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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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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 and, unless
otherwis
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