Exhibit 10.7


 


JOHN DEERE SHORT-TERM INCENTIVE 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 Short-Term Incentive 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 


 


 


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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.


 


(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 Short-Term Incentive Bonus Plan.


 


(r)  “Plan Year” means
the Company’s fiscal year.


 


(s)  “Recoupment
Policy” means the Company’s Executive Incentive Award Recoupment Policy, as
amended from time to time, or any successor policy thereto.


 


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


 


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


 


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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 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.


 


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


 


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 


 


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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 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 $5,000,000.


 


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, on or before the March 15 following the end of each
Plan Year.


 


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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 Final Award
for the portion of the Plan Year the Employee was a Participant, determined in
accordance with Section 5.4 herein. 
Any such partial Final Award shall be evidenced in writing, and shall be
paid in cash, in one (1) lump sum, on or before the March 15
following the end of the Plan Year to which it relates.


 


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.


 


6.4  Repayment of Final Awards


 


Final Awards paid under the Plan shall be subject to the terms of the
Company’s Recoupment Policy. The Company shall have the right to recover Final
Awards paid under the Plan pursuant to the terms of the Recoupment Policy.


 


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 in
cash, in one (1) lump sum, on or before the March 15 following the
end of the Plan Year to which it relates.


 


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 Final Award for the portion of that Plan Year
that the Participant was employed by the Company, determined in accordance with
Section 5.4 herein.  Any such
partial Final Award shall be evidenced in writing, and shall be paid in cash,
in one (1) lump sum, on or before the March 15 following the end of
the Plan Year to which it relates.


 


 


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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.


 


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.


 


 


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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  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 or shareholder 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.


 


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.


 


11.3  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.


 


11.4  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.


 


11.5  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, 


 


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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 the March 15
following the end of the calendar year in which the Change in Control occurs.


 


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.


 


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.


 


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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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