Exhibit 10.2
EXHIBIT G
TRANSITION SUPPLY
AGREEMENT
This Transition Supply Agreement
(this “ Agreement ”) is made as of
February , 2005 (the “
Effective Date ”) by and between BRIGGS &
STRATTON POWER PRODUCTS GROUP, LLC, a Delaware limited liability
company (hereinafter referred to as “ Briggs
”), and MURRAY, INC., a Tennessee corporation, on behalf of
itself and any of its successors, including any liquidating trust,
if any, created pursuant to any plan of reorganization (hereinafter
referred to as “ Murray ”).
PRELIMINARY
STATEMENTS
A. Briggs is in the business of
supplying engines to manufacturers of lawn mowers, snow blowers,
chore products and other lawn and garden products (“
Lawn, Garden and Snow Products ”) and is also
directly engaged in the manufacturing of Lawn, Garden and Snow
Products. Briggs has sought opportunities to further expand its
offering of Lawn, Garden and Snow Products manufactured at existing
Briggs’ facilities.
B. Murray filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code on
November 8, 2004 and in connection therewith sought purchasers for
some or all of its assets.
C. Briggs has existing manufacturing
facilities and plans to expand its manufacturing capability by
purchasing the Acquired Assets which will eventually be moved to
other facilities designated by Briggs.
D. Briggs is not acquiring the real
estate used in Murray’s operations, employing the labor force
employed by Murray in its operations or otherwise continuing the
operations of Murray.
E. Briggs is acquiring from Murray
pursuant to an Asset Purchase Agreement between the parties dated
as of the date hereof certain designs, manufacturing equipment,
tooling, patents, trademarks, know-how, technical data, inventory
and other assets relating to the manufacture and sale of Lawn,
Garden and Snow Products (the “ Purchase
Agreement ”). Capitalized terms used herein which are
defined in the Purchase Agreement shall have the meanings assigned
in the Purchase Agreement unless otherwise defined
herein.
F. Briggs desires to contract with
Murray for the manufacture and purchase of certain products having
the specifications identified in EXHIBIT A in order
to facilitate prompt completion of the asset acquisition and the
continued supply of products to customers for a transition period
after the acquisition. Such products to be manufactured by Murray
for Briggs, including related spare parts but excluding any engines
that Briggs delivers to Murray for incorporation into the products,
are hereinafter referred to as “ Products
”.
G. Murray is willing to receive,
store and incorporate into Products the engines and other material
and components delivered by Briggs such as steel, transmissions and
wheels, to manufacture and sell the Products exclusively to Briggs,
and to fulfill its other obligations stated in this
Agreement.
In consideration of the premises and
the covenants contained herein, Briggs and Murray hereby agree as
follows:
1. SCOPE
(a) Scope . This Agreement,
together with all the exhibits attached hereto, states the terms on
which Briggs will purchase from Murray, and Murray will sell and
deliver to Briggs, the Products under the provisions of this
Agreement and such Automated Vendor Schedule (“
AVS ”) releases as may be issued by Briggs
pursuant to Section 5 below.
(b) Changes . The parties may
modify this Agreement as it applies to a specific AVS release
provided the modification is in writing and signed by both parties
and provided further that such modification is consistent with this
Agreement.
(c) Attachments . This
Agreement includes the following attachments, which are
incorporated into the Agreement by reference:
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1.
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Exhibit A.
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Product Specifications
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2.
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Exhibit B.
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Transition Period Budget, as amended from time
to time (the “ TP Budget ”)
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3.
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Exhibit C.
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Product Warranty
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4.
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Exhibit D.
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Insurance Schedule
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Except as otherwise provided herein,
each of the Exhibits hereto may only be amended with the prior
written consent of both Murray and Briggs.
(d) Exclusivity . Murray
agrees that, unless otherwise agreed by Briggs in writing, it shall
manufacture and sell Products solely to Briggs.
