Exhibit
10.26


 


DEERE & COMPANY

HITACHI CONSTRUCTION MACHINERY CO., LTD.

JOINT VENTURE AGREEMENT


 


                This agreement
(the “Agreement”) is made and entered into this 16th day of May, 1988 by and
between Deere & Company, a Delaware corporation (“Deere”), and Hitachi
Construction Machinery Co., Ltd., a Japanese corporation (“Hitachi”).


 


Recitals


 


                Deere and Hitachi
are parties to an agreement dated February 19, 1983 that provides for the
distribution by Deere of Hitachi manufactured excavators under the Deere trademark
on an exclusive basis in certain size ranges below 33 metric tons. Hitachi has
developed a dealer organization in North America that distributes excavators
and shovels under the Hitachi trademark, with particular emphasis on excavators
and shovels over 33 metric tons in size. Deere and Hitachi are now desirous of
entering into a joint venture arrangement for the manufacturing and
distribution of excavators which will create manufacturing and marketing
efficiencies, provide greater flexibility in responding to changing economic
conditions, enable the parties to compete effectively with larger integrated
manufacturers of excavators and maximize sales of excavators in North, Central
and South America (the “Territory”) through the expansion of the product lines
currently being distributed under the Deere and Hitachi trademarks and
tradenames.


 


 


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Covenants


 


                In consideration
of the premises and the mutual covenants of the parties set forth herein, the parties
hereto agree as follows:


 


ARTICLE I

Organization of the Company


 


                l.1            Formation.  Deere and Hitachi shall cause to be organized
a close corporation (the “Company”) under the General Corporation Law of
Delaware. The Certificate of Incorporation and Bylaws of the Company shall be
in the forms attached hereto as Exhibits A and B, respectively.


 


                1.2           Name.  The name of the Company shall be Deere-Hitachi
Construction Machinery Corporation.


 


                1.3           Purposes.  The purposes of the Company shall be to (a)
establish a facility in North America for the manufacture of excavators,
components and repair parts thereof of the types designed and manufactured by
Deere in the United States and by Hitachi in Japan; (b) manufacture all or part
of such excavators at the facility; (c) expand the product lines of excavators
currently being marketed under the Deere and Hitachi tradenames and trademarks;
(d) distribute excavators and service parts manufactured or purchased by the
Company on an exclusive basis in the Territory; and (e) engage in any other
lawful act or activity as provided for by the Certificate of Incorporation and
Bylaws of the Company.


 


                1.4           Authorized Capital.  As set forth in Exhibit A hereto, the initial
authorized capital of the Company shall consist of 1,000 shares of common
stock, no par value (the “Shares”).


 


                1.5.          Initial Stock Subscription and Use
of Funds.  (a) Each of Deere and
Hitachi (the “Shareholders”) shall subscribe to 500 Shares and pay to the
Company therefor the sum of approximately $15.75 million in immediately
available funds, or as otherwise agreed by the parties and the board of
directors of the Company except that (i) Deere may pay part of its subscription
by the


 


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transfer to the Company of certain machinery and equipment as listed
and described on Exhibit C hereto, which for this purpose shall be valued at
net book value as of the Closing based on financial statements of Deere which
shall be audited in accordance with generally accepted accounting principles
applied on a consistent basis and (ii) Hitachi may pay part of its subscription
by the transfer to the Company of (A) 70% (1,750,000 shares) of the issued and
outstanding shares of Hitachi Construction Machinery (America) Corporation (“HCMA”)
which for this purpose shall be valued at net book value as of the Closing
based on financial statements of HCMA which shall be audited in accordance with
generally accepted accounting principles applied on a consistent basis and (B)
1,999 of the issued and outstanding shares of Marubeni Construction Machinery
Canada, Ltd. ("MCMC"), which for this purpose shall be valued at net
book value as of the Closing based on financial statements of MCMC which shall
be audited in accordance with generally accepted accounting principles applied
on a consistent basis.


 


                (b)           The Company may purchase from certain
companies affiliated with Hitachi or Deere, and Hitachi or Deere shall cause
such companies to sell to the Company the machinery and equipment listed and
described on Exhibit D, the prices of which shall not include any engineering
or technical fees added by the parties.


 


                1.6           Transfer of Shares.  Neither Shareholder shall sell, assign,
transfer or otherwise dispose of or encumber, by sale, gift, pledge or
otherwise any of its Shares without the prior written consent of the other
Shareholder. Notwithstanding the foregoing, a Shareholder may sell, transfer or
assign its Shares to a wholly-owned subsidiary of the Shareholder, provided
that such subsidiary agrees in writing to be bound by this Section 1.6 as
though it were a Shareholder and shall take no actions which are contrary to
the terms of this Agreement. Each share


 


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certificate issued by the Company shall bear the following legend:


 


The shares evidenced by
this certificate were issued the pursuant to a certain Joint Venture Agreement
dated May 16th, 1988 (the “Agreement”) by and between Deere & Company and
Hitachi Construction Machinery Co., Ltd. The Agreement restricts the sale,
assignment, transfer or other disposition, or the encumbrance by sale, gift,
pledge or otherwise of such shares and any such sale, assignment transfer or
other disposition or encumbrance may be made only in accordance with the terms and
conditions thereof.


