Joint Venture Agreement

MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION


JOINT VENTURE AGREEMENT


BETWEEN


1. Instron Corporation, 100 Royall Street, Canton, Massachusetts 02021


- hereinafter called "Instron Corp."


2. Instron Partners, 100 Royall Street, Canton, Massachusetts 02021


- hereinafter called "IP"


3. Instron GmbH i. Gr., Industriestrasse 19, 67063 Ludwigshafen am Rhein


- hereinafter called "Instron GmbH"


- Instron Corp., IP and Instron GmbH are also jointly referred to as
"Instron" or the "Instron Parties" and each an "Instron Party"


and


4. Carl Schenck AG, Landwehrstrasse 55, Darmstadt


- hereinafter called "Schenck AG"


5. Schenck Atis GmbH, Landwehrstrasse 55, Darmstadt


- hereinafter called "Schenck Atis"


6. Schenck Pegasus Testing Inc., 535 Acorn Street, Deer Park, N.Y.
11729-3698, USA


- hereinafter called "SPT" -


- Schenck AG, Schenck Atis and SPT are also jointly referred to as
"Schenck" or the "Schenck Parties", and each a "Schenck Party",


- each Schenck Party and each Instron Party is also individually
referred to as a "Party", and Schenck and Instron are jointly referred
to as the "Parties", concerning


Instron Schenck Testing Systems GmbH, a German GmbH
Instron Schenck Testing Systems, a Delaware Partnership


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1.6 The German Schenck Business and the US Schenck Business, and each of
them, shall be jointly referred to as the "Schenck Business". The UK
Instron Business and the US Instron Business, and each of them, shall be
jointly referred to as the "Instron Business". The terms "Business" or
"Businesses" shall mean and include all of the aforementioned
businesses. The products of the Business as of the Effective Date are
listed in EXHIBIT 1.6.


1.7 The term "Affiliate", when used with reference to any person means a
company affiliated to it within the meaning of Section 15 of the German
Stock Corporation Act.


SEC. DEFINITIONS


DEFINITION OF REFERENCE SECTION
18 Month [*] Statement 7.1
30 Month [*] Statement 7.1
Actual [*] 7.1
[*] Statement (s) 7.1
Board 17.2
Budget 19.1
Business or Businesses 1.6, 8.3
[*] Option 25.1
[*] Option 2 25.2
Companies and Company 3.4
Confidential Information 34.1
Contribution Agreement (s) 3.7
German Schenck Business 1.2
German Schenck Contribution Agreement 3.5.2
GmbH 1.1
Instron Business 1.6
Instron Contribution Agreement (s) 3.6
Instron Schenck Testing Systems 3.5.4
Instron U.K. 1.5


* Material omitted and filed separately with the Securities and Exchange Commission.


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Joint Venture Companies 17.1
Management 17.1
Offered Party 25.3, 26.4, 30.2
Offering Party 25.3, 30.2
Notified Party 26.4
Receivables Statement 7.6
Schenck Business 1.6
Schenck Contribution Agreement(s) 3.6
Transferor 8.3
UK Instron Business 1.5
US Company 3.5.4
US Instron Business 1.4
US Instron Contribution Agreement 3.5.6
US Schenck Business 1.3
US Schenck Contribution Agreement 3.5.5


I INTRODUCTION
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SEC.1 PREAMBLE AND CURRENT STATUS


1.1 In preparation for the joint venture contemplated hereunder, the
following company was established: On July 24, 1996 Schenck Atis
established Schenck Atis Vermogensver waltungs GmbH, a German limited
liability company with a stated capital of DM 50,000, before the notary
public Dr. Klaus Berghauser in Darmstadt (Deed Role No. 3/96), and
registered under HRB 6497 with the Commercial Register of the local
court at Darmstadt, (hereinafter, called "GmbH") and subscribed to a
share in the nominal value of DM 50,000; on October 24, 1996, the
Articles of Association of the GmbH were amended as set out in Exhibit
1.1 by way of a notarial deed before the notary public Dr. Wolfgang
Ebner in Darmstadt (Deed Role No. 854/1996).


1.2 At its production plant in Darmstadt, Schenck Atis operates its business
of structural testing systems (the "German Schenck Business") .


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1.3 At its production plant in Troy, Schenck Pegasus Corporation operates
its business of structural testing systems (the "US Schenck Business").


1.4 At its production plant in Canton, Instron Corp. operates its business
of structural testing systems (the "US Instron Business").


1.5 At its production plant in High Wycombe, Instron's subsidiary Instron
Limited ("Instron U.K.") operates its business of structural testing
systems (the "UK Instron Business").