2. TERM
This Agreement shall become
effective immediately upon completion of the Closing under the
Purchase Agreement between the parties. Thereafter, this Agreement
shall remain in effect through eighteen months after the Closing
unless earlier terminated by Briggs (the “ Term
”). Notwithstanding the foregoing, Briggs may elect to remove
one or more Products from EXHIBIT A upon written
notice to Murray as Briggs determines its long-term manufacturing
requirements, and may terminate this Agreement prior to its
expiration date in accordance with Section 17 . Termination
of this Agreement, either by expiration of the Term or by virtue of
the exercise by Briggs of its rights to terminate this Agreement
sooner pursuant to Section 17(a) hereof or a Funding
Termination pursuant to Section 17(b) hereof shall
hereinafter be referred to as a “ Termination
”.
3. QUANTITIES
(a) Each month Briggs will provide
Murray with a non-binding forecast of its monthly Product
requirements for the coming 12 months (the “ Forecast
”). All forecasted quantities may be increased or decreased
by Briggs in its sole discretion as Briggs’ business
requirements are further defined.
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(b) Quantities of Products to be
purchased shall be stated in each release issued in accordance with
Briggs’ AVS. Murray shall maintain 4-6 weeks of finished
goods inventory and 8-12 weeks of raw materials and work in process
consistent with the AVS and funds made available by
Advances.
(c) Within fifteen (15) days of
receipt of the initial Forecast, Murray will submit to Briggs for
approval a modified TP Budget for a period of twelve (12) months,
and within ten (10) days of the receipt of any subsequent Forecast,
Murray will submit to Briggs for approval a modified TP Budget for
a period of six (6) months, in each case which approval shall not
be unreasonably withheld. Briggs shall have the obligation to
approve or disapprove a proposed modified TP Budget within ten (10)
days of delivery thereof by Murray and, in the event it disapproves
any such proposed modified TP Budget, shall provide Murray with a
detailed written explanation for such disapproval. If the parties
are unable to resolve any disputes with respect to any TP Budget,
Briggs shall either accept the TP Budget proposed by Murray, with
any modifications agreed upon by the parties, or terminate this
Agreement in accordance with Section 17(b) .
4. PRICING
(a) Pricing; The Cost of
Manufacturing . The prices to be paid by Briggs in accordance
with Section 10 to Murray for Products provided to Briggs
each month under this Agreement shall equal the Cost of
Manufacturing such Products.
(i) For the purposes of this
Agreement, “ Cost of Manufacturing ”
means the sum of (x) the Direct Labor Costs, (y) Operations Related
Overhead Costs, and (z) the Direct Material Costs in each case that
are actually incurred by Murray in making and fully packaging each
Product during such calendar month; provided however
, it is expressly agreed by the parties that the Cost of
Manufacturing shall exclude any costs relating to any underfunding,
deficiency or liability relating to any of Murray’s benefit
plans and any Excluded Employee Benefits Liabilities as well as any
costs arising from or relating to environmental compliance, cleanup
or waste management at any Facility and any Excluded Environmental
Liabilities.
(ii) For the purposes of this
Agreement, “ Direct Labor Costs ” means
for any calendar month the amount of employee wages and benefits
(including any retention or other bonus compensation approved by
Briggs in writing) actually paid to Murray’s employees during
such calendar month.
(iii) For the purposes of this
Agreement, “ Direct Material Costs ”
means for any calendar month the amount of costs actually incurred
by Murray to vendors or suppliers other than Briggs during such
calendar month in purchasing component parts for making and fully
packaging each Product.
(iv) For the purposes of this
Agreement, “ Operations Related Overhead Costs
” means for any calendar month the lesser of (x) the
operations related out of
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pocket overhead costs actually
incurred by Murray in making and fully packaging each Product
during such month or (y) the amount set forth for such calendar
month on Exhibit B as “Budgeted Overhead” for
such calendar month, which Exhibit may only be amended with the
prior written consent of Briggs. Notwithstanding the foregoing the
parties expressly agree that the Operations Related Overhead Costs
excludes depreciation, amortization and other related accounting
charges as well as any insurance costs not otherwise expressly
provided for in the Budged Overhead.