 


ARTICLE II



Closing


 


                2.1           Time and Place of Closing.  The Closing of the payment for the subscriptions
referred to in Section 1.5 and the execution of the other agreements referred
to in Section 3.1(c) (the “Closing”) shall take place at the offices of Deere
at 10:00 a. m., local time on May 31, 1988, or at such other time, date or
place as the parties hereto may mutually agree.


 


                2.2           Authorizations, Approvals or
Consents.  Each of Deere and Hitachi
shall use its best efforts to obtain, prior to the date set forth in Section
2.1 for the Closing, any authorization, approval, consent or review from or by governmental
authorities, third parties, or the respective boards of directors of the parties
that may be necessary or advisable to carry out the transactions contemplated
by this Agreement and the exhibits hereto. In no event shall the Closing take
place prior to the obtaining or completion of all such authorizations,
approvals, consents or reviews.


 


                2.3           Organization of the Company and
Stock Subscriptions.  Prior to the
Closing, each of Deere and Hitachi shall have taken the action set forth in
Section 1.1 of this Agreement.


 


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ARTICLE III



Shareholder Voting


 


                3.1           Agreement to Vote.  Each Shareholder shall vote its Shares, use its
best efforts to cause members of the board of directors of the Company (the “Board
of Directors”) designated by such Shareholder pursuant to Section 4.1 of this Agreement
to cast their votes, to effectuate the following matters:


 


                (a)  the election of an eight-member Board of
Directors in accordance with the provisions of Section 4.1 of this Agreement;


 


                (b)  the adoption of Bylaws of the Company in the
form attached hereto as Exhibit B; and


 


                (c)  the taking of all such action by the Company
as is necessary to (i) adopt, ratify and implement all provisions of this
Agreement; and (ii) enter into a Manufacturing License Agreement, a Name and
Trademark Agreement and a Supply Agreement with each of Deere and Hitachi in
the forms attached hereto as Exhibits E, F, G, H, I, and J respectively;. and a
Supply Agreement with Deere in the form attached hereto as Exhibit K.


 


                3.2           Meetings of Shareholders.  Annual and special meetings of the
shareholders of the Company shall be called and held in accordance with the
Bylaws of the Company. The Bylaws shall provide that at any meeting of the
shareholders of the Company, the holders of two-thirds of the capital stock
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum for the transaction of business.


 


                3.3           Matters Requiring Shareholder
Approval.  The only matters presented
for vote of the shareholders of the Company shall be those required by the
General Corporation Law of Delaware to be voted on by the shareholders and such
other matters as may be agreed upon by the parties; provided that none of the
following matters shall be authorized unless it has been


 


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approved by the affirmative vote of the holders of at least two-thirds
of the voting stock of the Company outstanding on the record date for the
meeting (or at the time of the meeting if no record date is fixed):


 


                (a)  any amendment to the Certificate of Incorporation
of the Company;


 


                (b)  the merger or consolidation of the Company
with another entity including any subsidiary of the Company;


 


                (c)   the
voluntary bankruptcy, liquidation or dissolution of the Company;


 


                (d)  the increase, decrease or any other change in
the authorized capital stock of the Company; and 


 


                (e)  the transfer of substantially all of the
assets of the Company or of any of its subsidiaries to any person or entity.


 


ARTICLE IV



Board of Directors


 


                4.1           Responsibility and Composition.
 The Board of Directors shall be
responsible for the overall management of the business and affairs of the
Company and each of its subsidiaries. The Board of Directors shall consist of
eight members, four of whom may be designated by Deere (one of whom shall be
the President of the Company) and four of whom may be designated by Hitachi.
Each of Deere and Hitachi shall have the right to approve or reject the
director candidates designated by the other, provided that neither party will
unreasonably withhold its approval of any such candidate. In the event that a
vacancy on the Board of Directors is caused by the death, resignation or
removal of a director prior to the end of such director’s term of office, the
Board of Directors shall elect a successor director designated by the
Shareholder who had designated the prior occupant of the vacant board seat
(subject to the same right of approval or rejection in Deere or Hitachi).
Either party may, from time to time, elect to change a director


 


 


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or directors which it has designated, and the Board of Directors shall
take such action as may be necessary to effectuate such change (subject to the
same right of approval or rejection in Deere or Hitachi).


 


                4.2           Meetings of the Board of Directors.
 Annual, regular and special meetings of
the Board of Directors shall be called and held in accordance with the Bylaws
of the Company. At any meeting of the Board of Directors, three directors shall
constitute a quorum for the transaction of business, provided such quorum shall
include at least one director who was designated by Hitachi and at least one
director who was designated by Deere.


