AMENDED AND RESTATED
EMPLOYMENT AND COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AND COMPENSATION AGREEMENT (this
"Agreement"), made and entered into as of April 1, 2000, between Terex
Corporation, a Delaware corporation, with its principal office located at 500
Post Road East, Suite 320, Westport, CT (together with its successors and
assigns permitted under this Agreement) ("Terex"), and Ronald M. DeFeo
("DeFeo"), whose address is 45 Beachside Avenue, Westport, CT 06880.
W I T N E S S E T H:
WHEREAS, Terex and DeFeo entered into that certain Employment and
Compensation Agreement dated as of June 1, 1999 (the "Original Agreement").
WHEREAS, Terex has determined that it is in the best interests of Terex
and its stockholders to enter into this Agreement amending and restating the
obligations and duties of both Terex and DeFeo; and
WHEREAS, Terex wishes to assure itself of the services of DeFeo for the
period hereinafter provided, and DeFeo is willing to be employed by Terex for
said period, upon the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Terex and DeFeo (individually a "Party" and
together the "Parties") agree as follows:
1. DEFINITIONS.
(a) "Affiliate" shall mean an entity
(i) that is directly or indirectly controlled by or under common
control with Terex, or
(ii) that controls Terex.
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(b) "Base Salary" shall mean the annual salary provided for in Section
3 below, as adjusted from time to time by the Board.
(c) "Beneficial Owner" shall have the meaning defined in Rule 13d-3
under the Exchange Act.
(d) "Beneficiary" shall mean the person or persons named by DeFeo
pursuant to Section 21 below or, in the event that no such person is named
and survives DeFeo, his estate.
(e) "Board" shall mean the Board of Directors of Terex.
(f) "Cause" shall mean:
(i) DeFeo's conviction in a court of law of, or guilty plea or no
contest plea to, a felony charge or a misdemeanor charge involving
moral turpitude,
(ii) willful, substantial and continued failure by DeFeo to
perform his duties under this Agreement,
(iii) willful engagement by DeFeo in conduct that is demonstrably
and materially injurious to Terex,
(iv) entry by a court or quasi-judicial governmental agency of
the United States or a political subdivision thereof of an order
barring DeFeo from serving as an officer or director of a public
company, or
(v) a breach by DeFeo of Section 10 or Section 11 below. For the
purposes of clauses (ii) and (iii) of this definition, no act or
failure to act on the part of DeFeo shall be deemed "willful" (x) if
caused by a Disability or (y) unless done, or omitted to be done, by
him not in good faith or without reasonable belief that his act or
omission was in the best interest of Terex.
(g) "Change in Control" shall mean
(i) any Person becoming the Beneficial Owner of 35 percent or
more of the combined voting power of Terex's then outstanding
securities, excluding any Person who becomes such a Beneficial Owner
in connection with transactions described in clauses (x), (y) or (z)
of paragraph (iii) below;
(ii) a change in the composition of the Board occurring within a
rolling two-year period, as a result of which fewer than a majority of
the directors are Incumbent Directors ("Incumbent Directors" shall
mean directors who either (x) are members of the Board as of the date
of this Agreement or (y) are elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination, but
shall not include an individual not otherwise an Incumbent Director
whose election or nomination is in connection with an actual or
threatened proxy contest, including but not limited to a consent
solicitation, relating to the election of directors to the Board);
(iii) consummation, in any transaction or series of transactions,
of a complete liquidation or dissolution of Terex or a merger,
consolidation or sale of all or substantially all of Terex's assets
(collectively, a "Business Combination") other than a Business
Combination after which (x) the stockholders of Terex own more than 50
percent of the combined voting power of the voting securities of the
company resulting from the Business Combination, (y) at least a
majority of the board of directors of the resulting corporation were
Incumbent Directors and (z) no individual, entity or group (excluding
any corporation resulting from the Business Combination or any
employee benefit plan of such corporation or of Terex) becomes the
Beneficial Owner of 35 percent or more of the combined voting power of
the securities of the resulting corporation, who did not own such
securities immediately before the Business Combination; or
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(iv) the stockholders of Terex approve a plan of complete
liquidation or dissolution of Terex or there is consummated a sale or
disposition by Terex of all or substantially all Terex's assets.
(h) "Code" shall mean the Internal Revenue Code of 1986, as from time
to time amended.
(i) "Committee" shall mean the Compensation Committee of the Board.
(j) "Covenant Period" shall mean the period beginning with
commencement of the Term and ending as provided in Section 11(b) and, as
applicable, Section 12(b).
(k) "Date of Termination" shall mean, with respect to any purported
termination of DeFeo's employment during the Term, (i) if DeFeo's
employment terminates due to Disability, 30 days after a good-faith
determination of Disability by Terex (provided that DeFeo shall not have
returned to full-time performance of his duties during such 30-day period),
and (ii) if DeFeo's employment terminates for any other reason, the date
specified in the Notice of Termination (which shall be not less than 30
days, and, in the case of Voluntary Termination by DeFeo, not more than 60
days, after the date of such Notice of Termination).
