EMPLOYMENT AND COMPENSATION AGREEMENT
THIS EMPLOYMENT AND COMPENSATION AGREEMENT (this "Agreement"), made and
entered into as of July 1, 2005, between Terex Corporation, a Delaware
corporation, with its principal office located at 000 Xxxx Xxxx Xxxx, Xxxxxxxx,
XX 00000 (together with its successors and assigns permitted under this
Agreement, "Terex"), and Xxxxxx X. XxXxx ("XxXxx"), whose address is 00
Xxxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000.
W I T N E S S E T H:
WHEREAS, Terex wishes to assure itself of the services of XxXxx for the
period hereinafter provided, and XxXxx is willing to be employed by Terex for
said period, upon the terms and conditions provided in this Agreement; and
WHEREAS, Terex has determined that it is in the best interests of Terex and
its stockholders to enter into 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 XxXxx (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.
(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 XxXxx
pursuant to Section 23 below or, in the event that no such person is named
and survives XxXxx, his estate.
(e) "Board" shall mean the Board of Directors of Terex.
(f) "Cause" shall mean:
(i) XxXxx'x conviction in a court of law in the United States,
Canada, Australia or Europe of, or guilty plea or no contest plea to,
a felony charge or a misdemeanor charge involving moral turpitude (it
being understood that a driving violation alone will not be deemed to
involve moral turpitude unless accompanied by some other act involving
moral turpitude),
(ii) willful, substantial and continued failure by XxXxx to
perform his duties under this Agreement,
(iii) willful engagement by XxXxx 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 XxXxx from serving as an officer or director of a public
company, or
(v) a breach by XxXxx of Section 11 or Section 12 below.
For the purposes of clauses (ii) and (iii) of this definition, no
act or failure to act on the part of XxXxx 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.
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(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
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the securities of the resulting corporation, who did not own such
securities immediately before the Business Combination; or
(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 XxXxx'x employment during the Term, (i) if XxXxx'x
employment terminates due to Disability, 30 days after a good-faith
determination of Disability by Terex (provided that XxXxx shall not have
returned to full-time performance of his duties during such 30-day period),
(ii) if XxXxx'x employment terminates due to death, the date of death, and
(iii) if XxXxx'x 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 XxXxx, not more than 60
days, after the date of such Notice of Termination).
(l) "Disability" shall mean XxXxx'x 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.
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(m) "Diversified Industrial Group" shall consist of Xxxxx Corporation,
Xxxxxxx Corporation, Xxxxxxxxx-Xxxx Co., Ltd., Illinois Tool Works, Inc.
and Dover Corporation, (as such group may be adjusted in the reasonable
discretion of the Compensation Committee to recognize changed circumstances
with respect to the companies comprising the Diversified Industrial Group).
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
from time to time amended.
(o) "Good Reason" shall mean the occurrence (without XxXxx'x 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(o),
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 XxXxx of any duties inconsistent with
XxXxx'x status as a senior executive officer of Terex or a substantial
adverse alteration in the nature of XxXxx'x 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 removal of titles other than that of Chief
Executive Officer, 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 XxXxx'x 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
XxXxx;
(ii) a reduction by Terex in XxXxx'x base salary and/or annual
target 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
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similarly and proportionately 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 XxXxx any portion of XxXxx'x
current compensation except pursuant to an across-the-board
compensation deferral similarly and proportionately 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;
(iv) the failure by Terex to continue in effect any compensation
plan or other benefit in which XxXxx participates which is material to
XxXxx'x total compensation, except pursuant to an across-the-board
compensation or benefit deferral or reduction similarly and
proportionately 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 XxXxx with
benefits substantially similar to those enjoyed by XxXxx 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
XxXxx 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 XxXxx of any material fringe benefit enjoyed by
XxXxx at the time (including, without limitation, automobile, country
club, vacation and pension benefits), or the failure by Terex to
provide XxXxx with the number of paid vacation days to which XxXxx is
then entitled; or
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(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 XxXxx be based anywhere other
than at Terex's principal offices except for necessary travel on
Terex's business to an extent substantially consistent with XxXxx'x
business travel obligations on the date of this Agreement.
