Exhibit 10.5
Exhibit D
SALE, MARKETING & SUPPLY
AGREEMENT
SALE, MARKETING & SUPPLY
AGREEMENT (the “
Agreement ”), dated as of
[ ],
2006, by and between Lone Star Steel Company, L.P., a Delaware
limited partnership organized under the laws of the State of
Delaware in the United States of America (“ LSS
”), and Apolo Mecânica e Estruturas S.A., a corporation
( sociedade anônima/ stock corporation ), organized
under the laws of the Federative Republic of Brazil, with head
offices in the city of Lorena, State of São Paulo, at Av. Dr.
Léo de Affonseca Netto, 750, CEP 12600-000, duly enrolled with
the CNPJ under No. 42.419.150/0001-84, herein represented by its
undersigned legal representatives, duly authorized as they solely
declare (the “ Company ”).
RECITALS:
WHEREAS , it is a condition to the equity investment of
Lone Star Brazil Holdings 2, Ltda., a limited liability company (
sociedade empresária limitada) organized under
the laws of the Federative Republic of Brazil, with head offices at
City of São Paulo, State of São Paulo, at Rua Funchal,
263, 10º andar, sala 17-I, CEP 04551-060, duly enrolled with
the CNPJ under No. 08.278.633/0001-78 (“ LSB 2
”) in the Company that this Agreement be entered into between
LSS and the Company, to set forth the terms and conditions pursuant
to which the Company will process and sell Tubular Products (as
defined below) to LSS and LSS, as the exclusive marketer, will
purchase and resell such Tubular Products; and
WHEREAS , LSS intends to provide distribution services,
customer product acceptance, sales and marketing support,
technical/thermal treating expertise and other services in order to
increase the sales of Tubular Products in North America and in
other markets in which the Company markets its Tubular Products, as
agreed to between the parties.
NOW, THEREFORE
, in consideration of the mutual
covenants and agreements hereinafter set forth, and for other good
and valuable consideration, the receipt and sufficiency of which
are acknowledged, the parties hereto agree as follows:
1.
Defined Terms . The following terms as used in
this Agreement shall have the meaning ascribed to them
below:
“ Affiliate ” of
a specified person (the “ Specified Person ”)
means any Person (a) who, directly or indirectly, controls, is
controlled by, or is under common control with the Specified
Person, (b) who, directly or indirectly, owns or controls fifty
percent (50%) or more of the Specified Person’s outstanding
voting securities or equity interests, (c) of whom the Specified
Person, directly or indirectly, owns or controls fifty percent
(50%) or more of the outstanding voting securities or equity
interests or (d) who has the right, directly or indirectly, to
appoint or elect fifty percent (50%) or more of the Specified
Person’s board of directors or equivalent managing
body.
“ Agreement ” has
the meaning set forth in the introductory paragraph
hereof.
“ Business Day ”
means a day on which banks are open for general banking business in
both São Paulo, São Paulo State, Brazil and Dallas,
Texas, the United States of America (excluding Saturdays, Sundays
and public holidays).
“ Company ” has
the meaning set forth in the introductory paragraph
hereof.
“ Contract ” has
the meaning set forth in Section 6 hereof.
“ Coupling ”
means a tubular section used for the exclusive purpose of joining
two threaded pin ends of pipe or equipment having the same external
and internal diameters and same thread.
“ Coupling Materials
” means seamless pipes from which tubular sections are
prepared for the manufacture of Couplings or
Cross-Overs.
“ Cross-Over ”
means a tubular section used for the exclusive purpose of joining
two threaded pin ends of pipe having different dimensions or
threads.
“ Dispute ” has
the meaning set forth in Section 27 hereof.
“ Force Majeure ”
has the meaning set forth in Section 18 hereof.
“ Governmental
Authority ” means any authority, regulatory or
administrative agency, commission, department, board, bureau,
agency, instrumentality or court of Brazil, the United States of
America, or any other nation or sovereign state, any federal,
bilateral, or multilateral governmental authority, any state,
possession, territory, county, district, city, or other
governmental unit or subdivision, and any branch, agency, or
judicial body of any of the foregoing.
