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                                                                    EXHIBIT 10.7

                       JOHN DEERE PERFORMANCE BONUS PLAN


Section 1. Establishment and Purpose

     1.1   Establishment of the Plan. Deere & Company, a Delaware corporation
(the "Company"), hereby establishes an annual incentive compensation plan to
be known as the "John Deere Performance Bonus Plan" (the "Plan"), as set
forth in this document. The Plan permits the awarding of annual cash bonuses to
Employees of the Company, based on the achievement of pre-established
performance goals.

     Upon approval by the Board of Directors of the Company, subject to approval
by the shareholders, the Plan shall become effective as of November 1, 1994 (the
"Effective Date") and shall remain in effect until terminated by the Board or
Committee as provided by Section 13 herein.

     1.2   Purpose. The purpose of the Plan is to provide Participants with a
meaningful annual incentive opportunity geared toward the achievement of
specific performance goals.

Section 2. Definitions

     Whenever used in the Plan, the following terms shall have the meanings set
forth below (unless otherwise expressly provided) and, when the defined meaning
is intended, the term is capitalized.

     (a) "Award Opportunity" means the various levels of incentive award
payouts which a Participant may earn under the Plan, as established by the
Committee pursuant to Section 5.1 herein.

     (b) "Base Salary" shall mean the regular salary or salary continuance
earned during the Plan Year before any salary reduction contributions made to
the Company's Internal Revenue Code Section 401(k) Plan or other deferred
compensation plans. Among other compensation, "Base Salary" shall not include
awards under this Plan, any suggestions awards, pay for unused vacation, any
bonus or profit sharing benefits, the Company matching contribution under any
plan providing such, overtime or overtime premiums, relocation allowances,
mortgage differential allowances, any premium allowances for overseas service,
moving allowances, or any other special awards.

     (c) "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

     (d) "Board" or "Board of Directors" means the Board of Directors of the
Company.

     (e) "Committee" means a committee of two (2) or more individuals,
appointed by the Board to administer the Plan, pursuant to Section 3 herein, who
are not current or former officers or employees of the Company and who are
"outside directors" to the extent required by and within the meaning of
Section 162(m) of the Internal Revenue Code of 1986 (the "Code"), as amended.

     (f) "Company" means Deere & Company, a Delaware corporation (including
any and all subsidiaries), and any successor thereto.

     (g) "Corporate" shall mean Deere & Company and its subsidiaries.

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     (h) "Disability" shall have the meaning ascribed to such term in applicable
disability or retirement plans of the Company.

     (i) "Effective Date" means the date the Plan becomes effective, as set
forth in Section 1.1 herein.

     (j) "Employee" means a full-time, salaried employee of the Company.

     (k) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.

     (l) "Executive Officers" shall mean any executive officers designated by
the Committee for purposes of qualifying payouts under the Plan for exemption
from Section 162(m) of the Code.

     (m) "Final Award" means the actual award earned during a Plan Year by a
Participant, as determined by the Committee at the end of the Plan Year.

     (n) "Noncorporate" shall mean a specified segment of Deere & Company's
operations designated as such by the Chief Executive Officer and approved by the
Committee for purposes of the Plan, such as a business unit, division, product
line, or other such segmentation.

     (o) "Participant" means an Employee who is actively participating in the
Plan.

     (p) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).

     (q) "Plan" means the Deere & Company Performance Bonus Plan.

     (r) "Plan Year" means the Company's fiscal year.

     (s) "Retirement" shall have the meaning ascribed to such term in the John
Deere Pension Plan for Salaried Employees, or any successor plan thereto.

     (t) "Target Incentive Award" means the award to be paid to a Participant
when planned performance results are achieved, as established by the Committee.

Section 3. Administration

     The Plan shall be administered by the Committee. The Committee may delegate
to the Company responsibility for day-to-day administration of, the Plan,
following administrative guidelines approved from time to time by the Committee.