ESTABLISHMENT OF THE JOINT VENTURE - ----------------------------------


SEC.3 GENERAL STRUCTURE


3.1 Instron and Schenck will form a joint venture in order to design,
manufacture, sell and service structures testing systems as heretofore
produced in the Business.


3.2 The joint venture shall reflect the intent of the parties of creating a
joint production and sales effort and of sharing the opportunities of
such joint effort.


3.3 The joint venture shall aim to create, and be perceived as, a joint
presence of the parties under the industrial leadership of Instron
offering high quality products tailored to the requirements of the
desired customer base. It will seek to service high level market
segments utilizing the established quality image and reputation of
Instron and Schenck.


3.4 The joint venture will be established in such form that Instron will
hold 51% of the interests in each of the GmbH (to be renamed as Instron
Schenck Testing Systems GmbH) and Instron Schenck Testing Systems (the
"Companies" and each a "Company"). Schenck will hold 49% of the
interests in each of the Companies.


3.5 For this purpose, the Parties agree to take the following steps:


3.5.1 Schenck Atis will sell and transfer to Instron GmbH a partial
share in the GmbH in the nominal value of DM 25,500 as set out
in Section 4.


3.5.2 On the date hereof, Schenck Atis will contribute the German
Schenck Business to the GmbH against issuance of a share
(Geschaftsanteil) in the nominal value of DM


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* and pursuant to a contribution agreement to be entered
into in the form attached as EXHIBIT 3.5.2 ("German Schenck
Contribution Agreement") . To the extent that the book value of
the contributed Business exceeds the aforementioned nominal
value, it shall be booked as a loan as more specifically set
forth in the German Schenck Contribution Agreement.


3.5.3 On the date hereof, Instron GmbH will subscribe to a share in
the GmbH in the nominal value of [*] and will undertake to
contribute the equivalent in DM (at the best available spot rate
of today of Bank of Boston and any other second bank reasonably
selected by Instron) of the amount of [*] to the GmbH, of which
[*] will be treated as stated capital and the excess will be
treated as capital reserve.


3.5.4 On the date hereof, IP and SPT will establish a Delaware General
Partnership under the name "Instron Schenck Testing Systems"
(the "US Company") and with a partnership agreement as set out
in EXHIBIT 3.5.4.


3.5.5 On the date hereof, SPT will contribute the US Schenck Business
and order backlog transferred to it by Schenck Pegasus
Corporation prior to or on the date hereof to the US Company
against issuance of its 49% partnership interest and pursuant to
a contribution agreement to be entered into in the form attached
as EXHIBIT 3.5.5 ("US Schenck Contribution Agreement").


3.5.6 On the date hereof, IP will contribute the US Instron Business
and the UK Instron Business, each as transferred to it on or
prior to the date hereof by Testing Systems Holdings, Inc. and
IST Enterprises Ltd., and the amount of [*] to the US Company
against issuance of its 51% partnership interest and pursuant to
a contribution agreement to be entered into in the form attached
as EXHIBIT 3.5.6 ("US Instron


* Material omitted and filed separately with the Securities and Exchange Commission.


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Contribution Agreement").


3.6 The German Schenck Contribution Agreement and the US Schenck
Contribution Agreement shall be jointly referred to as the "Schenck
Contribution Agreements", and each of them shall also be referred to as
the "Schenck Contribution Agreement". The US Instron Contribution
Agreement shall also be referred to as the "Instron Contribution
Agreement". The terms "Contribution Agreement" or "Contribution
Agreements" shall mean and include all of the Schenck Contribution
Agreements and the Instron Contribution Agreement.


3.7 On or after the date hereof, the US Company will establish subsidiaries
in the US and the UK to conduct business as resolved by the board of the
US Company.


3.8 After such transfers, the GmbH shall make different tax elections
according to US and German tax law, respectively, as follows:


3.8.1 An item of income, gain, loss, and deduction with respect to any
property (other than cash) that has been contributed by a
shareholder to the capital of the GmbH and which is required or
permitted to be allocated to such shareholder for US income tax
purposes under Section 704 (c) of the US Internal Revenue Code
so as to take into account the variation between the tax basis
of such property and its fair market value at the time of its
contribution shall be allocated to such Partner solely for
income tax purposes in the manner so required or permitted using
the traditional method under Treasury Regulation Section
1.704-3.


3.8.2 In connection with any assignment or transfer of an interest
described in Sections 734 (b) and 743 (b) of the US Internal
Revenue Code of 1986 the GmbH shall at the time and in the
manner provided in Treasury Regulations Section 1.754-1 (b) (or
any like statute or regulation then in effect) make an election
to adjust the basis of the GmbH's property in the manner
provided in Section 755 of the Code


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provided such adjustment increases the basis of GmbH property.