(p) "Machinery Group" shall consist of Astec Industries, Inc.,
Manitowoc, Inc., JLG Industries, Inc., Caterpillar, Inc. and Joy Global,
Inc. (as such group may be adjusted in the reasonable discretion of the
Compensation Committee to recognize changed circumstances with respect to
the companies comprising the Machinery Group).
(q) "Notice of Termination" shall mean delivery of written notice by
one Party and receipt thereof by the other Party in accordance with Section
28 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
XxXxx'x employment hereunder.
(r) "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
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(iv) a corporation owned, directly or indirectly, by the
stockholders of Terex in substantially the same proportion as their
ownership of stock of Terex.
(s) "Return on Invested Capital" shall be calculated as operating
income for the applicable four quarter period divided by the sum of the
average stockholders' equity and the average net debt for the four quarters
of such period, with average net debt consisting of long-term debt,
including the current portion of long-term debt, less cash and cash
equivalents.
(t) "Spouse" shall mean, during the Term of Employment, the woman who
as of any relevant date is legally married to XxXxx.
(u) "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.
(v) "Terex's Annual Incentive Compensation Plan" shall mean the Terex
2004 Annual Incentive Compensation Plan or any subsequently adopted plan
regarding the payment of annual bonuses to the senior executives of Terex.
(w) "Term of Employment" or "Term" shall mean the period specified in
Section 2(b) below during which XxXxx is employed by Terex or any of its
Affiliates.
2. TERM OF EMPLOYMENT, POSITIONS AND DUTIES.
(a) Employment of XxXxx. Terex hereby employs XxXxx, and XxXxx 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, 2012, 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
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shall occur on or prior to December 31, 2012, 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, 2012.
(c) Title, Duties and Authorities.
(i) Until termination of his employment hereunder, XxXxx 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 XxXxx, and
to ensure XxXxx'x re-election during the Term, (x) as a member of and
(y) consistent with generally accepted best corporate governance
standards, as Chairman of, the Board.
(d) Time and Effort.
(i) XxXxx 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 XxXxx
from
(A) serving on the boards of (x) a reasonable number of
trade associations and charitable organizations and (y) with the
prior consent of the Board, any other business not in competition
with Terex,
(B) engaging in charitable activities and community affairs,
and
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(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.
XxXxx shall receive from Terex an initial Base Salary, payable in
accordance with the regular payroll practices of Terex, of $850,000. During
the Term, the Board shall review the Base Salary for increase no less often
than annually.
4. ANNUAL BONUS.
(a) Entitlement. XxXxx shall receive an annual bonus in respect of
each calendar year during the Term of Employment in accordance with Terex's
Annual Incentive Compensation Plan or any annual incentive plan or plans
established by Terex either for XxXxx 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 60 days after the
completion of Terex's audited financial statements for such calendar year.
5. LONG-TERM INCENTIVE COMPENSATION.
During the Term, XxXxx shall participate in any long-term incentive
plan or plans established by Terex either for XxXxx alone or for members of
Terex's senior management generally.
6. EQUITY OPPORTUNITY.
(a) As soon as legally permissible and reasonably practicable after
the execution of this Agreement, XxXxx shall be entitled to receive a
restricted stock award of an aggregate of 100,000 shares of Terex common
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stock which shall vest as follows, subject to the achievement of the
performance criteria provided for below:
(i) 10,000 shares shall vest on March 31, 2006 in the event that
Terex's Return on Invested Capital equals or exceeds 20% for calendar
year 2005.
(ii) 10,000 shares shall vest on March 31, 2007 in the event that
Terex's Return on Invested Capital equals or exceeds 20% for calendar
year 2006.
(iii) 10,000 shares vest on March 31, 2008 in the event that
Terex's Return on Invested Capital equals or exceeds 20% for calendar
year 2007.