(v) In the event this Agreement is
terminated during any calendar month, the amount of Direct Labor
Costs, Direct Material Costs and Operations Related Overhead Costs
for such calendar month allocated to the Cost of Manufacturing for
such calendar month shall be based upon the number of days during
such calendar month on which the last Product was produced for
Briggs during such calendar month and the number of days during
such calendar month after such last Product was produced for
Briggs.
(b) Adjustments to the Cost of
Manufacturing . The Cost of Manufacturing shall be adjusted up
or down every month as follows:
(i) Through continuous improvement
and quality controls, Murray shall use commercially reasonable
efforts to decrease the production costs of the
Products.
(ii) Direct Material Costs and
Direct Labor Costs shall be adjusted to reflect actual labor and
material cost increases or decreases incurred by Murray, which
affect the cost of manufacturing the Products; provided ,
however , that Direct Material Costs and Direct Labor Costs
may not increase unless Murray provides written justification for
the proposed increase. Murray will use its best efforts to maintain
competitive prices for the Products. This effort and cooperation
may include continual review, enhancement and improvement to
Product technology and/or know-how.
(c) Changes in Vendors . All
changes in vendors or manufacturing processes that Murray makes
shall be made in accordance with quality assurance procedures
acceptable to Briggs. Murray will make no such change which
adversely affects the quality, availability, or the Cost of
Manufacturing of the Products without the prior written consent of
Briggs.
(d) Maintenance of Books and
Records . Murray shall keep full and true books of account and
other records in sufficient detail so that the Cost of
Manufacturing payable to Murray hereunder can be properly
ascertained. Murray agrees, at the request of and expense of
Briggs, to permit an independent certified public accountant
selected by Briggs to have access, during ordinary business hours,
to such books and records as may be necessary to determine the
respective Cost of Manufacturing at any time with respect to
Products delivered pursuant to this Agreement. Murray further
agrees, at the request of and expense of Briggs, to provide Briggs
reasonable access to the facilities used by Murray in the
performance of this Agreement.
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5. PURCHASE COMMITMENTS
(a) Murray Commitments .
Murray will not make any commitments to purchase tooling, raw
materials, parts or components from a third party supplier or
otherwise voluntarily commit to the incurrence of significant costs
or expenses without first receiving one or more appropriate AVS
releases from Briggs and such costs, expenses and purchases are
included in the TP Budget.
(b) Briggs’ AVS
Releases . Briggs’ AVS releases for Products may consist
of hard copies of Briggs purchase orders, electronic messages as
set forth in Section 16 or other written communications from
Briggs which state specific delivery requirements. The releases
will be processed as follows:
(i) Briggs will issue weekly AVS
releases, which state delivery dates and quantities for Products to
be released for shipment within the next ninety (90) days. The AVS
includes a firm commitment and release for 4 weeks and provides a
non-binding forecast for an additional 12 weeks.
(ii) The shipping documents prepared
by Murray will reference the applicable AVS release
number.
(iii) As Briggs’ requirements
are further defined, it may change the quantities and delivery
dates on the AVS as long as Briggs notifies Murray of the changes
in accordance with reasonable lead times. Briggs will use its best
efforts to provide at least sixty (60) days advance notice to
Murray of such changes.
(c) Briggs Financing . Except
for the Advances set forth herein and any financing which may be
requested by Murray after the date hereof and agreed to by Briggs
upon terms which are satisfactory to Briggs, Briggs shall not
provide any financing for the purchase of any raw materials or
component parts necessary to manufacture the Products in connection
with this Agreement. In the event of Termination of this Agreement,
Murray shall apply any Advances which Briggs had not previously
deducted and realized in the calculation of the Additional Purchase
Price for any month to the Termination Payment, and remit the
balance to Briggs only after the Termination Payment has been fully
and indefeasibly paid.
6. AVAILABILITY OF PRODUCTS
In connection with a termination of
this Agreement, Briggs may elect to purchase from Murray a safety
stock of Products sufficient to accommodate sales during the time
that Briggs’ manufacturing equipment and tools are moved from
Murray’s facilities to one or more locations designated by
Briggs, provided the production and delivery of such safety stock
is paid for by Briggs.
