement. If a claim regarding an underpayment
is made by the Internal Revenue Service (the
“Service”), and such underpayment claim does not arise
as a result of Employee’s failure to remit to the Service any
Excise Tax due on any Payment, then Employer may either increase
the Gross-Up Payment by the amount of the claimed underpayment, or
Employer may contest such claim. If Employer decides to contest the
claim, Employer shall bear and pay directly the costs and expenses
(including additional interest and penalties) incurred in
connection with such contest, shall indemnify and hold
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Employee harmless
on an after-tax basis for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of
such underpayment claim, and payment of costs and expenses,
including advancing any funds necessary to pay the claim while it
is being contested. In such case, Employee agrees to cooperate with
and assist Employer in contesting such claim. In the event that
Employer exhausts its remedies and Employee is required to make a
payment of any Excise Tax in regard to an underpayment, the
Accounting Firm shall determine the amount of the underpayment that
has occurred and any such underpayment shall be promptly paid by
Employer to or for Employee’s benefit, if not already paid
during the process of contesting the claim. In the case of an
overpayment, Employee shall, at the direction and expense of
Employer, take such steps as are reasonably necessary (including
the filing of returns and claims for refund), follow reasonable
instructions from, and procedures established by, Employer, and
otherwise reasonably cooperate with Employer to correct such
overpayment; provided, however, that (i)&nbs