(l) "Disability" shall mean DeFeo's inability to perform the essential
duties set forth in this Agreement by reason of a physical or mental
disability or infirmity that has continued for more than six consecutive
months or for such shorter periods as aggregate more than 24 weeks in any
24-month period.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
from time to time amended.
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(n) "Good Reason" shall mean the occurrence (without DeFeo's express
written consent) of any one of the following acts or omissions by Terex
unless, in the case of any act or omission described in this Section 1(n)
or Section 9(j) below, such act or omission is corrected prior to the Date
of Termination specified in the Notice of Termination in respect thereof:
(i) the assignment to DeFeo of any duties inconsistent with
DeFeo's status as a senior executive officer of Terex or a substantial
adverse alteration in the nature of DeFeo's authority, duties or
responsibilities, or any other action by Terex which results in a
diminution in such status, authority, duties or responsibilities (it
being understood that a mere change in authority, duties or
responsibilities, or any other action by Terex will not constitute
Good Reason in and of itself unless it results in a substantial
adverse alteration or diminution of DeFeo's authority, duties or
responsibilities), excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which
is remedied by Terex promptly after receipt of notice thereof given by
DeFeo;
(ii) a reduction by Terex in DeFeo's base salary and/or annual
bonus as in effect on the date hereof or as the same may be increased
from time to time, except for across-the-board reductions similarly
affecting all senior executives of Terex, provided, however, that such
across-the-board reductions are not made as a result of, or in
contemplation of, a Change in Control;
(iii) the failure by Terex to pay to DeFeo any portion of DeFeo's
current compensation except pursuant to an across-the-board
compensation deferral similarly affecting all senior executives of
Terex, provided, however, that such across-the-board compensation
deferrals are not made as a result of, or in contemplation of, a
Change in Control;
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(iv) the failure by Terex to continue in effect any compensation
plan or other benefit in which DeFeo participates which is material to
DeFeo's total compensation, except pursuant to an across-the-board
compensation or benefit deferral or reduction similarly affecting all
senior executives of Terex, provided, however, that such
across-the-board compensation or benefit deferrals are not made as a
result of, or in contemplation of, a Change in Control;
(v) the failure by Terex to continue to provide DeFeo with
benefits substantially similar to those enjoyed by DeFeo under any of
Terex's pension, life insurance, medical, health and accident,
disability plans or other benefits (including, without limitation,
automobile, country club, vacation, and pension benefits) in which
DeFeo was participating at the time, the taking of any action by Terex
which would directly or indirectly materially reduce any of such
benefits or deprive DeFeo of any material fringe benefit enjoyed by
DeFeo at the time, (including, without limitation, automobile, country
club, vacation and pension benefits), or the failure by Terex to
provide DeFeo with the number of paid vacation days to which DeFeo is
then entitled; or
(vi) the relocation of Terex's principal offices to a location
more than 50 miles from the location of such offices on the date of
this Agreement or a requirement that DeFeo be based anywhere other
than at Terex's principal DeFeo offices except for necessary travel on
Terex's business to an extent substantially consistent with DeFeo's
business travel obligations on the date of this Agreement.
(o) "Notice of Termination" shall mean delivery of written notice by
one Party and receipt thereof by the other Party in accordance with Section
25 below, which notice shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
DeFeo's employment hereunder.
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(p) "Person" shall have the meaning defined in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
provided, however, that a Person shall not include:
(i) Terex or any subsidiary or affiliate (as such term is defined
in Rule 12b-2 promulgated under the Exchange Act),
(ii) a trustee or other fiduciary holding securities under an
employee benefit plan of Terex or any Subsidiary or Affiliate,
(iii) an underwriter temporarily holding securities pursuant to
an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the
stockholders of Terex in substantially the same proportion as their
ownership of stock of Terex.
(q) "Spouse" shall mean, during the Term of Employment, the woman who
as of any relevant date is legally married to DeFeo.
(r) "Subsidiary" shall mean a corporation of which Terex owns directly
or indirectly more than 50 percent of its outstanding securities
representing the right, other than as affected by events of default, to
vote for the election of directors.
(s) "Term of Employment" or "Term" shall mean the period specified in
Section 2(b) below during which DeFeo is employed by Terex or any of its
Affiliates.
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2. TERM OF EMPLOYMENT, POSITIONS AND DUTIES.
(a) Employment of DeFeo. Terex hereby employs DeFeo, and DeFeo hereby
accepts employment with Terex, in the position and with the duties and
responsibilities set forth below and upon such other terms and conditions
as are hereinafter stated.
(b) Term of Employment. The Term of Employment shall commence on the
date of this Agreement and shall terminate on December 31, 2001, unless it
is sooner terminated as provided in Section 9 below or extended by
agreement of the Parties; provided, however, that, if a Change in Control
shall occur on or prior to December 31, 2001, the Term of Employment shall
continue in effect until the later of (x) 36 months after the month in
which such Change in Control occurs or (y) December 31, 2001.