 


                4.3           Matters Requiring Special Approval.
 Notwithstanding any other provision in
this Agreement to the contrary, any action of the Company or any of its
subsidiaries with respect to any of the following matters shall require the
approval of at least one director designated by Hitachi and at least one
director designated by Deere:


 


                (a)  the approval of annual financial statements
and policies relating to the investment or allocation of surplus funds and
creation of reserve accounts;


 


                (b)  the approval of annual business, strategic,
and manufacturing plans and annual capital budgets;


 


                (c)  the making of any investment in the equity or
debt securities of another corporation or in any partnership or other
enterprise (other than temporary investment of cash in money market
instruments);


 


                (d)  the formation, dissolution, merger or
consolidation of any subsidiary of the Company; 


 


                (e)  the making of any material capital expenditure
not otherwise provided for in an annual business plan or annual capital budget
that has been approved by the Board of Directors pursuant to this Section 4.3;


 


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                (f)  the extension of any material credit,
including the lending of funds by the Company, to another person or entity
other than in the ordinary course of the business of the Company or to a
wholly-owned subsidiary of the Company;


 


                (g)  the establishment or closure of any place of
business of the Company that would be (at the time of establishment) or is
(immediately prior to the time of proposed closure) a material part of the
business of the Company;


 


                (h)  the merger or consolidation of the Company
with another entity including any subsidiary of the Company;


 


                (i)  the voluntary bankruptcy, liquidation or
dissolution of the Company;


 


                (j)  the declaration or payment of any dividends;


 


                (k)  the issuance of any equity security, including
but not limited to any warrant, stock option or convertible debt, to any person
or entity;


 


                (1)  the transfer of any material asset of the
Company or of any of its subsidiaries other than in the ordinary course of
business to any Shareholder or to any other person or entity;


 


                (m)  the addition of any product line other than
excavators and components thereof or the elimination of any product line;


 


                (n)  the amendment to the range of models offered
to Deere or Hitachi dealers as set forth on Exhibit N; and


 


                (o)  any amendment to the Bylaws of the Company.


 


                4.4           Election of Officers.  The Board of Directors shall elect officers
consisting of a President, Vice-President for Administration, Vice-President
for Manufacturing, Vice-President for Deere Marketing, Vice-President for
Hitachi Marketing, Vice-President for International Relations and such other
officers as provided for in the By-Laws. Deere shall be entitled to nominate
the President, the Vice President for Administration, and Vice President for
Deere Marketing. Hitachi shall be entitled to nominate the Vice President for


 


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Manufacturing, the Vice President for Hitachi Marketing, and the Vice
President for International Relations.


 


                Each of Deere and
Hitachi shall have the right to approve or reject the officer candidates
nominated by the other, provided that neither party will unreasonably withhold
its approval of any such candidate. The candidates so nominated and approved
from time to time shall be elected by the Board of Directors. Either party may,
from time to time, elect to change an officer or officers which it has
nominated, and the Board of Directors shall take such action as may be
necessary to effectuate such change (subject to the same right of approval or
rejection in Deere or Hitachi).


 


                4.5           Subsidiaries.  The Company shall take such action as is
necessary to cause the Boards of Directors of HCMA and MCMC and any other
subsidiary of the Company to consist of the President and the Vice Presidents
of the Company unless otherwise agreed by the parties.  Hitachi shall be entitled to nominate the
Presidents of HCMA and MCMC and Deere shall have the right to approve or reject
any such candidate provided that Deere will not unreasonably withhold its
approval of any such candidate.


 


ARTICLE V



Accounting and Financial Policies


 


                5.1           Books and Records.  The Company shall maintain books and records
in accordance with United States generally accepted accounting principles
applied on a consistent basis. Such books and records shall be maintained on
the accrual method of accounting and shall otherwise comply with the applicable
legal requirements and be adequate to permit the filing of tax returns by the
Company. Either Shareholder or a representative designated by it shall at all
times have the right to inspect and examine the books and records of the
Company at its


 


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headquarter’s office during normal business hours of its operations.


 


                5.2           Financial Reports.  Within 90 days after the end of the fiscal
year, the Company shall cause to be prepared and distributed to each
Shareholder audited financial statements of the Company as of the end of and
for such year, all of which shall be prepared in accordance with generally
accepted accounting principles applied on a consistent basis.


 


                5.3           Fiscal Year.  The fiscal year of the Company shall end on
December 31st.


 


                5.4           Appointment of Auditors.  The Company shall retain a firm of
independent public accountants appointed by the Board of Directors.


 


                5.5           Financial Policies and Dividends.
 All of the financial policies of the
Company, including, but not limited to, the declaration of dividends,
compensation and bonus policies for personnel, investment or allocation of
surplus funds, and creation of reserve accounts, shall be established by the
Board of Directors.


