Exhibit 10.27
MARKETING PROFIT SHARING
AGREEMENT
[IMA Implementing Agreement]
THIS MARKETING PROFIT SHARING AGREEMENT (this
“Agreement”) is entered into as of the 1st day of
January, 2002, by and between John Deere Construction and Forestry
Equipment Company (“JDCFC”), a Delaware corporation
wholly-owned by Deere & Company (“Deere”) and
Hitachi Construction Machinery Holding U.S.A. Corporation
(“HHUS”), a Delaware corporation wholly-owned by
Hitachi Construction Machinery Co., Ltd,
(“HCM”).
WHEREAS, on October 16, 2001, Deere and HCM entered into an
Integrated Marketing Agreement (“IMA”) in which they
agreed to engage in a joint venture which would integrate their
respective marketing organizations in North, Central and South
America (“Territory”) for the distribution of certain
products as defined in the IMA and ancillary supply agreements
(collectively, the “Products”); and
WHEREAS, the new marketing joint venture will be an unincorporated
joint undertaking and will be in addition to the existing
manufacturing joint venture established by Deere and HCM in an
Agreement dated May 16, 1988 (“1988 JV
Agreement”); and
WHEREAS JDCFC and HHUS agree to work together to achieve, and take
mutual responsibility for, the cost reductions and distribution
synergies that will result from the combined marketing
organizations; and
WHEREAS, following the integration the parties agreed that all
marketing functions previously performed separately by JDCFC,
Hitachi Construction Machinery of America (“HCMA”) and
Hitachi Construction Machinery of Canada (“HCMC”),
would be assumed by JDCFC, utilizing the existing systems and
facilities of JDCFC; and
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WHEREAS, the IMA and ancillary supply agreements also provided,
among other things, that upon integration of the parties’
marketing organizations profits derived from distribution of
Products in the Territory by JDCFC would be shared as follows:
JDCFC—60%; HHUS—40%, such profits to be determined in
accordance with United States Generally Accepted Accounting
Principles (“US GAAP”); and
WHEREAS, the parties desire to provide further definition with
respect to their respective rights and obligations in implementing
the profit sharing terms of the IMA.
NOW THEREFORE, the parties hereto agree as follows:
1.
In accordance with the terms of the IMA, following integration
JDCFC will assume sole responsibility for the distribution of
Products within the Territory.
2.
The Parties anticipate that the integration of their respective
marketing organizations will result in substantial cost reductions
through, among other things, the sharing of common marketing and
product support systems, consolidation of facilities, as well as
realization of synergies through integration of their parts
distribution systems. It is also anticipated that these benefits
will be accomplished by the utilization of systems already in
place, or to be put into place at JDCFC, and through the
discontinuance of separate systems and operations previously in
place at and utilized by HCMA and HCMC.
3.
As JDCFC has agreed to assume responsibility for the distribution
of Products within the Territory, utilizing its existing assets,
facilities, systems, personnel and such Hitachi personnel as may be
required. No initial cash capital will be contributed by either
party in connection with carrying out the functions of the
integrated marketing organization. Accordingly, HHUS and its
affiliates, including but not limited to HCMA, HCMC, and
Deere-Hitachi, shall not acquire any equity ownership in JDCFC or
interests in the tangible or intangible assets of
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JDCFC or its affiliates, and JDCFC and its
affiliates shall not acquire any equity ownership in HHUS or
interests in the tangible or intangible assets of HHUS or its
affiliates, by virtue of the integration of their respective
marketing organizations. To provide further clarity, the parties
agree that the mutual benefits anticipated by the integration will
be realized through, among other things, improved efficiencies, and
eliminating duplication and redundancies within their respective
organizations, all of which contribute to the basis for the
percentages agreed upon for the sharing of the profits derived from
the distribution of Products within the Territory.
4.
Except as provided in paragraph 8 of this Agreement, the profits
and losses derived from distributing Products within the Territory
for periods beginning on or after January 1, 2002, shall be
shared as follows: JDCFC—60%; HHUS—40%. The Parties
acknowledge and agree that the sharing of profits and losses in
these percentages is based upon, among other things, the cost
reductions agreed upon in the IMA and the synergies achieved from
the integration as referred to in the IMA, as well as in
paragraph 2 of this Agreement. Accordingly, profit and loss
sharing provisions of this Agreement will become effective for
Products distributed after the execution of the IMA and at the time
the cost reduction provisions become effective, on January 1,
2002. In the event Euclid trucks are not made available due to
bankruptcy or other events not attributable to JDCFC or any of its
affiliates, the parties agree to increase Deere’s 60 percent
split. If the parties cannot agree on a mutually acceptable
adjustment, the percentage split shall be determined by arbitration
pursuant to the 1988 JV Agreement, section 10.10.
5.
Profits and losses from the distribution of Products shall be
determined in accordance with US GAAP, and shall take into account
the following practices:
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(i)
the standard profit by product accounting methods and systems which
have been heretofore utilized by Deere, provided that Deere shall
provide Hitachi with a description of such standard accounting
methods and systems in reasonable details and provided Deere shall
have discretionary authority to change such standard accounting
methods and systems so long as the new accounting methods and
systems are applied consistently within JDCFC and that detailed
description of such new methods and systems shall be provided to
Hitachi annually; (ii) product or division specific costs
shall be directly assigned to such product or division;
(iii) allocations of indirect costs shall be in accordance
with the standard allocation methods which have heretofore been
utilized by Deere provided that: (a) Deere shall provide
Hitachi with a description of such standard allocation methods in
reasonable detail, (b)&n