     Subject to the limitations of the Plan, the Committee shall: (i) select
from the regular, full-time salaried Employees of the Company, those who shall
participate in the Plan, (ii) grant award opportunities in such forms and
amounts as it shall determine, (iii) impose such limitations, restrictions, and
conditions upon such awards as it shall deem appropriate, (iv) interpret the
Plan and adopt, amend, and rescind administrative guidelines and other rules and
regulations relating to the Plan, (v) correct any defect or omission or
reconcile any inconsistency in this Plan or in any award opportunity granted
hereunder, and (vi) make all other necessary determinations and take all other
actions necessary or advisable for the implementation and administration of the
Plan. The Committee's determinations on matters within its authority shall be
conclusive and binding upon all parties.

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Section 4. Eligibility and Participation

     4.1  Eligibility. All Employees (as defined in Section 2 herein) who are
actively employed by the Company in any Plan Year shall be eligible to
participate in the Plan for such Plan Year, subject to the limitations of
Section 7 herein.

     4.2  Participation. Participation in the Plan shall be determined annually
by the Committee based upon the criteria set forth herein. Employees who are
eligible to participate in the Plan shall be so notified in writing, and shall
be apprised of the performance goals and related award opportunities for the
relevant Plan Year, as soon as is practicable.

     4.3   Partial Plan Year Participation. Except as provided in Section 11, in
the event that an Employee becomes eligible to participate in the Plan
subsequent to the commencement of a Plan Year, then such Employee's Final Award
shall be based on the Base Salary earned as an eligible Employee.

     4.4   No Right to Participate. No Participant or other Employee shall at
any time have a right to be selected for participation in the Plan for any Plan
Year, despite having previously participated in the Plan.

Section 5. Award Determination

     5.1   Performance Goals. Prior to the beginning of each Plan Year, or as
soon as practicable thereafter, the Committee shall establish performance goals
for that Plan Year. Except as provided in Section 11, the goals may be based on
any combination of Corporate, Non-corporate, and individual performance. After
the performance goals are established, the Committee will align the achievement
of the performance goals with the Award Opportunities (as described in Section
5.2 herein), such that the level of achievement of the preestablished
performance goals at the end of the Plan Year will determine the Final Award
amounts. Except as provided in Section 11, the Committee also shall have the
authority to exercise subjective discretion in the determination of Final
Awards, as well as the authority to delegate the ability to exercise subjective
discretion in this respect.

     The Committee also may establish one (1) or more Company-wide performance
goals which must be achieved for any Participant to receive an award for that
Plan Year.

     5.2   Award Opportunities. Prior to the beginning of each Plan Year, or as
soon as practicable thereafter, the Committee shall establish an Award
Opportunity for each Participant. The established Award Opportunity shall vary
in relation to the job classification of each Participant. Except as provided in
Section 11, in the event a Participant changes job levels during a Plan Year,
the Participant's Award Opportunity may be adjusted to reflect the amount of
time at each job level during the Plan Year.

     5.3   Adjustment of Performance Goals. Except as provided in Section 11,
the Committee shall have the right to adjust the performance goals and the Award
Opportunities (either up or down) during a Plan Year if it determines that
external changes or other unanticipated business conditions have materially
affected the fairness of the goals and have unduly influenced the Company's
ability to meet them. Further, in the event of a Plan Year of less than twelve
(12) months, the Committee shall have the right to adjust the performance goals
and the Award Opportunities accordingly, at its sole discretion.

     5.4   Final Award Determinations. At the end of each Plan Year, Final
Awards shall be computed for each Participant as determined by the Committee.
Except as provided in Section 11, each individual award shall be based upon (i)
the Participant's Target Incentive Award percentage, multiplied by his Base
Salary, (ii) Corporate and Non-corporate performance, and (iii) individual
performance (if applicable). Final Award

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amounts may vary above or below the Target Incentive Award, based on the level
of achievement of the preestablished Corporate, Non-corporate, and individual
performance goals.

     5.5   Limitations. The amount payable to a Participant for any calendar
year shall not exceed $2,000,000.

Section 6. Payment of Final Awards

     6.1   Form and Timing of Payment. Final Award payments shall be payable in
cash, in one (1) lump sum, as soon as practicable after the end of each Plan
Year, or more frequently during the Plan Year, as determined by the Committee in
its sole discretion.