 


ARTICLE VI



Representations and Warranties of Hitachi


 


                In order to induce
Deere to enter into this Agreement and to consummate the transactions
contemplated hereby, Hitachi makes the following representations and warranties:


 


                6.1           Organization, Power and Authority.
Hitachi is a corporation duly organized and legally existing in good standing
under the laws of Japan and has full corporate power and authority necessary to
enter into this Agreement and to carry out all of the agreements and
transactions contemplated hereby.


 


                6.2           Due Authorization and Absence of
Breach.  The execution, delivery and
performance of this Agreement and each of the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby have been


 


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duly authorized by all necessary corporate action of Hitachi. This
Agreement has been duly executed and delivered by Hitachi and is a valid and binding
obligation of Hitachi, enforceable in accordance with its terms. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) conflict with or violate any
provisions of (i) the charter of Hitachi, (ii) any law, ordinance or
regulation, or (iii) any decree or order of any court or administrative or
other governmental body which is either applicable to, binding upon or
enforceable against Hitachi; (b) result in any breach of or default under any mortgage,
contract, agreement, indenture, trust, or other instrument which is either
binding upon or enforceable against Hitachi; or (c) violate any legally
protected right of any individual or entity or give to any individual or entity
a right or claim against Deere.


 


                6.3           Accuracy of Information Furnished
by Hitachi.  To the knowledge of
Hitachi, no representation, statement or information made or furnished by
Hitachi in this Agreement and the other information and statements previously
furnished in writing by Hitachi, contains any untrue statement of a material
fact or omits any material fact necessary to make the information contained
therein not misleading. All assets to be contributed by Hitachi to the Company
and all assets and liabilities of HCMA and MCMC shall be subject to audit in
accordance with United States generally accepted accounting principles prior to
the Closing by a certified independent auditor designated by Deere.


 


                6.4           Litigation.  There is no action, suit, proceeding or
investigation pending or, to the knowledge of Hitachi, threatened or
contemplated which questions the legality, validity or propriety of the
agreements or transactions contemplated by this Agreement.


 


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                6.5           Hitachi Subsidiaries. Hitachi
makes the representations and warranties relating to HCMA and MCMC as set forth
on Exhibit L.


 


ARTICLE VII


Representations and
Warranties of Deere


 


                In order to induce
Hitachi to enter into this Agreement and to consummate the transactions
contemplated hereby, Deere makes the following representation and warranties:


 


                7.1           Organization, Power and Authority.  Deere is a corporation duly organized and
validly existing under the laws of the State of Delaware, with full corporate
power and authority to enter into this Agreement and to carry out all of the
agreements and transactions contemplated hereby.


 


                7.2           Due Authorization and Absence of
Breach. The execution, delivery and performance of this Agreement and each
of the other agreements contemplated hereby have been duly authorized by all
necessary corporate action of Deere. This Agreement has been duly executed and
delivered by Deere and is a valid and binding obligation of Deere, enforceable
in accordance with its terms. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will:
(a) conflict with or violate any provision of (i) the charter of
Deere, (ii) any law, ordinance or regulation, or (iii) any decree or
order of any court or administrative or other governmental body which is either
applicable to, binding upon or enforceable against Deere; (b) result in
any breach of or default under any mortgage, contract, agreement, indenture,
trust or other instrument which is either binding upon or enforceable against
Deere; or (c) violate any legally protected right of any individual or
entity or give to any individual or entity a right or claim against Hitachi.


 


                7.3           Accuracy of Information Furnished
by Deere. To the knowledge of Deere, no representation, statement or
information


 


 


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made or furnished by Deere in this Agreement and the other information
and statements previously furnished in writing by Deere, contains any untrue
statement of a material fact or omits any material fact necessary to make the
information contained therein not misleading. All assets to be contributed by
Deere to the Company shall be subject to audit in accordance with United States
generally accepted accounting principles prior to the Closing by a certified
independent auditor designated by Hitachi.


 


                7.4           Litigation. There is no
action, suit, proceeding or investigation pending or, to the knowledge of
Deere, threatened or contemplated which questions the legality, validity or
propriety of the agreements or transactions contemplated by this Agreement.


 


                7.5           Good Title to Assets Contributed.
Deere has good and marketable title to the assets set forth on Exhibit C,
free and clear of all liens, claims, encumbrances, equities or interests of
every kind, nature and description whatsoever.