(c) Title, Duties and Authorities.
(i) Until termination of his employment hereunder, DeFeo shall be
employed as Chief Executive Officer of Terex, reporting to the Board,
with all the authorities and responsibilities that normally accrue to
the position of chief executive officer, and shall hold such other
titles as the Board may grant, including but not limited to President
and Chief Operating Officer of Terex.
(ii) Consistent with its obligations to stockholders, Terex
agrees to use its best efforts to procure the election of DeFeo as a
member of and Chairman of the Board and to ensure DeFeo's re-election
to that position during the Term.
(d) Time and Effort.
(i) DeFeo agrees to devote his best efforts and abilities and his
full business time and attention to the affairs of Terex in order to
carry out his duties and responsibilities under this Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude DeFeo
from
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(A) serving on the boards of (x) a reasonable number of
trade associations and charitable organizations, (y) United
Rentals, Inc. and (z) with the prior consent of the Board, any
other business not in competition with Terex,
(B) engaging in charitable activities and community affairs,
and
(C) managing his personal investments and affairs; provided,
however, that any such activities do not materially interfere
with the proper performance of his duties and responsibilities
specified in Section 2(c) above.
3. BASE SALARY.
DeFeo shall receive from Terex an initial Base Salary, payable
in accordance with the regular payroll practices of Terex, of $600,000. During
the Term, the Board shall review the Base Salary for increase no less often than
annually as of the beginning of each calendar year after 1999.
4. ANNUAL BONUS.
(a) Entitlement. DeFeo shall receive an annual bonus in respect of
each calendar year during the Term of Employment in accordance with any
annual incentive plan or plans established by Terex either for DeFeo alone
or for members of Terex's senior management generally.
(b) Payment. The annual bonus shall be payable as soon as reasonably
practicable after the completion of Terex's audited financial statements
for such calendar year, prepared in accordance with generally accepted
accounting principles, but in no event later than 120 days after the end of
the calendar year.
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5. LONG-TERM INCENTIVE COMPENSATION.
During the Term DeFeo shall participate in any long-term
incentive plan or plans established by Terex either for DeFeo alone or for
members of Terex's senior management generally.
6. EQUITY OPPORTUNITY.
During the Term DeFeo shall be eligible to receive grants of
options to purchase shares of Terex's stock and awards of shares of Terex's
stock, either or both as determined by the Committee, under and in accordance
with the terms of applicable plans of Terex and related option and award
agreements. DeFeo shall also be entitled to participate in any equity programs
of Subsidiaries or Affiliates upon such terms and conditions as may be
established by the Committee.
7. EXPENSE REIMBURSEMENT.
DeFeo shall be entitled to prompt reimbursement by Terex for
all reasonable out-of-pocket expenses incurred by him during the Term in
performing services under this Agreement, upon his submission of such accounts
and records as may be reasonably required by Terex.
8. EMPLOYEE BENEFIT PLANS.
During the Term DeFeo shall be entitled to participate in all
life insurance, short-term and long-term disability, accident, health insurance
and savings/retirement plans that are applicable to Terex employees generally or
to the senior executives of Terex. DeFeo shall be entitled to the number of paid
vacation days per year determined by Terex, which, however, shall not be less
than four weeks in any calendar year. DeFeo shall also be entitled to all paid
holidays given by Terex to its employees generally.
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9. TERMINATION OF EMPLOYMENT.
(a) General. Notwithstanding anything to the contrary herein, in the
event of termination of DeFeo's employment under this Agreement for any
reason whatsoever, he, his dependents or his Beneficiary, as may be the
case, shall be entitled to receive (in addition to payments and benefits
under, and except as specifically provided in, subsections (b) through (i)
below as applicable):
(i) his Base Salary through the Date of Termination;
(ii) payment in lieu of any unused vacation, in accordance with
Terex's vacation policy and applicable laws:
(iii) any annual bonus not yet paid to him for any calendar year
prior to the year in which his termination occurs, which bonus shall
not be less than the annual bonus paid to DeFeo for the calendar year
preceding the Date of Termination that has most recently been paid to
DeFeo;
(iv) a prorated amount of DeFeo's bonus for the calendar during
which his termination occurs, which bonus shall not be less than the
product of (A) the annual bonus paid to DeFeo for the calendar year
preceding the Date of Termination that has most recently been paid to
DeFeo and (B) a fraction, the numerator of which is the number of days
in the current calendar year through the Date of Termination and the
denominator of which is 365;
(v) any deferred compensation under any incentive compensation
plan of Terex or any deferred compensation agreement then in effect;
(vi) any other compensation or benefits, including without
limitation long-term incentive compensation described in Section 5
above, benefits under equity grants and awards described in Section 6
above and employee benefits under plans described in Section 8 above,
that have vested through the Date of Termination or to which he may
then be entitled in accordance with the applicable terms of each
grant, award or plan; and
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(vi) reimbursement in accordance with Section 7 above of any
business expenses incurred by DeFeo through the Date of Termination
but not yet paid to him.