     6.2   Payment of Partial Awards. In the event a Participant no longer meets
the eligibility criteria as set forth in the Plan during the course of a
particular Plan Year, the Committee may, in its sole discretion, pay a partial
award for the portion of the Plan Year the Employee was a Participant, computed
as determined by the Committee.

     6.3   Unsecured Interest. No participant or any other party claiming an
interest in amounts earned under the Plan shall have any interest whatsoever in
any specific asset of the Company. To the extent that any party acquires a right
to receive payments under the Plan, such right shall be equivalent to that of an
unsecured general creditor of the Company.

Section 7. Termination of Employment

     7.1   Termination of Employment Due to Death, Disability, Retirement, or
Transfer to Business Unit Not Included in the Plan. In the event a Participant's
employment is terminated by reason of death, Disability, Retirement, or transfer
to a business unit not included in the Plan, the Final Award determined in
accordance with Section 5.4 herein shall be reduced to reflect participation
prior to termination only. The reduced award shall be based upon the amount of
Base Salary earned during the Plan Year prior to termination. In the case of a
Participant's Disability, the employment termination shall be deemed to have
occurred on the date the Committee determines the definition of Disability to
have been satisfied.

     The Final Award thus determined shall be payable as soon as practicable
following the end of the Plan Year in which employment termination occurred, or
sooner (except with respect to Executive Officers), as determined by the
Committee in its sole discretion.

     7.2   Termination of Employment for Other Reasons. In the event a
Participant's employment is terminated for any reason other than death,
Disability, or Retirement (of which the Committee shall be the sole judge), all
of the Participant's rights to a Final Award for the Plan Year then in progress
shall be forfeited. However, the Committee, in its sole discretion, may pay a
partial award for the portion of that Plan Year that the Participant was
employed by the Company, computed as determined by the Committee.

Section 8. Rights of Participants

     8.1   Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.

     8.2   Nontransferability. No right or interest of any Participant in the
Plan shall be assignable or transferable, or subject to any lien, directly, by
operation of law, or otherwise, including, but not limited to, execution, levy,
garnishment, attachment, pledge, and bankruptcy.

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Section 9. Beneficiary Designation

     Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each designation will revoke all
prior designations by the same Participant and will be effective only when filed
by the Participant in writing with the Committee during his or her lifetime. In
the absence of any such designation, or if the designated beneficiary is no
longer living, benefits shall be paid to the surviving member(s) of the
following classes of beneficiaries, with preference for classes in the order
listed below:

     (a) Participant's spouse (unless the parties were divorced or legally
separated by court decree);

     (b) Participant's children (including children by adoption);

     (c) Participant's parents (including parents by adoption); or

     (d) Participant's executor or administrator.

     Payments of benefits, in accordance with Section 7.1, shall be made
exclusively to the member(s) of the first class, in the order listed above,
which has surviving member(s). If that class has more than one (1) member,
benefit payments shall be made in equal shares among members of that class.

Section 10. Deferrals

     The Committee may permit a Participant to defer such Participant's receipt
of the payment of cash that would otherwise be due to such Participant at the
end of a Plan Year.

Section 11. Executive Officers

     11.1   Applicability of Section 11. The provisions of this Section 11 shall
apply only to Executive Officers. In the event of any inconsistencies between
this Section 11 and the other Plan provisions, the provisions of this Section 11
shall control.

     11.2   No Partial Plan Year Participation. An Executive Officer who becomes
eligible after the beginning of a Plan Year may participate in the Plan for the
succeeding Plan Year.

     11.3   Award Determination. Prior to the beginning of each Plan Year, or as
soon as practicable thereafter, the Committee shall establish the Target
Incentive Award percentage for each Executive Officer and performance goals for
that Plan Year. Performance measures to be used shall be chosen from among the
following factors, or any combination of the following, as the Committee deems
appropriate: (a) total stockholder return; (b) growth in revenues, sales,
settlements, market share, customer conversion, net income, stock price, and/or
earnings per share; (c) return on assets, net assets, and/or capital; (d) return
on stockholders' equity; (e) economic value added; or (f) improvements in costs
and/or expenses. The Committee may select among the performance measures
specified from Plan Year to Plan Year which need not be the same for each
Executive Officer in a given year.