 


ARTICLE VIII


Other Agreements


 


                8.1           Exclusivity. Except as
otherwise agreed in writing, from and after the Closing, neither Deere nor
Hitachi nor any of their respective affiliates shall, (1) distribute
excavators (including service parts and components therefor) in the Territory,
(2) distribute any other product which is either manufactured or
distributed by the Company (including service parts and components therefor) in
the Territory, (3) license any third party to manufacture excavators
(including service parts and components therefor) for distribution in the
Territory, or (4) license any third party to manufacture any other product
which is either manufactured or distributed by the Company (including service
parts and components therefor) for distribution in the Territory, except in
accordance with the


 


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terms and conditions of this Agreement and the exhibits attached
hereto. To the extent that it is necessary to manufacture excavators or
components locally to preserve distribution in any country, Hitachi and Deere
shall meet and mutually decide on any appropriate action or actions to be taken
by each party to best preserve the distribution of the products under this
Agreement. Hitachi shall use its best efforts to preserve the exclusivity of
the Company in the Territory with respect to the products which are the subject
of this Agreement, including service parts and components therefor. As an
exception to the foregoing exclusivity provision, Hitachi shall have the right
to honor its obligations under agreements with dealers in Central or South
America, as listed on Exhibit M, which predate the closing date as set forth
in Section 2.1. However, it is further agreed that Hitachi shall
terminate, or seek to transfer to the Company, upon the approval of the
Company, such dealer agreements at the earliest possible legal opportunity.
After discussions with Deere and Hitachi, the Company shall evaluate and select
the most appropriate distribution systems in Central and South America. Such
evaluations may include such matters as financial and legal aspects, past and
current sales records, cancellation fee, ability of handling both medium and
large excavators, service, and related issues. The Company also will evaluate
both Deere and Hitachi dealers in each country of Central and South America.
The objective of the Company shall be to create a more efficient distribution
system for Hitachi and Deere branded machines. Hitachi shall take appropriate
steps to ensure that any interim shipments in Central and South America are for
consumption within the respective dealer’s area of responsibility and are
reasonably related to the dealer’s market potential and domestic machine
population. It is the intention of the parties to resolve all such dealer
relationships with the objective of establishing the Company as the exclusive
distributor of excavators or any other product which is either


 


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manufactured or distributed by the Company (including service parts and
components for such excavators or other products), in the Territory. As a
further exception, Deere and Hitachi shall have the right to manufacture and
distribute in the Territory excavators in the mini-excavator class (i.e.,
typically below 6 metric tons with pivot boom configuration).


 


                8.2           Confidentiality. In connection
with the operations of the Company, the parties hereto may make available to
the Company certain information designated in writing to be confidential (“Confidential
Information”). Except as otherwise provided in this Agreement or the exhibits
hereto, all such Confidential Information shall be treated by the Company as
confidential and shall not be disclosed to anyone except to those persons
having a legitimate business need for such information and subject to the
provisions set forth herein. Such Confidential Information shall be and remain
at all times the property of the party providing such Confidential Information
and neither the Company, nor any of its subsidiaries nor any director, officer
or employee of the Company or any of its subsidiaries shall have the right to
disclose such Confidential Information to (i) the other party (ii) any
affiliate of such other party or (iii) any director, officer, employee,
agent or representative of such other party or any of its affiliates. In
particular such Confidential Information shall under no circumstances be deemed
to be a property right or asset of the Company to which any party or its
affiliate is entitled by virtue of its ownership interest in the Company or
otherwise. Each party and its affiliates shall not, without the prior written
consent of the party providing Confidential Information, disclose any
Confidential Information to any third party except as otherwise required by law
or government regulation. In the event Confidential Information is furnished by
the Company to a third party, the Company shall first require the third party
to enter into a written agreement preserving the


 


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confidentiality of such Confidential Information and limiting its
disclosure to persons who have a legitimate business need for such Confidential
Information.


 


                8.3           Indemnification.


 


                                (a)           Each party to this Agreement shall
defend, indemnify and hold harmless the other party and the Company from and
against any material claim, liability, demand, loss, damage, judgment or other
obligation or right of action which may arise as a result of:


 


                                                (i)            breach of this Agreement by the indemnifying
party;


 


                                                (ii)           misrepresentation by the indemnifying
party to third parties;


 


                                                (iii)          anything done or omitted to be done
through the gross negligence or willful misconduct of the indemnifying party or
of its officers, directors, employees or agents; or


 


                                                (iv)          any action by any of the indemnifying
parties, officers, directors, employees or agents (which are not individuals
holding positions of employment in the Company) which action has not been
authorized by the Board of Directors of the Company or which binds the Company
beyond the scope of this Agreement.


 


                                (b)           Hitachi shall defend, indemnify and
hold harmless Deere and the Company from and against any material claim,
liability, demand, loss, damage, judgment or other obligation or right of
action arising from acts or omissions of HCMA and MCMC occurring prior to the
Closing. Such indemnification shall include, but not be limited to, the
following:


 


                                                (i)            obligations to dealers or
distributors arising from contractual relationships in existence prior to the
Closing;


 


                                                (ii)           obligations related to sales
promotion and allowances prior to Closing unless adequately accrued on the books
of HCMA and MCMC at Closing;


 


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                                                (iii)          liabilities resulting from the sale of
products prior to Closing unless adequately accrued on the book of HCMA and
MCMC at Closing including, but not limited to, (A) warranty expenses and
administration (such administration to be handled in the same manner and under
the same terms as it was prior to Closing), (B) product liability claims
and litigation, (C) product recalls and (D) uncollectible
receivables; and


 


                                                (iv)          prior service, pension and insurance
benefit liabilities for employees transferred to the Company unless adequately
accrued on the books of HCMA and MCMC at Closing.