3.8.3 The value booked by the GmbH according to German tax law for the
assets contributed shall be determined pursuant to the minimum
values allowed under Section 20 para 2 of the German
Transformation Tax Act (Umwandlungssteuergesetz).


3.9 Schenck hereby licenses to the Companies and their subsidiaries the use
of the name "Schenck" as part of their corporate names for a period from
the Effective Date until [*] following the date Schenck ceases to be a
shareholder or partner in the relevant Company, and otherwise including
the use as a tradename and unregistered trademark for a period from the
Effective Date until [*] following the date Schenck ceases to be a
shareholder or partner in the relevant Company. Instron hereby licenses
to the Companies and their subsidiaries the use of the name "Instron" as
part of their corporate names for a period from the Effective Date until
[*] following the date Instron ceases to be a shareholder or partner in
the relevant Company, and otherwise including the use as a tradename and
unregistered trademark for a period from the Effective Date until [*]
following the date Instron ceases to be a shareholder or partner in the
relevant Company. Each license is royalty-free, nonexclusive and
nontransferable.


SEC.4 SALE AND TRANSFER OF SHARES


4.1 Schenck Atis hereby splits its share in the GmbH in the nominal value of
[*] in two partial shares in the nominal values of [*] and [*] and sells
and transfers to Instron GmbH as of the Effective Date and subject to
the terms and conditions of this Agreement, 51% of its shares in GmbH,
i.e. the share in the nominal value of [*] free of all liens and
encumbrances of whatever nature, with all rights and obligations
appurtenant thereto, in


* Material omitted and filed separately with the Securities and Exchange Commission.


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particular all rights to dividends not yet distributed; Instron GmbH
hereby accepts such sale and transfer.


4.2 To the extent additional documents or actions are required or beneficial
for purposes of the transfer or a required registration of a transfer of
any of the share purchased, the Parties shall cooperate with each other.


SEC.5 EFFECTIVE DATE


The Effective Date within the meaning of this Agreement shall be the
date of signature of this Agreement.


SEC.6 PURCHASE PRICE AND COMPENSATION PAYMENT


6.1 The purchase price for the share sold pursuant to Section 4 hereof shall
be [*].


6.2 Instron GmbH shall compensate Schenck Atis for the excess value of the
contribution by Schenck compared with the contribution by Instron as
follows: Instron GmbH shall make an initial payment of [*] to Schenck
Atis. This amount is based on the estimated aggregate [*] contributed by
each of Schenck and Instron under this Agreement and the Contribution
Agreements as set out in EXHIBIT 7.5. The Parties undertake to update
EXHIBIT 7.5 within 30 days from the Effective Date to reflect the status
of the [*] contributed as of the Effective Date. To the extent that the
[*] contributed by any of the Parties is greater (but not more than [*])
or lower than set out in EXHIBIT 7.5, the compensation will be adjusted
as set out in EXHIBIT 6.2. Any payments resulting from such adjustments
and to be made by either of Instron or Schenck become due within 35 days
after the Effective Date.


6.3 The payment set forth in Section 6.1 shall
be made within three German business days from the Effective Date to the
following account:


[*]


* Material omitted and filed separately with the Securities and Exchange Commission.


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The initial payment set forth in Section 6.2 shall be due for payment
within three German business days from the Effective Date. It shall be
paid to Schenck AG on behalf of Schenck Atis by wire transfer in same
day funds as follows:


[*]


Any adjustment payment will be made to the aforementioned account if to
be made to Schenck, and to an account to be notified by Instron, if to
be made to Instron.


6.4 If either Party is in default with any of the above payments, it shall
pay default interest from the due date of payment at the rate of 3%
above the applicable discount rate of the German Federal Bank.


SEC.7 [*] AND REVIEW


7.1 As soon as practicable after the end of the eighteenth month after the
Effective Date, but not later than 30 days thereafter, the Companies
shall jointly prepare and have audited a statement setting forth the [*]
by each of Instron and Schenck to the Joint Venture Companies as set out
in EXHIBIT 7.5 (as updated by the Parties pursuant to Section 6.2,
provided that an increase of the [*] contributed by any Party in excess
of [*] shall be disregarded for purposes of this Agreement) and the
actual [*] (as defined in EXHIBIT 7.1, hereinafter called "Actual [*]")
achieved by such Company for those [*] out of such [*] during the period
of 18 months from the Effective Date ("18 Month [*] Statement") , and
shall deliver the 18 Month [*] Statement to Instron Corp. and Schenck
AG. Likewise, as soon as practicable after the end of the thirtieth
month after the Effective Date, but not later than 30 days thereafter,
each Company shall prepare and have audited a statement setting forth
the [*] by each of Instron and Schenck to such Company and the Actual
[*]