(iv) 35,000 shares shall vest on March 31, 2009 in the event that
Terex's Return on Invested Capital for each of the four calendar years
2005, 2006, 2007 and 2008 equals or exceeds the average Return on
Invested Capital of the Machinery Group for each of those four years;
provided, however, that in the event Terex's Return on Invested
Capital for each of the four calendar years 2005, 2006, 2007 and 2008
is less than the average Return on Invested Capital of the Machinery
Group for each of those four years, but Terex's average Return on
Invested Capital for any three of such four years equals or exceeds
the average Return on Invested Capital for the Machinery Group for the
comparable three years, then 20,000 shares (of the 35,000 shares
provided for in this clause (iv)) shall vest on March 31, 2009. If
Terex's Return on Invested Capital for each of the four calendar years
2005, 2006, 2007 and 2008 is less than the average Return on Invested
Capital of the Machinery Group for each of those four years and
Terex's average Return on Invested Capital does not equal or exceed
the average Return on Invested Capital for the Machinery Group for
three of such four years, then no shares (of the 35,000 shares
provided for in this clause (iv)) shall vest.
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(v) 35,000 shares shall vest on March 31, 2009 in the event that
the ratio of Terex's average Return on Invested Capital for the three
calendar years 2006, 2007 and 2008 to the average Return on Invested
Capital of the Diversified Industrial Group for 2006, 2007 and 2008
(the "Three Year Ratio") equals or exceeds 110% of the ratio that
Terex's average Return on Invested Capital for 2005 bears to the
average Return on Invested Capital of the Diversified Industrial Group
for 2005 (the "2005 Ratio"); provided, however, that 20,000 shares (of
the 35,000 shares provided for in this clause (v)) shall vest on March
31, 2009 if the Three Year Ratio equals or exceeds 100% of the 2005
Ratio but is less than 110% of the 2005 Ratio. If the Three Year Ratio
is less than 100% of the 2005 Ratio, then no shares (of the 35,000
shares provided for in this clause (v)) shall vest.
(b) During the Term, XxXxx 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 annually, under and in
accordance with the terms of applicable plans of Terex and related option
and award agreements. XxXxx 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.
XxXxx 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.
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During the Term, XxXxx 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. XxXxx 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. XxXxx shall also be entitled to all paid
holidays given by Terex to its employees generally.
9. TERMINATION OF EMPLOYMENT.
(a) General. Notwithstanding anything to the contrary herein, in the
event of termination of XxXxx'x 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 earned but not yet paid to him, which
bonus shall not be less than the annual bonus paid to XxXxx for the
calendar year preceding the Date of Termination that has most recently
been paid to XxXxx;
(iv) any deferred compensation under any incentive compensation
plan of Terex or any deferred compensation agreement then in effect;
(v) 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,
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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
(vi) reimbursement in accordance with Section 7 above of any
business expenses incurred by XxXxx through the Date of Termination
but not yet paid to him.
(b) Termination due to Death. In the event that XxXxx'x 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 XxXxx for the calendar year preceding the Date of Termination that
has most recently been paid to XxXxx 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 XxXxx'x
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 XxXxx for the calendar year
preceding the Date of Termination that has most recently been paid to XxXxx
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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.
(d) Termination by Terex for Cause. In the event that XxXxx'x
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) or (v) of Section 1(f) above
unless and until, with the Board's prior approval, Terex has delivered
to XxXxx 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 XxXxx for reconsideration, and (y) the Board shall
thereafter cause a written notice to be delivered on its behalf to
XxXxx 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(o)(i) to the contrary notwithstanding, upon delivery to XxXxx of
Notice of Termination under this Section 9(d), XxXxx 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.
(e) Termination by Terex Without Cause or by XxXxx for Good Reason.
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(i) Terex shall provide XxXxx 30 days' Notice of Termination of
his employment without Cause, and XxXxx shall provide 30 days' Notice
of Termination of his employment for Good Reason.