 


                                (c)           Each party shall use its best efforts
to cause the members of the Board of Directors designated by each such party,
pursuant to Section 4.1 of this Agreement, to cause the Company to defend,
indemnify and hold harmless Deere and Hitachi from and against any material
claim, liability, demand, loss, damage, judgment or other obligation or right
of action which may arise as a result of any act or omission of the Company or
any of its subsidiaries occurring subsequent to the Closing.


 


                                (d)           In the event that either party shall
become obligated to indemnify the other party under this Section 8.3, the
parties shall meet to decide how to best satisfy such obligation, taking into
account the facts and circumstances giving rise to such obligation and the
magnitude of such obligation.


 


                8.4           Improvements, Inventions and
Know-How. Except as provided in the Manufacturing License Agreements
attached hereto as Exhibits E and F, (a) any and all improvements,
inventions and know-how, patentable or unpatentable, which may be developed by
the Company during the term of this Agreement shall be the property of the
Company. Each party hereto shall use its best efforts to cause the members of
the Board of Directors designated by such party, pursuant to Section 4.1
of this Agreement, to cause the Company to grant a non-exclusive royalty free
license, to each of Deere and Hitachi to make, use or sell


 


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any an all such improvements, inventions and know-how, and (b) nothing
herein shall grant to either Deere or Hitachi any rights to proprietary
technology owned by the other party.


 


                8.5           Financial Protection. It is
the intent of the parties to financially structure the Company in such a
fashion that neither Hitachi nor Deere shall be financially disadvantaged by
the creation of the Company. Transfer pricing between the parties and the
Company shall take into account the marketing and product support expenses
incurred by either party on behalf of the products sold to and distributed by
the Company together with the income properly attributable thereto. This intent
shall not be construed as requiring frequent changes in transfer price
relationships to preserve perfect equality; rather, such transfer price
relationships shall be adjusted only when material and nontransitory inequities
are determined to result from the then current transfer price relationships. In
that event, the parties shall meet to negotiate proper adjustments and changes.
The parties agree to review and consider the need for changes in transfer price
relationships at least annually.


 


                8.6           Sources of Components and Parts.
With the exception of the incorporation of Deere engines into all Deere-branded
excavators models, the Company shall only use the designs and specifications
supplied by Deere for the Model 690 and successor models, and the designs
and specifications supplied by Hitachi for all remaining models, provided
however that the Company shall have the right where cost effective to purchase
components and parts for such excavators from third party sources so long as
those components and parts meet or exceed the required designs and
specifications of Deere or Hitachi, as determined by Deere or Hitachi,
respectively.


 


                8.7           Primary Marketing Objective.
The parties agree that the primary marketing objectives of the Company shall
be:


 


                (a)           to maximize the sales of excavators
under both the Deere and Hitachi tradenames and trademarks; to simultaneously


 


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expand the range of models offered to Deere or Hitachi dealers as set
forth on Exhibit N; and to maintain and strengthen existing dealer
networks.


 


                (b)           to identify and develop opportunities
for greater distribution efficiencies for both Hitachi and Deere-branded
machines through the use of integrated support, administrative, and promotional
efforts. Such efficiencies will be implemented in a fashion that minimizes
potentially disruptive effects at the dealer level for both Deere and Hitachi
dealers. It is contemplated that such efficiencies will eventually include the merger
of HCMA and MCMC, and the incorporation of the excavator business of Deere into
the Company, subject to Section 4.3(h) of this Agreement.


 


                8.8           Formation Expenses. Except as
they may otherwise agree, each party shall bear its own expenses incurred in
connection with the formation of the joint venture.


 


                8.9           Liabilities Retained by the
Parties. All material existing liabilities of the parties as of the
Closing, including all material contingent liabilities arising from acts or
omissions of the parties occurring prior to the Closing, shall be retained by the
parties. Such liabilities shall include, but not be limited to, the following:


 


                (a)           obligations to dealers or
distributors arising from contractual relationships in existence prior to the
Closing;


 


                (b)           obligations related to sales
promotion and allowances; 


 


                (c)           costs of transferring Deere and
Hitachi employees to the Company, including all incentives and moving expenses;


 


                (d)           liabilities resulting from the sale
of products prior to the Closing, including but not limited to


 


                                (i)            warranty expense and administration,


 


                                (ii)           product liability claims and
litigation,


 


                                (iii)          product recalls, and


 


                                (iv)          uncollectible receivables; and


 


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                (e)           prior service, pension and insurance
benefit liabilities for employees transferred to the Company.