(b) Termination due to Death. In the event that DeFeo's employment
terminates due to his death, his Beneficiary shall be entitled, in addition
to the compensation and benefits specified in Section 9(a), to:
(i) his Base Salary, at the rate in effect on the date of his
death, through the end of the month in which his death occurs, and
(ii) an annual bonus under Terex's Annual Incentive Compensation
Plan prorated to the date of death, plus any discretionary payment
that may be awarded, for the year in which his death occurs, which
bonus shall not be less than the product of (A) the annual bonus paid
to DeFeo for the calendar year preceding the Date of Termination that
has most recently been paid to DeFeo and (B) a fraction, the numerator
of which is the number of days in the current calendar year through
the date of termination and the denominator of which is 365.
(c) Termination due to Disability. In the event that DeFeo's
employment terminates due to Disability, as determined by Terex based on
competent medical advice, he or his Beneficiary, as the case may be, shall
be entitled, in addition to the compensation and benefits specified in
Section 9(a), to an annual bonus under Terex's Annual Incentive
Compensation Plan prorated to the Date of Termination, plus any
discretionary payment that may be awarded, for the year in which his
termination due to Disability occurs, which bonus shall not be less than
the product of (A) the annual bonus paid to DeFeo for the calendar year
preceding the Date of Termination that has most recently been paid to DeFeo
and (B) a fraction, the numerator of which is the number of days in the
current calendar year through the date of termination and the denominator
of which is 365.
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(d) Termination by Terex for Cause. In the event that DeFeo's
employment is terminated by Terex for Cause, he shall be entitled only to
the compensation and benefits specified in Section 9(a).
Notwithstanding the foregoing, termination for Cause may not occur pursuant
to clauses (ii), (iii), (iv), (v) or (vi) of Section 1(f) above unless and
until, with the Board's prior approval, Terex has delivered to DeFeo Notice
of Termination, which shall contain in reasonable detail the facts
purporting to constitute such nonperformance, act, omission or breach, and
afforded him 30 days thereafter to cure the same and/or to respond in
writing to the Board setting forth his position that his termination for
Cause should not occur and requesting reconsideration by the Board, in
which event (x) the effective date of termination of employment shall be
deferred until the Board has had the opportunity to consider whether such
nonperformance, act, omission or breach has been cured and to consider any
request by DeFeo for reconsideration, and (y) the Board shall thereafter
cause a written notice to be delivered on its behalf to DeFeo stating
either that it has rescinded its determination that his employment is to be
terminated for Cause or that affirms its determination that his employment
is to be terminated for Cause and that contains an effective date of
termination of employment, which shall be not earlier than 15 days after
such notice is given. Section 1(n)(i) to the contrary notwithstanding, upon
delivery to DeFeo of Notice of Termination under this Section 9(d), DeFeo
shall be suspended from all duties and responsibilities unless and until
the Board rescinds its determination that his employment is to be
terminated for Cause.
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(e) Termination by Terex Without Cause or by DeFeo for Good Reason.
(i) Terex shall provide DeFeo 30 days' Notice of Termination of
his employment without Cause, and DeFeo shall provide 30 days' Notice
of Termination of his employment for Good Reason.
(ii) In the event of termination by Terex of DeFeo's employment
without Cause or of termination by DeFeo of his employment for Good
Reason, he shall be entitled, in addition to the compensation and
benefits specified in Section 9(a), to:
(A) two times his Base Salary, at the rate in effect
immediately before such termination,
(B) two times the average of his annual earned bonuses for
the two calendar years in the Term preceding the year in which
the Term ends,
(C) continuing coverage under the life, disability, accident
and health insurance programs for Terex employees generally and
under any supplemental programs covering Terex executives, as
from time to time in effect, for the two-year period from such
termination or until DeFeo becomes eligible for substantially
similar coverage under the employee welfare plans of a new
employer, whichever occurs earlier, provided that DeFeo's right
to elect continued medical coverage after termination of
employment under Part 6 of Title I of the Employee Retirement
Income Security Act of 1974, as amended, shall be deemed
satisfied by the coverage provided in this clause (C),
(D) immediate and unconditional vesting of the unvested
stock options and stock grants previously awarded to DeFeo and,
for the one-year period following either such termination, the
right to exercise any stock options held by him; provided,
however, that any unvested "performance" stock options, stock
grants, long-term incentive awards or other similar awards shall
not vest unless their specified performance objectives are
achieved prior to the Date of Termination and otherwise as
provided in the relevant plan documents, and
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(E) continuation of all other benefits in effect on the Date
of Termination (including, without limitation, automobile,
country club, vacation and pension benefits, if applicable) for
the two (2) years period following such termination or until
DeFeo becomes eligible for substantially similar benefits from a
new employer.