* Material omitted and filed separately with the Securities and Exchange Commission.
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achieved by such Company for those [*] out of the [*] from the end of
the period covered by the 18 Month [*] Statement to the end of the
period of 30 months from the Effective Date ("30 Month [*] Statement"),
and shall deliver the 30 Month [*] Statement to Instron Corp. and
Schenck AG. Each of the 18 Month [*] Statements and the 30 Month [*]
Statements (collectively the "[*] Statements") shall present a fair and
true view of the Actual [*] achieved by the relevant Company for the
relevant [*] during the relevant period and shall be complete and
correct in all respects. For purposes of this Section 7, the [*] on an
[*] shall be deemed "achieved" when the relevant [*] can be [*] under US
GAAP.


7.2 Upon receipt of each of the [*] Statements, each of Instron Corp. and
Schenck AG and their auditors shall have 60 days to review them or have,
them reviewed. For this purpose, the Companies shall grant Instron,
Schenck and their auditors any access to all documents and information
deemed relevant by the respective party, including appropriate
interviews with personnel. Notwithstanding the above, the parties,
auditors shall have the right to participate in preparing the [*]
Statements.


7.3 The [*] Statements shall be binding for both Parties, unless either
Party notifies the Companies in writing within 60 days after receipt of
both [*] Statements of any objections with respect to the [*] Statements
presented. If the Parties and the Companies cannot reach agreement
concerning the objections made within 60 days, the matter shall be
referred to the German office of an international firm of auditors,
which is independent from both Parties and has been selected jointly by
both Parties within a further period of 14 days. If the Parties cannot
agree on an auditing firm within the above period, such auditing firm
shall be appointed by the President of the Frankfurt Chamber of Industry
and Commerce upon application by either Party. The auditing firm shall
reach a decision on the issues in


* Material omitted and filed separately with the Securities and Exchange Commission.
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dispute within 60 days. The second sentence of Section 7.2 shall apply
accordingly. The, determination of the appointed auditor shall be made
in the English language and shall be final and binding for both Parties.


7.4 The costs for the preparation of the [*] Statements shall be borne by
the Companies. Each Party shall bear the costs of its own auditors. The
costs of the appointed independent auditors shall be borne by the
Companies.


7.5 (i) If the aggregate Actual [*] achieved by the Companies for the
[*] by Instron or Schenck, as the case may be, as determined by
the relevant 18 Month [*] Statement, is less than the aggregate
guaranteed [*] on the [*] by that Party to the Companies as set
out in EXHIBIT 7.5 (as updated by the Parties pursuant to
Section 6.2, provided that an increase of the [*] contributed by
Any Party in excess of [*] shall be disregarded for purposes of
this Agreement), then that Party shall pay the difference to the
companies within 30 days from the relevant 18 Month [*]
Statement having become final.


(ii) If the aggregate Actual [*] achieved by the Companies for the
[*] by Instron or Schenck, as determined by the relevant 30
Month [*] Statement, is greater than zero, then the Companies
shall pay such amount to the relevant Party within 30 days from
the relevant 30 Month [*] Statement having become final,
provided that such amount shall always be limited to the amount
of the payment made by that Party under Section 7.5 (i). If such
aggregate Actual [*] achieved is less than zero, the relevant
Party shall pay the shortfall to the Companies.


7.6 Each Schenck Party guarantees to the Companies the [*] of all accounts
receivable resulting from the [*] transferred by the Schenck Parties
within [*] months after the


* Material omitted and filed separately with the Securities and Exchange Commission.
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Effective Date. Each Instron Party guarantees to the Companies the [*]
of all accounts receivable resulting from the [*] transferred by the
Instron Parties within [*] months after the Effective Date. As soon as
practicable after the end of the [*] month after the Effective Date, but
not later than 30 days thereafter, the Companies shall jointly prepare a
statement (hereinafter called the "Receivables Statement") as of the end
of the [*] months period showing the accounts receivable resulting from
the [*] by each Party and the amount thereof not collected within the
above period. Sections 7.1 through 7.4 shall apply accordingly. Each
Party will, within a period of thirty days after the Receivables
Statement having become final, pay to the Companies the amount shown on
the Receivables Statement as not collected. The Companies shall continue
to use their best efforts to collect the accounts receivable. Any
amounts collected shall be reimbursed to the respective Party within
thirty days from receipt. If, [*] months after the Effective Date, any
accounts receivable are not collected, such accounts receivable shall be
transferred to the respective Party at such Party's request; the
Companies' obligation to use best efforts to ...