“ ICC Rules ” has
the meaning set forth in Section 27 hereof.
“ Law ” means any
statute, law, treaty, ordinance, rule, regulation, instrument,
directive, decree, permit, agreement, Order or injunction of or
with any Governmental Authority, and includes, without limitation,
rules or regulations of any regulatory or self-regulatory authority
compliance with which is required by law.
“ Line Pipe ”
means finished or unfinished line pipe processed and supplied by
the Company.
“ LSB 2 ” has the
meaning set forth in the recitals hereof.
“ LSS ” has the
meaning set forth in the introductory paragraph hereof.
“ North America ”
means the United States of America, Canada, and Mexico (which
includes any offshore drilling within the territorial waters of
such countries).
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“ Oil Country Tubular
Goods ” or “ OCTG ” means casing,
tubing, drill pipe, semi-finished and unfinished green tubes,
Coupling Materials and finished Couplings processed and supplied by
the Company.
“ Order ” means
any writ, judgment, decree, injunction or similar order of any
Governmental Authority.
“ Person ” means
any individual, partnership, limited liability company,
corporation, cooperative, joint venture, trust, estate or other
entity.
“ Specialty Tubing
” means mechanical and pressure tubes, cold drawn and hot
finished tubes, shells for redraw and other boiler tubes processed
and supplied by the Company.
“ Term ” has the
meaning set forth in Section 9 hereof.
“ Tubular Products
” means Oil Country Tubular Goods, Specialty Tubing, and/or
Line Pipe; for greater clarity, such term shall not include
galvanized unfinished line or other pipe.
“ US Dollars ” or
“ US$ ” means legal currency in the United
States of America.
2.
Exclusive Marketing . During the Term of this
Agreement, the Company hereby grants LSS the exclusive right,
without limitation or exclusion, to market and sell Tubular
Products (a) to any party located in North America, (b) for any
Tubular Product purchases initiated in North America without regard
to the end-use location, except South America, and (c) from time to
time, as mutually agreed by the parties in advance and in writing,
to customers located outside North America and intending to use the
Tubular Products outside North America. LSS shall have no
obligation to purchase Tubular Products from the Company in any
particular amounts.
3.
Duties of LSS . During the Term of this
Agreement, LSS shall:
(a)
provide distribution services, customer product acceptance, sales
and marketing support, technical/thermal treating expertise and
other services in order to increase the sales of Tubular Products
in North America and in other markets, as agreed to from time to
time by LSS and the Company;
(b)
pay all expenses and costs incurred by it in connection with the
marketing and sales of Tubular Products in North America pursuant
to Section 2 hereof; and
(c)
provide periodic reports of sales of Tubular Products in North
America as may be requested from time to time by the
Company.
4.
Method of Sales . LSS will purchase all the
products according to the following method: Duty paid on a
DDP (Houston, Texas Port, or such other location as
designated by
3
LSS) basis according to INCO 2000
terms (duty paid, end of ships tackle, title passes at dock in
Houston, Texas, or such other location as designated by LSS, or, if
no such location is designated, then when the Tubular Products are
delivered to LSS), or as mutually agreed by the parties in each
Contract.
5.
Price and Payment . Prices shall be negotiated
on an inquiry-by-inquiry basis mutually agreed to by LSS and the
Company; provided, however, that the price shall be the lowest
price and on the most favorable terms offered by the Company to any
other purchaser from the Company in an export transaction or an
internal transaction in Brazil where purchaser intends to export
the Tubular Products. The prices and quantities for the
required sizes shall be discussed and agreed upon between LSS and
the Company at least sixty (60) days prior to the date of the
actual Contract (as defined below) delivery date. The Company
shall work with its suppliers to offer competitive prices.