(iii) The payments specified in Section 9(e)(ii)(A) and (B) shall
be made by Terex to DeFeo as follows:
(A) 50 percent of the amounts due shall be paid ratably in
cash over the 12 months following the Date of Termination, and
(B) the remaining 50 percent of these amounts shall be paid
in a cash lump sum at the beginning of the 13th month following
the Date of Termination.
(iv) DeFeo's right to terminate his employment for Good Reason
shall not be affected by his incapacity due to physical or mental
illness. DeFeo's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or omission
constituting Good Reason.
(f) Voluntary Termination by DeFeo. DeFeo shall have the right
voluntarily to terminate his employment in accordance with Section 1(k)
above. If he does so, he shall be entitled only to the compensation and
benefits specified in Section 9(a).
(g) Termination by Terex Without Cause or by DeFeo for Good Reason
Following a Change in Control. In the event of termination of DeFeo's
employment within 24 months following a Change in Control (i) by Terex
without Cause or (ii) by DeFeo for Good Reason, he shall be entitled, in
addition to the compensation and benefits specified in Section 9(a), to the
amounts specified in Section 9(e)(ii) (A) and (B), payable to him in a cash
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lump sum on the Date of Termination, and to the additional rights specified
in Section 9(e)(ii)(C), (D) and (E). In addition, DeFeo shall be entitled
to immediate and unconditional vesting of any unvested "performance" stock
options, stock grants, long-term incentive awards (including, without
limitation, units issued to DeFeo and outstanding under the 1999 Long Term
Incentive Plan for their maximum cumulative value) or other similar awards
(h) Terex's Election Not to Extend the Agreement. In the event that
Terex does not extend this Agreement or enter into a new employment and
compensation agreement, commencing at the end of the Term, on terms at
least as favorable as those set forth in this Agreement, DeFeo shall be
entitled, in addition to the compensation and benefits specified in Section
9(a), to the amounts specified in Section 9(e)(ii)(A) and (B), payable to
him as provided in Section 9(e)(iii), and to the additional rights
specified in Section 9(e)(ii)(C), (D) and (E).
(i) DeFeo's Election Not to Extend the Agreement. In the event that
DeFeo does not accept an offer by Terex to extend this Agreement or enter
into a new employment and compensation agreement on terms at least as
favorable as those set forth in this Agreement commencing at the end of the
Term, he shall be deemed to have terminated his employment voluntarily as
of the end of the Term and shall be entitled only to the compensation and
benefits specified in Section 9(a).
(j) Cessation of Payments. If, during or after the Term, DeFeo commits
a breach of Section 10 or Section 11 below, Terex shall have no further
obligation to make payments to him under this Agreement except as may be
required in accordance with Section 9(a).
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(k) Notice Requirements. Any purported termination of DeFeo's
employment that is not effected pursuant to Notice of Termination
satisfying the requirements of Sections 1(k) and 1(o) and Section 25 shall
not be effective for purposes of this Agreement.
10. EXCISE TAX GROSS-UP.
(a) Notwithstanding anything in this Agreement to the contrary and
except as set forth below, in the event it shall be determined that any
payment or distribution by Terex or its affiliates to or for the benefit of
DeFeo (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 10) (a "Payment") would
be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by DeFeo 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 DeFeo shall
be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by DeFeo 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, DeFeo retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. Notwithstanding the foregoing, if it
shall be determined that DeFeo is entitled to a Gross-Up Payment, but that
the Payments do not exceed 105% of the greatest amount (the "Reduced
Amount") that could be paid to DeFeo such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be
made to DeFeo and the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
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(b) Subject to the provisions of Section 10(c) below, all
determinations required to be made under this Section 10, 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 PricewaterhouseCoopers LLP or such other
nationally recognized certified public accounting firm as may be designated
by DeFeo (the "Accounting Firm") which shall provide detailed supporting
calculations both to Terex and DeFeo simultaneously with any event giving
rise to a Gross-Up Payment. All fees and expenses of the Accounting Firm
shall be borne solely by Terex. Any Gross-Up Payment, as determined
pursuant to this Section 10, shall be paid by Terex to DeFeo simultaneously
with any event giving rise to a Gross-Up Payment. Absent manifest error,
any determination by the Accounting Firm shall be binding upon Terex and
DeFeo. 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 Terex should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that Terex
exhausts its remedies pursuant to Section 10(c) and DeFeo 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 (including any interest and penalties thereon) shall be
promptly paid by Terex to or for the benefit of DeFeo.
(c) DeFeo shall notify Terex in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by Terex of
the Gross-Up Payment or the Underpayment. Such notification shall be given
as soon as practicable but no later than ten (10) business days after DeFeo
is informed in writing of such claim and shall apprise Terex of the nature
of such claim and the date on which such claim is requested to be paid.
