Executive Retention Agreement - HE Holdings Inc.
HE Holdings, Inc.
Executive Retention Agreement
Agreement entered into this 20th day of January 1997 by and between HE Holdings,
Inc., a Delaware corporation (the 'Company') and Name, (the 'Executive').
The Board of Directors of General Motors Corporation is negotiating a change in
control of the ownership of the Company and desires to retain and incentivize
the Executive to lead the implementation of the change in ownership.
Additionally, the Company desires to assure the continued attention to
responsibilities of the Executive without any distraction arising out of the
circumstances surrounding the change in ownership.
The Company and the Executive desire to enter into this Agreement and for good
and valuable consideration and the mutual covenants contained in this agreement
the parties agree as follows:
1. Definitions. The following terms shall have the following meaning for
purposes of this Agreement.
a. 'Award Compensation' means amount times Base Compensation.
b. 'Base Compensation' means the annual rate of base salary of the
Executive as of the date of a Change in Control, plus the actual Annual
Incentive Plan bonus paid for performance in the calendar year
immediately preceding the date of a Change in Control.
c. 'Cause' means the Executive's (i) conviction of, or plea of nolo
contendere to, a felony; (ii) use of illegal drugs; or (iii) willful
and intentional misconduct, willful neglect or gross negligence, in the
performance of the Executive's duties, which the Company reasonably
believes has caused a demonstrable and serious injury to the Company,
monetary or otherwise; provided, however, that such acts or events
shall constitute Cause only if the Executive is given written notice
that the Company intends to terminate the Executive's employment for
Cause, which notice shall specify the particular acts or failures to
act on the basis of which the decision to so terminate employment was
made. In the case of a termination for Cause as described in clause
(iii) above, the Executive shall be given the opportunity within 30
days of the receipt of such notice to meet with the Company to defend
such acts or failures to act, prior to termination. The Company may
suspend the Executive's title and authority pending such meeting.
d. 'Change in Control' means during the Term the effective date of (a) a
change in ownership of the common stock of the Company, whether by
sale, merger, consolidation or reorganization pursuant to which General
Motors Corporation does not directly or indirectly own more than 50% of
the outstanding common stock, in value, of the Company or any successor
surviving entity, or (b) the sale or distribution of all or
substantially all of the assets of the Company to an unrelated entity
or entities or to an entity in which General Motors Corporation does
not directly or indirectly own more than 50% in value of the equity of
e. 'Code' means the Internal Revenue Code of 1986, as amended.
f. 'Company' means HE Holdings, Inc. and its successors and assigns.
g. 'Term' means the period commencing on the date of this Agreement and
continuing for three years.
2. Payment of Award Compensation
a. Provided that the Executive is employed by the Company or its
subsidiaries on the first anniversary of a Change in Control, the
Company shall pay to the Executive, on such first anniversary, 50% of
the Award Compensation.
b. Provided that the Executive is employed by the Company or its
subsidiaries on the second anniversary of a Change in Control, the
Company shall pay to the Executive, on such second anniversary, the
Award Compensation not paid under 'a' above.
c. If the Executive's employment is involuntarily terminated by the
Company (other than for Cause) after a Change in Control at least one
year after the Change in Control and prior to the payment of the total
Award Compensation, the Company shall pay the Executive an amount equal
to (i) the Award Compensation times a fraction, the numerator of which
is the number of full calendar months in which the Executive was
employed by the Company or its subsidiaries after the Change in
Control, and the denominator of which is 24, less (ii) any amount of
Award Compensation previously paid to the Executive under 'a', above.