All of the Contracts will be submitted by LSS, or any other company
that LSS so designates, to the Company. The Company, or a
wholly-owned subsidiary of the Company, including but not limited
to Apolo America Pipe and Tube Corp., will be the importer of
record for all products purchased by LSS under this
Agreement. All prices and payments under this Agreement shall
be in U.S. Dollars, unless otherwise agreed to in writing by LSS
and the Company. Payment terms are net thirty (30) days from
the invoice date in immediately available funds.
6.
Contract . The terms of a purchase order when
completed and signed by the parties for each order (the “
Contract ”), will, along with the terms of this
Agreement, control with respect to that order.
7.
Processing Standards . The Company shall
process and ship Tubular Products in a good and workmanlike manner,
in accordance with industry standards and any additional or further
standards set forth in the Contract. LSS shall have the right
to inspect (either itself or by means of an agent) all Tubular
Products delivered to LSS or its assignee, and may reject, by
notice to the Company within sixty (60) days after delivery and
based on a substantiated report to be delivered together with such
notice, any portion of a shipment of Tubular Products not meeting
the standards set forth herein and in the applicable
Contract. LSS also shall have the right to inspect (either
itself or by means of an agent), any Tubular Products prior to
loading at the point of origin. LSS’s (or its
agent’s) inspection shall follow all internal rules when at
the Company’s premises. Notwithstanding any provision
to the contrary contained in this Section 7 , in the
event that the Company does not agree with any rejection by LSS of
any portion of a shipment of Tubular Products as not meeting the
standards set forth herein and in the applicable Contract, the
Company has the right, at its own cost, to solicit an independent
inspection by an independent surveyor mutually agreed to by the
Company and LSS. The opinion of such independent surveyor
with respect to whether such rejection by LSS was justified in
accordance with the standards articulated in this
Section 7 shall be final and binding on both
parties.
8.
Prompt Delivery . The Company agrees to have
each shipment of Tubular Products ready for shipment no later than
ninety (90) days after the date of acceptance of LSS’s
Contract, except in case of Force Majeure. If any shipment
has not arrived at the location designated in the Contract on or
before the sixtieth (60 th ) day
after the acknowledged shipment date on each Contract, LSS has the
right to renegotiate the purchase price for that Contract.
If
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no agreement is reached on the
renegotiation of the price, the Contract involved shall be
terminated with no costs to either party and the Company shall have
the right to sell the Tubular Products of the terminated Contract
in North America. For sales of Tubular Products inside North
America, the Company grants to LSS the right of first refusal in
relation to any purchase offer the Company may have for such
Tubular Products of the terminated Contract in which the offered
price is 80% or lower than the last price offered by the Company in
the renegotiation round of the terminated Contract.
9.
Term . The term of this Agreement (the “
Term ”) will be ten (10) years commencing on the date
of this Agreement and ending on the tenth (10 th )
anniversary of the date of this Agreement; provided, however, that
LSS and the Company hereby agree to use their best efforts to
extend the Term of this Agreement for an additional ten (10) years
(and subsequent ten (10) year periods) at least six (6) months
prior to the expiration of the initial (or a subsequent) ten (10)
year period.
10.
Termination . This Agreement may be terminated
prior to its expiration as provided in Section 9 above
by sixty (60) days advance written notice as follows:
(a)
By either party, effective immediately, in the event the other
party should fail to perform in any material respect any of its
obligations hereunder and should fail to remedy such nonperformance
within ninety (90) days after receiving written demand
therefor;
(b)
By either party, effective immediately, if the other party should
be declared insolvent or bankrupt or makes an assignment or other
arrangement for the benefit of its creditors, or if such other
party should be nationalized or have any of its material assets
expropriated by any government or political subdivision thereof;
or
(c)
By the Company, effective immediately, in the event that LSS or any
Affiliate thereof is no longer a shareholder of the
Company.
11.
Effect of Termination or Non-renewal .
(a)
Any termination or non-renewal of this Agreement shall not affect
(i) the obligations of the Company and LSS under each
outstanding Contract; (ii) the obligation of the Company to
process, ship and deliver to LSS all Tubular Products sold by the
Company prior to the date of termination, and (iii) the obligation
of LSS to pay the outst