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DeFeo shall not pay such claim prior to the expiration of the thirty (30)
day period following the date on which he gives such notice to Terex (or
such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If Terex notifies DeFeo in writing prior to
the expiration of such period that it desires to contest such claim, DeFeo
shall:
(i) provide Terex any information reasonably requested by Terex
relating to such claim,
(ii) take such action in connection with contesting such claim as
Terex 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 Terex,
(iii) cooperate with Terex in good faith in order effectively to
contest such claim, and
(iv) permit Terex to participate in any proceedings relating to
such claim; provided, however, that Terex 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
DeFeo 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 Section 10(c),
Terex 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 DeFeo to pay the tax claimed and sue for a refund or
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contest the claim in any permissible manner, and DeFeo 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 Terex shall determine; provided, however, that if
Terex directs DeFeo to pay such claim and sue for a refund, Terex
shall pay the amount of such payment to DeFeo, along with an
additional Gross-Up Payment, and shall indemnify and hold DeFeo
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 payment or with respect to any imputed income with
respect to such payment; and further provided that any extension of
the statute of limitations relating to payment of taxes for the
taxable year of DeFeo with respect to which such contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, Terex's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder
and DeFeo 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 DeFeo of an amount advanced by Terex
pursuant to Section 10(c), DeFeo receives any refund with respect to such
claim, DeFeo shall (subject to Terex's complying with the requirements of
Section 10(c)) promptly pay to Terex the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto).
11. CONFIDENTIAL INFORMATION.
(a) Acknowledgments. DeFeo acknowledges that:
(i) As a result of his employment with Terex, DeFeo has obtained
and will obtain secret and confidential information concerning the
business of Terex and its Affiliates, including, without limitation,
the identity of customers and sources of supply, their needs and
requirements, the nature and extent of contracts with them, and
related cost, price and sales information.
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(ii) Terex and its Affiliates will suffer damage that will be
difficult to compute if, during the Term or thereafter, DeFeo should
divulge secret and confidential information relating to the business
of Terex heretofore or hereafter acquired by him in the course of his
employment with Terex or any of its Affiliates.
(iii) The provisions of this Section 11 are reasonable and
necessary for the protection of the business of Terex and its
Affiliates.
(b) Confidential Information. DeFeo agrees that he will not at any
time, either during the Term of Employment or thereafter, divulge to any
person, firm or corporation any information obtained or learned by him
during the course of his employment with Terex or any of its Affiliates,
with regard to the operational, financial, business or other affairs of
Terex or its Affiliates, their officers and directors, including, without
limitation, trade "know how," secrets, customer lists, sources of supply,
pricing policies, operational methods or technical processes, except
(i) in the course of performing his duties hereunder,
(ii) with Terex's express written consent,
(iii) to the extent that any such information is in the public
domain, is ascertainable from public or published information or is
known to any person who is not subject to a contractual or fiduciary
obligation owed to Terex not to disclose such information, in each
case other than as a result of DeFeo's breach of any of his
obligations hereunder, or
(iv) when required to be disclosed by court order, subpoena or
other government process.
In the event that DeFeo shall be required to make disclosure
pursuant to the provisions of clause (iv) of the preceding sentence,
he shall promptly, but in no event more than 48 hours after learning
of such court order, subpoena, or other government process, notify
Terex, by personal delivery or by facsimile, confirmed by mail.
Further, at Terex's written request and expense, DeFeo shall
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(i) take all reasonably necessary steps requested by Terex to
defend against the enforcement of such court order, subpoena or other
government process, and;
(ii) permit Terex to intervene and participate with counsel of
its choice in any proceeding relating to the enforcement thereof.
(c) Return of Documents and Property. Upon termination of his
employment with Terex, or at any time Terex may so request, DeFeo will
promptly deliver to Terex all files, memoranda, notes, records, reports,
manuals, data, drawings, blueprints and other documents and information
(and all copies thereof) relating to the business of Terex and/or its
Affiliates, and all property associated therewith, that are then in his
possession or under his control.
(d) Remedies and Sanctions. In the event that DeFeo is found to be in
violation of Section 11(b) or (c), Terex shall be entitled to relief as
provided in Section 13 below.
12. NONCOMPETITION/NONSOLICITATION.
(a) Acknowledgments. DeFeo acknowledges that:
(i) Terex and its Affiliates will suffer damage that will be
difficult to compute if, during the Term or thereafter, DeFeo should
enter a competitive business.
(ii) The provisions of this Section 12 are reasonable and
necessary for the protection of the business of Terex and its
Affiliates.