(ii) In the event of termination by Terex of XxXxx'x employment
without Cause or of termination by XxXxx 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 Date of
Termination,
(C) a prorated amount of XxXxx'x 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 XxXxx for
the calendar year preceding the Date of Termination that has most
recently been paid to XxXxx 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,
(D) 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 XxXxx becomes eligible for substantially
similar coverage under the employee welfare plans of a new
employer, whichever occurs earlier, provided that XxXxx'x right
to elect continued medical coverage after termination of
employment under Part 6 of Title I of the Employee Retirement
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Income Security Act of 1974, as amended, shall be deemed
satisfied by the coverage provided in this clause (D),
(E) immediate and unconditional vesting of the unvested
stock options and stock grants previously awarded to XxXxx 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 (other than any outstanding units issued to XxXxx under
the 1999 Long Term Incentive Plan, which shall vest in accordance
with the terms of such plan), and the aforesaid one-year period
shall not begin to run, unless their specified performance
objectives are achieved prior to the Date of Termination and
otherwise as provided in the relevant plan documents, and
(F) 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) year period following such termination or until XxXxx
becomes eligible for substantially similar benefits from a new
employer, whichever occurs earlier.
(iii) The payments specified in Section 9(e)(ii)(A) and (B) shall
be made by Terex to XxXxx 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.
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(iv) XxXxx'x right to terminate his employment for Good Reason
shall not be affected by his incapacity due to physical or mental
illness. XxXxx'x 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 XxXxx. XxXxx shall have the right to
voluntarily terminate his employment in accordance with Section 1(q) 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 XxXxx for Good Reason
Following a Change in Control. In the event of termination of XxXxx'x
employment within 24 months following a Change in Control (i) by Terex
without Cause or (ii) by XxXxx for Good Reason, he shall be entitled, in
addition to the compensation and benefits specified in Section 9(a), to (A)
the greater of (x) the amounts specified in Section 9(e)(ii)(A), (B) and
(C), and (y) an amount equal to all compensation required to be paid to
XxXxx for the balance of the term of this Agreement, in either case,
payable to him in a cash lump sum on the Date of Termination, and (B) the
additional rights specified in Section 9(e)(ii)(D), (E) and (F). In
addition, XxXxx shall be entitled to immediate and unconditional vesting of
(i) any unvested "performance" stock options, stock grants and long-term
incentive awards (and, for the one-year period following the Date of
Termination, the right to exercise any such stock options), (ii) any
outstanding units under the 1999 Long Term Incentive Plan for their maximum
cumulative value or other similar awards, and (iii) any amounts payable
under the Terex Corporation Supplemental Executive Retirement Plan for the
number of years of service achieved by XxXxx on the Date of Termination.
(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
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least as favorable as those set forth in this Agreement, XxXxx 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)(D), (E) and (F).
(i) XxXxx'x Election Not to Extend the Agreement. In the event that
XxXxx 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, XxXxx commits
a breach of Section 11 or Section 12 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).
(k) Notice Requirements. Any purported termination of XxXxx'x
employment that is not effected pursuant to Notice of Termination
satisfying the requirements of Sections 1(k) and 1(q) and Section 28 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
XxXxx (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
19
be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by XxXxx 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 XxXxx shall
be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by XxXxx 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, XxXxx 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 XxXxx 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 XxXxx such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be
made to XxXxx and the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
(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 XxXxx (the "Accounting Firm") which shall provide detailed supporting
calculations both to Terex and XxXxx 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 XxXxx simultaneously
with any event giving rise to a Gross-Up Payment. Absent manifest error,
20
any determination by the Accounting Firm shall be binding upon Terex and
XxXxx. 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 XxXxx 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 XxXxx.
(c) XxXxx 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 10 business days after XxXxx 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. XxXxx
shall not pay such claim prior to the expiration of the 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 XxXxx in writing prior to the expiration
of such period that it desires to contest such claim, XxXxx 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,
21
(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 XxXxx
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 XxXxx to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and XxXxx 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 XxXxx to pay such claim and xxx for a refund, Terex
shall pay the amount of such payment to XxXxx, along with an
additional Gross-Up Payment, and shall indemnify and hold XxXxx
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 XxXxx 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
22
with respect to which a Gross-Up Payment would be payable hereunder
and XxXxx 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 XxXxx of an amount advanced by Terex
pursuant to Section 10(c), XxXxx receives any refund with respect to such
claim, XxXxx 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. XxXxx acknowledges that:
(i) As a result of his employment with Terex, XxXxx 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.