7. MANUFACTURING ASSETS
(a) Briggs is acquiring under the
Purchase Agreement and shall provide, and Murray shall operate and
maintain for Briggs all equipment, tools and substantially all of
the component parts necessary for the production of the Products
(hereinafter the “ Manufacturing Assets
”). Briggs shall provide such insurance for the Manufacturing
Assets as it deems appropriate. At least monthly, Murray shall
perform scheduled maintenance on the Manufacturing Assets and
provide a copy of maintenance records to Briggs.
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(b) The Manufacturing Assets shall
at all times be properly housed and maintained by Murray and shall
not be used by Murray for any purpose other than the manufacture of
Products under this Agreement.
(c) At Briggs’ request and
expense, Murray shall mark or label all Manufacturing Assets to
identify them clearly as owned by Briggs.
8. TRANSPORTATION AND OTHER TERMS
(a) Designation of Carriers .
Murray will deliver the Products FOB at its manufacturing facility.
Carriers shall be selected by Briggs.
(b) Payment of Charges .
Transportation charges will be paid by Briggs.
(c) Title . Briggs takes
title to Products when they are manufactured and constitute
finished goods.
(d) Risk of Loss . Briggs
assumes risk of loss when the Products are delivered to the carrier
at Murray’s manufacturing facility.
9. PRODUCT BRANDING, IMPORTING, LABELING AND
MANUALS
(a) Branding . Products sold
to Briggs under this Agreement shall be manufactured and delivered
to Briggs with trademarks designated by Briggs.
(b) Foreign Purchases .
Murray shall be the importer of record for all components of the
Products it supplies. Briggs will not be a party to the
importation, its name will not appear as importer of record on any
customs declaration, and the transactions contemplated by this
Agreement will be consummated after importation occurs. Upon
Briggs’ request, Murray will provide Briggs a properly
executed Customs Form 331 entitled “Certificate of
Delivery” and Form FD 701 entitled “Importers Entry
Notice” if applicable.
(c) Country of Origin .
Invoices shall contain the country of origin of the Products (
i.e. , the country in which the item was actually
manufactured). Murray warrants that for items imported into the
United States by it, the country of origin on its invoices is
correct and the Products are marked conspicuously, legibly,
indelibly and permanently in accordance with U.S. law. For imported
items and Products produced or purchased within the U.S., Murray
warrants that it will provide, upon request, information or
documentation establishing the country of origin.
(d) Manuals . Murray will
deliver with each unit of Product an operator manual containing
relevant information related to the operation, maintenance and
repair of the Product.
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10. INSPECTION, INVOICES AND
PAYMENT
(a) Inspection . Briggs may
inspect Products on delivery and reject any that it determines to
be defective. Any rejected Products may be returned to Murray at
its expense, including charges for unpacking, examining, repacking
and reshipping the Products to Murray. Upon Briggs’ request,
Murray shall also compensate Briggs for the cost of sorting,
reworking and other activities related to rejected
Products.
(b) Invoices . If Murray
participates in Briggs’ Evaluated Receipts System, invoices
shall be submitted in accordance with those procedures. If Murray
submits hardcopies of invoices, the invoices will contain at least
the purchase order release number, item number on the release,
invoice quantity, unit price and total invoice amount. Murray shall
submit one invoice for all Products delivered to Briggs per any
calendar month. In the event Briggs does not purchase any Products
during a particular month no invoice shall be submitted for such
month.
(c) Purchase Price Advances;
Payment of Additional Purchase Price .
(i) On the first day of each
calendar month during the Transition Period Briggs shall advance to
Murray (x) the amounts set forth for such month on Exhibit B
as the “ Purchase Price Advance ” for
such month and (y) any other advance which Briggs, in its sole
discretion, elects to advance to Murray for the month (each, a
“ Purchase Price Advance ”).
Notwithstanding the foregoing, Briggs shall not be obligated to
make a Purchase Price Advance following Termination an