(b) Noncompetition and Nonsolicitation. During the Covenant Period
(which shall extend for 18 months after the Term, unless the date of
termination is within twenty-four (24) months following a Change in
Control, in which event the Covenant Period shall extend for a period of
twenty-four (24) months from the date of termination) DeFeo, without the
prior written permission of Terex, shall not, directly or indirectly:
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(i) enter into the employ of or render any services to any
person, firm or corporation engaged in any business that derives more
than 5 percent of its gross sales from products that are
interchangeable with or substitutable for a product sold by one or
more of the businesses conducted by Terex or any of its Affiliates
when the Term ends (a "Competitive Business"),
(ii) engage in any Competitive Business for his own account,
(iii) become associated with or interested in any Competitive
Business as an individual, partner, shareholder, creditor, director,
officer, principal, agent, employee, trustee, consultant, advisor or
in any other relationship or capacity,
(iv) employ or retain, or have or cause any other person or
entity to employ or retain, any person who was employed or retained by
Terex or any of its Affiliates while DeFeo was employed by Terex, or
(v) solicit, endeavor to entice away from or knowingly interfere
with Terex or any of its Affiliates, any of its or their customers or
sources of supply.
Notwithstanding, the foregoing, nothing in this Agreement
shall preclude DeFeo from investing his personal assets in the securities of any
corporation or other business entity that is engaged in a Competitive Business
if such securities are traded on a national stock exchange or in the
over-the-counter market and if such investment does not result in his
beneficially owning, at any time, more than five percent of the publicly-traded
equity securities of such competitor.
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(c) Remedies and Sanctions. In the event that DeFeo is found to be in
violation of Section 12(b), Terex shall be entitled to relief as provided
in Section 13 below.
13. INJUNCTIVE RELIEF.
(a) If DeFeo commits a breach, or threatens to commit a breach, of any
of the provisions of Section 11 or 12 above, Terex shall have the right and
remedy to seek to have the provisions of this Agreement specifically
enforced by any court having equity jurisdiction, it being acknowledged and
agreed by DeFeo that the services being rendered hereunder to Terex are of
a special, unique and extraordinary character and that any such breach or
threatened breach will cause irreparable injury to Terex and that monetary
damages will not provide an adequate remedy to Terex. The rights and
remedies enumerated in this Section 13(a) shall be independent of the other
and shall be severally enforceable, and such rights and remedies shall be
in addition to, and not in lieu of, any other damages, rights and remedies
available to Terex under law or equity.
(b) If DeFeo shall violate any covenant contained in this Section 13,
the Covenant Period shall automatically extend for 13 months from the date
on which DeFeo permanently ceases such violation or, if later, from the
date of entry by a court of competent jurisdiction of a final order or
judgment enforcing such covenant.
(c) If any provision of this Section 13 is held to be unenforceable
because of the scope, duration or area of its applicability, the tribunal
making such determination shall have the power to modify such scope,
duration, or area, or all of them, and any such provision shall then be
applicable in such modified form.
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14. OUTPLACEMENT SERVICES.
In the event of the termination of DeFeo's employment after a
Change in Control or without Cause or for Good Reason or Terex does not extend
this Agreement or enter into a new employment and compensation agreement with
DeFeo, in each case as provided for in this Agreement, Terex agrees, at its sole
cost and expense, to provide DeFeo with outplacement services for a period of at
least twelve (12) months following the date of termination. Terex and DeFeo
shall use their good faith efforts to locate a provider, and determine the scope
of, outplacement services which is reasonably acceptable to both parties taking
into account the status of DeFeo as a senior executive officer.
15. WITHHOLDING TAXES.
All payments to DeFeo or his Beneficiary shall be subject to
withholding on account of federal, state and local taxes as required by law. If
any payment under this Agreement is insufficient to provide the amount of such
taxes required to be withheld, Terex may withhold such taxes from any subsequent
payment due DeFeo or his Beneficiary. In the event that all payments due are
insufficient to provide the required amount of such withholding taxes, DeFeo or
his Beneficiary, within five days after written notice from Terex, shall pay to
Terex the amount of such withholding taxes in excess of the payments due.
16. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Terex's indemnification of
DeFeo, and Terex shall indemnify him to the fullest extent permitted by
applicable law consistent with Terex's Certificate of Incorporation and By-Laws
as in effect on the date of this Agreement, with respect to any action or
failure to act on his part while he is (x) an officer, director or employee of
Terex or any Subsidiary or Affiliate or (y) a director or officer of any trade
association or business enterprise that is not a subsidiary or Affiliate and in
which capacity his service is at Terex's request. To the extent that directors'
and officers' liability insurance is obtainable on commercially economic terms,
Terex shall cause DeFeo to be covered, during the Term and after the Term in
25
respect of claims arising from any such service during the Term, by such
insurance on terms no less favorable than the directors' and officers' liability
insurance maintained by Terex as in effect on the date of this Agreement in
terms of coverage, limits and reimbursement of defense costs. In any period
during which such insurance coverage is not obtainable on commercially economic
terms, Terex shall cause DeFeo to be covered by as much of such insurance as may
be obtained for the largest premium paid by Terex for such an insurance policy
in effect during the Term.
17. ASSIGNABILITY, SUCCESSORS, BINDING AGREEMENT.
(a) In addition to any obligations imposed by law upon any successor
to Terex, Terex will use its best efforts to persuade any successor
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of
Terex to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Terex would be required to perform it if
no such succession had taken place. Failure of Terex to use its best
efforts to obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and shall
entitle DeFeo to compensation from Terex in the same amount and on the same
terms as DeFeo would be entitled to hereunder if he were to terminate his
employment for Good Reason after a Change in Control, except that, for
purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.