     At the end of the Plan Year and prior to payment, the Committee shall
certify in writing the extent to which the performance goals and any other
material terms were satisfied. Final Awards shall be computed for each Executive
Officer based on (i) the Participant's Target Incentive Award multiplied by his
Base Salary, and (ii) Corporate and Non-corporate (if applicable) performance.

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     Final Award amounts may vary above or below the Target Incentive Award
based on the level of achievement of the pre-established Corporate and Non-
corporate performance goals.

     11.4   Non-adjustment of Performance Goals. Once established, performance
goals shall not be changed during the Plan Year. Participants shall not receive
any payout when the Company or Non-corporate segment (if applicable) does not
achieve at least minimum performance goals.

     11.5   Individual Performance and Discretionary Adjustments. Individual
performance shall not be reflected in the Final Award. However, the Committee
retains the discretion to eliminate or decrease the amount of the Final Award
otherwise payable to a Participant.

     11.6   Possible Modification. If, on advice of the Company's tax counsel,
the Committee determines that Code Section 162(m) and the regulations thereunder
will not adversely affect the deductibility for federal income tax purposes of
any amount paid under the Plan by applying one or more of Sections 2.1(b),
2.1(m), 4.3, 5.1, 5.2, 5.3, or 5.4 to an Executive Officer without regard to the
exceptions to such Section or Sections contained in this Section 11, then the
Committee may, in its sole discretion, apply such Section or Sections to the
Executive Officer without regard to the exceptions to such Section or Sections
that are contained in this Section 11.

Section 12. Change in Control

     12.1   Change in Control. In the event of a Change in Control of the
Company, as defined below, a Participant who is an Employee as of the date of
the Change in Control shall be entitled to, for the Plan Year in which the
Change in Control occurs, the greater of:

     (a)   The Final Award determined using:

     (i)   The Participant's actual Base Salary rate in effect on the date of
the Change in Control;

     (ii)  The Participant's Target Incentive Award percentage; and

     (iii) Actual Corporate, Non-corporate, and individual results to the date
of the Change in Control; or

     (b)   The Participant's Target Incentive Award times his actual Base Salary
rate in effect on the date of the Change in Control.

     The Committee, as constituted immediately prior to the Change in Control,
shall determine how actual Corporate, Non-corporate, and individual performance
should be measured for purposes of the Final Award calculation in Section
12.1(a). The Committee's determination shall be conclusive and final.

     Final Awards shall be payable in cash to the Participant as soon as
administratively possible, but no later than thirty (30) days following a Change
in Control.

     12.2  Definition of a Change in Control. A "Change in Control" shall be
defined as a dissolution, liquidation, merger, or consolidation in which the
Company is not the surviving corporation, or the acquisition of thirty percent
(30%) or more of the Company's common stock by one (1) individual, corporation,
or other entity.

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Section 13. Amendment and Modification

     The Committee, in its sole discretion, without notice, at any time and from
time to time, may modify or amend, in whole or in part, any or all of the
provisions of the Plan, or suspend or terminate it entirely; provided, however,
that no such modification, amendment, suspension, or termination may, without
the consent of a Participant (or his or her beneficiary in the case of the death
of the Participant), reduce the right of a Participant (or his or her
beneficiary, as the case may be) to a payment or distribution hereunder to which
he or she is otherwise entitled.

Section 14. Miscellaneous

     14.1   Governing Law. The Plan, and all agreements hereunder, shall be
governed by and construed in accordance with the laws of the State of Delaware.

     14.2   Withholding Taxes. The Company shall have the right to deduct from
all payments under the Plan any Federal, state, or local taxes required by law
to be withheld with respect to such payments.

     14.3   Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.

     14.4   Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

     14.5   Costs of the Plan. All costs of implementing and administering the
Plan shall be borne by the Company.

     14.6   Successors. All obligations of the Company under the Plan shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

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