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TRANSITION SUPPLY AGREEMENT

Requirements Supplier Agreement

TRANSITION SUPPLY AGREEMENT | Document Parties: BRIGGS & STRATTON POWER PRODUCTS GROUP, LLC | MURRAY, INC You are currently viewing:
This Requirements Supplier Agreement involves

BRIGGS & STRATTON POWER PRODUCTS GROUP, LLC | MURRAY, INC

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Title: TRANSITION SUPPLY AGREEMENT
Governing Law: Wisconsin     Date: 1/28/2005
Industry: Misc. Capital Goods     Sector: Capital Goods

TRANSITION SUPPLY AGREEMENT, Parties: briggs & stratton power products group  llc , murray  inc
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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:

 

1.  

Exhibit A.

 

Product Specifications

2.  

Exhibit B.

 

Transition Period Budget, as amended from time to time (the “ TP Budget ”)

3.  

Exhibit C.

 

Product Warranty

4.  

Exhibit D.

 

Insurance Schedule

 

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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