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(b) This Agreement shall inure to the benefit of and be enforceable by
DeFeo's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If DeFeo shall die
while any amount would still be payable to him hereunder (other than
amounts which, by their terms, terminate upon his death) if he had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of DeFeo's estate.
18. REPRESENTATIONS.
The Parties respectively represent and warrant that each is
fully authorized and empowered to enter into this Agreement and that the
performance of its or his obligations, as the case may be, under this Agreement
will not violate any agreement between such Party and any other person, firm or
organization. Terex represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
19. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement
contains the entire understanding and agreement between the Parties concerning
the subject matter hereof and supersedes any prior agreements, whether written
or oral, between the Parties concerning the subject matter hereof. In the event
of a conflict between this Agreement and terms of any benefit plan, grant or
award, the provisions of this Agreement shall govern the determination of
DeFeo's rights. Notwithstanding the previous sentence, to the extent that the
provisions of any benefit plan, grant or award are more favorable to DeFeo than
the provisions of this Agreement, the provisions of such benefit plan, grant or
award shall govern the determination of DeFeo's rights.
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20. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such
amendment is agreed to in writing and signed by both DeFeo and an authorized
officer of Terex. No waiver by either Party of any breach by the other Party of
any condition or provision contained in this Agreement to be performed by such
other Party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time. Any waiver must be in
writing and signed by the Party to be charged with the waiver.
21. SEVERABILITY.
In the event that any provision or portion of this Agreement
shall be determined to be valid or unenforceable for any reason, in whole or in
part, the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law.
22. SURVIVAL.
The respective rights and obligations of the Parties under
this Agreement shall survive any termination of DeFeo's employment with Terex.
23. BENEFICIARIES/REFERENCES.
DeFeo shall be entitled to select (and change, to the extent
permitted under any applicable law) a beneficiary or beneficiaries to receive
any compensation or benefit payable under this Agreement following DeFeo's death
by giving Terex written notice thereof. In the event of DeFeo's death or of a
judicial determination of his incompetence, reference in this Agreement to DeFeo
shall be deemed to refer, as appropriate, to his beneficiary, estate or other
legal representative.
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24. MITIGATION.
Terex agrees that, if DeFeo's employment by Terex terminates
during the Term, DeFeo is not required to seek other employment or to attempt in
any way to reduce any amounts payable to him due under this Agreement. Further,
the amount of any payment shall not be reduced by any compensation earned by
DeFeo as the result of employment by another employer, by retirement benefits,
by offset against any amount claimed to be owed by DeFeo to Terex, or otherwise.
25. GOVERNING LAW.
This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Connecticut, without
reference to principles of conflict of laws.
26. RESOLUTION OF DISPUTES.
(a) Arbitration. Except as provided in Section 24(b), any disputes
arising under or in connection with this Agreement shall be resolved by
arbitration, to be held in Stamford, Connecticut, in accordance with the
commercial rules and procedures of the American Arbitration Association.
(b) Litigation. Notwithstanding the foregoing, DeFeo shall have the
right to waive his rights under Section 24(a) and have any dispute resolved
by a court of competent jurisdiction.
(c) Costs. Except as provided in Sections 10(c), 11(b) and 27, each
Party shall bear its or his respective costs, fees (including attorneys'
fees) and expenses of any arbitration or litigation in connection with this
Agreement.
(d) Continuation of Payments. Pending the outcome or resolution of any
dispute between the Parties, Terex shall continue to pay to DeFeo all
amounts, and provide on his behalf all benefits, due him under this
Agreement.
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27. LEGAL EXPENSES.
Terex agrees to pay the reasonable out-of pocket legal
expenses actually incurred by DeFeo in connection with the negotiation and
execution of this Agreement. Terex agrees to pay all reasonable out-of-pocket
costs and expenses, including all reasonable attorneys' fees and disbursements,
actually incurred by DeFeo in collecting or enforcing payments to which he is
ultimately determined to be entitled (whether by agreement among the parties,
court order or otherwise) pursuant to this Agreement in accordance with its
terms.
28. NOTICES.
Any notice given to either Party shall be in writing and shall
be deemed to have been given when delivered either personally, by fax, by
overnight delivery service (such as Federal Express) or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address as
the Party may subsequently give notice of.
If to Terex:
Terex Corporation
500 Post Road East
Westport, CT 06880
Attention: General Counsel
Fax: (203) 227-1647
If to DeFeo:
Ronald M. DeFeo
45 Beachside Avenue
Westport, CT 06880
Fax: (203) 227-8317
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29. HEADINGS.
The headings of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
30. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
Terex Corporation
By: _________________________
Name:
Title:
---------------------------
Ronald M. DeFeo