3. Excise Taxes.
a. Anything in this Agreement to the contrary notwithstanding and except
as set forth below, if it is determined that any payment or
distribution by the Company to or for the benefit of Executive (whether
paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 3) (a 'Payment') would
be subject to the excise tax imposed by Section 4999 of the Code, or
any interest or penalties are incurred by Executive with respect to
such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the 'Excise
Tax'), then Executive shall be entitled to receive an additional
payment (a 'Gross-Up Payment') in an amount such that after payment by
Executive of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this paragraph
'a', if it is determined that Executive is entitled to a Gross-Up
Payment, but that Executive, after taking into account the Payments and
the Gross-Up Payment, would not receive a net after-tax benefit of at
least $50,000 (taking into account both income taxes and any Excise
Tax) as compared to the net after-tax proceeds to Executive resulting
from an elimination of the Gross-Up Payment and a reduction of the
payments, in the aggregate, to an amount (the 'Reduced Amount') such
that the receipt of Payments would not give rise to any Excise Tax then
no Gross-Up Payment shall be made to Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
b. Subject to the provisions of paragraph 'a', all determinations required
to be made under this Section 3, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be
made by a nationally recognized certified public accounting firm
selected by the Company (the 'Accounting Firm') which shall be retained
to provide detailed supporting calculations both to the Company and
Executive within 15 business days of the receipt of notice from
Executive that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section
3, shall be paid by the Company to Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and Executive.
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 Gross-Up Payments which will not
have been made by the Company should have been made ('Underpayment'),
consistent with the calculations required to be made hereunder. If the
Company exhausts its remedies pursuant to paragraph 'c' below and
Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.
c. Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after
Executive is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid or appealed. Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on
which the Executive gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies Executive in writing prior
to the expiration of such period that it desires to contest such claim,
(a) give the Company any information reasonable requested by the
Company relating to such claim,
(b) take such action in connection with contesting such claims as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
(c) cooperate with the Company in good faith in order to effectively
contest such claim, and
(d) permit the Company to participate in any proceedings relating to
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
Executive 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 representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this paragraph 'c',
the Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or
to contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to
Executive, on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder, and Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
d. If, after the receipt by Executive of an amount advanced by the Company
pursuant to paragraph 'c' above, Executive becomes entitled to receive
any refund with respect to such claim, Executive shall (subject to the
Company's complying with the requirements of paragraph 'c' above)
promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto).
If after the receipt by Executive of an amount advanced by the Company
pursuant to paragraph 'c' above, a determination is made that Executive
shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
4. Claims & Arbitration.
4.1 Arbitration of Claims. After exhausting administrative remedies provided
in applicable plans, if any, Executive shall settle by arbitration any
dispute or controversy arising in connection with this Agreement, whether
or not such dispute involves a plan subject to the Employee Retirement
Income Security Act of 1974, as amended ('ERISA'). Such arbitration shall
be conducted in accordance with the employment rules of the American
Arbitration Association before a panel of three arbitrators sitting in Los
Angeles, California. The award of the arbitrators shall be final and
nonappealable, and judgment may be entered on the award of the arbitrators
in any court having proper jurisdiction. All expenses of such arbitration
shall be borne by the Company in accordance with Section 4.2 hereof.
4.2 Payment of Legal Fees and Costs. The Company agrees to pay as incurred, to
the full extent permitted by law, all legal fees and expenses which
Executive may reasonably incur as a result of any contest (regardless of
the outcome thereof) by the Company or the Executive of the validity or
enforceability of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result of any contest
by Executive about the amount of payment pursuant to this Agreement), plus
in each case interest on any delayed payment at the applicable federal rate
provided for in Section 7872 (f) (2) (A) of the Code.
4.3 Agent for Service of Legal Process. Service of legal process with respect
to a claim under this Agreement shall be made upon the General Counsel of
5. Tax Withholding. All payments to the Executive under this Agreement will
be subject to the withholding of all applicable employment and income
6. Employment Rights and Termination of Employment. This Agreement shall not
confer upon the Executive any right to the continuation of employment with
7. Severability. In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect.
8. Successors. This Agreement shall be binding upon and inure to the benefit
of the Company and any successor of the Company. The Company will require
any successor to all or substantially all of the business and/or assets of
the Company to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform if no succession had taken place.
9. Notices. Any notice required under this Agreement shall be in writing and
shall be delivered by certified mail return receipt requested to each of
the parties as follows:
To the Executive: Name
To the Company: HE Holdings, Inc.
7200 Hughes Terrace
Los Angeles, CA 90045
or to such other address as either party shall have furnished to the other
in writing in accordance herewith.
10. Governing Law. The provisions of this Agreement shall be construed in
accordance of the laws of the state of California, to the extent not
preempted by ERISA.
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date and year first above written.
HE HOLDINGS, INC.