 


                8.10         Operating Losses. In the event
the Company sustains, or is projected to sustain, operating losses which
threaten its continued viability, the parties agree to discuss and consider the
adoption of appropriate measures to return the Company to a sound financial
base. Such measures shall include, but not be limited to, the following:


 


                                (a)           the revision of transfer prices for
goods sold by the parties to the Company,


 


                                (b)           the contribution by the parties in
equal amounts of additional operating capital, and


 


                                (c)           the review of total distribution
costs.


 


                If, despite the
good faith efforts of the parties, such operating losses continue, the parties
may agree to terminate the Agreement.


 


ARTICLE IX


Term and Termination


 


                9.1           Term. This Agreement shall
become effective as of the date hereof and shall continue in full force and
effect for an indefinite term hereafter unless terminated in accordance with
the provisions of this Agreement.


 


                9.2           Termination. Each of Deere and
Hitachi shall have the right to terminate this Agreement upon the happening of
any of the following events:


 


                (a)           the breach of any material provision
of this Agreement or any of the other agreements attached hereto as exhibits by
the other party that is not cured within 90 days (or such other period or may
be established by mutual agreement of the parties) after receipt of written
notice of such breach given by the non-breaching party;


 


                (b)           the filing by or against the other
party of any voluntary or involuntary petition in bankruptcy for corporate


 


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reorganization or any similar relief, the appointment of a receiver for
the other party or its property, a general assignment by the other party for the
benefit of its creditors, the inability admitted by the other party in writing
to pay its debts as they mature, or the liquidation of the other party;


 


                (c)           the performance of this Agreement by
the other party is precluded or constrained by causes beyond the control of
such party, including without limitation fire, storm, flood, earthquake,
explosion, accident, acts of public enemies, war, rebellion, insurrection,
labor disputes or shortages, transportation embargo, or failure or delays in
transportation, inability to secure raw materials, acts of God, or acts of
governmental authority or agency thereof; or


 


                (d)           a change in control of either Deere
or Hitachi. For purposes of this Section 9.2(d) and Section 9.4 below
a “change in control” shall mean a change of nature that would be required to
be reported, by a reporting company, in response to Item 5(f) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of 1934
(the “Exchange Act”); provided that, without limitation, a change in control of
a party shall be deemed to have occurred if (i) any person (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act), other than the
party or any person who on the date hereof is a director or officer of the
party, becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of that party representing
30% or more of the combined voting power of the party’s then outstanding
securities, or (ii) during any period of two consecutive years during the
term of this Agreement, individuals who at the beginning of such period
constitute the Board of that party, cease for any reason to constitute at least
a majority thereof, unless the election of each director who was not a director
at the beginning of such period has been approved in advance by


 


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directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period.


 


                9.3           Liquidation and Dissolution.
In the event that this Agreement is terminated pursuant to Section 9.2
above, the parties shall take such action as is necessary to cause the Board of
Directors to adopt a plan of liquidation and dissolution of the Company (the “Plan”).
The Plan shall include the return to each shareholder of any Confidential
Information provided by such shareholder to the Company and the transfer and
assignment by the Company of its interest in any and all inventions, know-how
and improvements, patentable or unpatentable, developed by the Company during
the term of this Agreement, to the shareholders to be held jointly. The Plan
also shall provide that the proceeds of liquidation be applied and distributed
in the following order of priority:


 


                (a)           to the payment of all of the Company’s
liabilities;


 


                (b)           to the setting up of any reserves
that the Board of Directors deems reasonably necessary to provide funds for any
contingent or unforeseen obligations or liabilities of the Company. At the
expiration of such period of time as the Board of Directors deems advisable,
the balance of such reserves shall be distributed as provided in subsection (c)
below; and


 


                (c)           to the shareholders in proportion to
their respective shareholdings.


 


                The Company may
sell any asset of the Company to any shareholder. Any expenses incurred in the
liquidation shall be expenses of the Company.


 


                9.4           Products. In the event that
this Agreement is terminated for any reason other than because of a material
breach of this Agreement by Deere, Hitachi shall (a) for a period of five years
following the date of such termination sell to Deere at Deere’s request, the
same or substantially the same Deere branded products that the Company
purchased from Hitachi or manufactured under the terms of this Agreement prior
to its


 


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termination and (b) for a period of fifteen years following the date of
such termination maintain manufacturing capabilities for the purpose of
providing Deere with a reasonable stock of service parts for products sold to
Deere. Hitachi shall make such sales to Deere on substantially the same terms
and conditions set forth in the Supply Agreement attached hereto as Exhibit J,
as amended to accommodate an OEM supply arrangement between Hitachi and Deere.
Hitachi’s obligations to make such sales to Deere shall terminate upon the
happening of (a) the filing by Deere of any voluntary petition in
bankruptcy for corporate reorganization or any similar relief and thereafter
Deere is unable to provide adequate assurance of its ability to pay for
products sold to it by Hitachi as such debts mature and (b) any change in
control of Deere that involves any entity which, or person who, is a direct
competitor of Hitachi in the manufacture and sale of excavators.