(ii) Terex and its Affiliates will suffer damage that will be
difficult to compute if, during the Term or thereafter, XxXxx 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. XxXxx 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,
23
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 XxXxx'x 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 XxXxx 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, XxXxx shall:
(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, XxXxx will
24
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 XxXxx 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. XxXxx acknowledges that:
(i) Terex and its Affiliates will suffer damage that will be
difficult to compute if, during the Term or thereafter, XxXxx 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 24 months following a Change in Control, in which
event the Covenant Period shall extend for a period of 24 months from the
date of termination), without the prior written permission of Terex, XxXxx
shall not, directly or indirectly:
(i) enter into the employ of or render any services to any
person, firm or corporation engaged in any business that derives more
than five 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,
25
(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 XxXxx 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 XxXxx 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.
(c) Remedies and Sanctions. In the event that XxXxx 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 XxXxx 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 XxXxx that the services being rendered hereunder to Terex are of
26
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 XxXxx shall violate any covenant contained in Sections 11 or
12, the Covenant Period shall automatically extend for 13 months from
the date on which XxXxx 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 Sections 11 or 12 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.
14. OUTPLACEMENT SERVICES.
In the event of the termination of XxXxx'x 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 XxXxx,
in each case as provided for in this Agreement, Terex agrees, at its sole cost
and expense, to provide XxXxx with outplacement services for a period of at
least 12 months following the date of termination. Terex and XxXxx 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 XxXxx as a senior executive officer.
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15. WITHHOLDING TAXES.
All payments to XxXxx 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 XxXxx or his Beneficiary. In the event that all payments due are
insufficient to provide the required amount of such withholding taxes, XxXxx 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 XxXxx, 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 XxXxx to be covered, during the Term and after the Term in 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 XxXxx to be covered by as much of such insurance as may be obtained
28
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 XxXxx to compensation from Terex in the same amount and on the same
terms as XxXxx 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.
(b) This Agreement shall inure to the benefit of and be enforceable by
XxXxx'x personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If XxXxx 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 XxXxx'x estate.
18. REPRESENTATIONS.
29
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 XxXxx'x
rights. Notwithstanding the previous sentence, to the extent that the provisions
of any benefit plan, grant or award are more favorable to XxXxx than the
provisions of this Agreement, the provisions of such benefit plan, grant or
award shall govern the determination of XxXxx'x rights.
20. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both XxXxx 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.
30
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 XxXxx'x employment with Terex.
23. BENEFICIARIES/REFERENCES.
XxXxx 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 XxXxx'x death by
giving Terex written notice thereof. In the event of XxXxx'x death or of a
judicial determination of his incompetence, reference in this Agreement to XxXxx
shall be deemed to refer, as appropriate, to his beneficiary, estate or other
legal representative.
24. MITIGATION.
Terex agrees that, if XxXxx'x employment by Terex terminates during the
Term, XxXxx 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 XxXxx as the
result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by XxXxx to Terex, or otherwise.
25. GOVERNING LAW.
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This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws.
26. RESOLUTION OF DISPUTES.
(a) Arbitration. Except as provided in Section 26(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, XxXxx shall have the
right to waive his rights under Section 26(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 XxXxx all
amounts, and provide on his behalf all benefits, due him under this
Agreement.
27. LEGAL EXPENSES.
Terex agrees to pay the reasonable out-of pocket legal expenses actually
incurred by XxXxx in connection with the negotiation and execution of this
Agreement up to a maximum amount of $20,000. Terex agrees to pay all reasonable
out-of-pocket costs and expenses, including all reasonable attorneys' fees and
disbursements, actually incurred by XxXxx in collecting or enforcing payments to
which he is ultimately determined to be entitled (whether by agreement among the
32
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
000 Xxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000
If to XxXxx:
Xxxxxx X. XxXxx
00 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
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.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
Terex Corporation
By: /s/ Xxxx X Xxxxx
--------------------
Name: Xxxx X Xxxxx
Title: Senior Vice President
/s/ Xxxxxx X. XxXxx
-------------------
Xxxxxx X. XxXxx
34