 


                For the purposes
of this Section 9.4, the term “change in control” shall have the meaning
ascribed to it in Section 9.2(d) above.


 


ARTICLE X


Miscellaneous


 


                10.1         Binding Effect. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Each party hereto shall use its best efforts
to cause the members of the Board of Directors designated by such party
pursuant to Section 4.1 of this Agreement, to cause the Company to agree
to be bound by all of the terms and conditions of this Agreement as though it
were a party hereto.


 


                10.2         Entire Agreement. This
instrument and the exhibits attached hereto supersede all prior understandings
and agreements of the parties with respect thereto. Any reference


 


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herein to this Agreement shall be deemed to include the exhibits
attached hereto.


 


                10.3         Amendment and Modification. The
parties hereto may amend, modify and supplement this Agreement in such manner
as may be agreed upon by them in writing.


 


                10.4         Governing Law. This Agreement is
executed in English, which shall be the controlling text and this Agreement and
all related agreements (unless otherwise agreed) shall be governed by and
construed in accordance with the laws of the State of Illinois applicable to
contracts made and to be performed therein.


 


                10.5         Severability. If any term,
restriction or covenant of this Agreement is deemed illegal or unenforceable
under the laws of the State of Illinois (or any other law deemed by a court of
competent jurisdiction to be controlling), or if any application of any term,
restriction or covenant of this Agreement to any person or circumstance is
deemed illegal or unenforceable, the parties shall in good faith negotiate
changes to the unenforceable term restriction or covenant so that the original
intent of such term restriction or covenant is preserved insofar as is
permissible by law.


 


                10.6         Headings. The descriptive
headings in this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.


 


                10.7         Execution in Counterpart. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original.


 


                10.8         Notices. Any notice, request,
information or other document to be given hereunder to any of the parties by
any other party shall be in writing and sent by certified or registered mail,
return receipt requested, or sent by telex or facsimile transmission, as
follows:


 


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If to Deere, addressed to:


                                Deere
& Company


                                John
Deere Road


                                Moline,
IL 61265


 


If to Hitachi, addressed to:


                                Hitachi
Construction Machinery Co., Ltd.


                                Nippon
Bldg. No. 6-2, 2-Chome


                                Ohtemachi,
Chiyodo-Ku


                                Tokyo 100, Japan


 


Any party may change the address to which notices hereunder are to be
sent to it by giving written notice of such change of address in the manner
herein provided for giving notice. Any notice given by telex or facsimile
transmission shall be deemed to have been given on the date it is sent or the
next business day if the date it is sent is not a business day, and any other
authorized notice shall be deemed to have been given five (5) business
days after the date it is sent.


 


                10.9         Further Assurances. Each of the
parties hereto shall execute and deliver any and all additional papers,
documents and other assurances, and shall do any and all acts and things
reasonably necessary in connection with the performance of its obligations
hereunder to carry out the intent of the parties hereto.


 


                10.10       Arbitration.


 


                                (a)           Any controversy or claim arising out
of or relating to this Agreement, or the breach thereof, which is unresolved
within 90 days (or such other period as may be established by mutual agreement
of the parties) of first written notification by either party, shall be settled
by binding arbitration in accordance with the Commercial Arbitration Rules of
the International Chamber of Commerce and judgment upon the


 


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award rendered may be entered in any court having jurisdiction thereof.
Such arbitration shall be conducted by three arbitrators, one selected by each
of Deere and Hitachi, and the two arbitrators so selected choosing a third (or,
failing agreement on the third, the International Chamber of Commerce choosing
a third). Any arbitration shall occur in Paris, France.


 


                                (b)           Each of Deere and Hitachi hereby
expressly submits itself generally and unconditionally to the personal jurisdiction
of any United States or state court which sits in the State of Illinois which
would have jurisdiction over the subject matter of an action to enforce an
arbitration award provided, however, that neither party shall be deemed to have
submitted to such jurisdiction unless or until it has been provided with actual
notice of the pending of proceedings in such court and given adequate
opportunity to appear.


 


                10.11       Assignment. Neither Hitachi nor
Deere shall assign its rights or obligations pursuant to this Agreement except
with the prior written consent of the other party.


 


                IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed as
of the day and year first above written.


 


	
   

  	
  DEERE & COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Thomas A. Gildehaus

  	
   

  
	
   

  	
   

  	
  THOMAS A. GILDEHAUS, EXECUTIVE VICE-PRESIDENT

  
	
   

  	
   

  	
   

  
	
   

  	
  HITACHI CONSTRUCTION MACHINERY, CO. LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ H. Okada

  	
   

  
	
   

  	
   

  	
  HAJIME OKADA, PRESIDENT

  
					



 


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