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EXHIBIT 10.12
SUPPLY AGREEMENT
Concluded on the date set forth below
by and between
VOESTALPINE TUBULARS Gmbh & Co KG
an Austrian limited partnership
and
GRANT PRIDECO, INC.
A Delaware corporation
to be effective August 1, 2003
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PREAMBLE
WHEREAS, VoestAlpine Tubulars GmbH & Co KG (formerly known
as
VOEST-ALPINE STAHHLROHR KINDBERG GmbH &
Co KG) is a limited partnership duly
organized, validly existing and in good
standing under the laws of Austria, with
its principal place of business in Kindberg
and business address at Alpine
StraBe 17, A-8652 Kindberg, Austria,
registered in the commercial register of
the Higher Court of Leoben under the
registration number 165400 k (hereinafter
referred to as "Seller"), which has been
involved for many years in the
manufacture of casings and tubings; and
WHEREAS, Grant Prideco, Inc. is a company duly organized,
validly
existing and in good standing under the
laws of Delaware, with its principal
place of business in Houston, Texas and
business address at 1330 Post Oak
Boulevard Suite 2700, Houston, Texas 77056
(hereinafter referred to as
"Purchaser"), which has been involved in
the field of manufacturing of drill
pipe and the processing of casings and
tubings; and
WHEREAS, Purchaser and Seller entered a Supply Agreement dated July
23,
1999 that will expire July 31, 2003 (the
"Original Supply Agreement"); and
WHEREAS,
Purchaser and Seller want to avoid any disruption in the
supply of Materials under the Original
Supply Agreement and therefore desire to
enter this agreement on this ______ day of
__________, 2003 to be effective on
August 1, 2003 (the "Effective Date")
WHEREAS, Purchaser wishes to purchase and Seller wishes to
supply
certain pipes as defined below;
WHEREAS, Purchaser is an affiliate of Seller and Purchaser and
Seller
desire, to avoid repetitive negotiations,
and to set forth the terms under which
affiliated purchases will be made,
Purchaser and Seller (hereinafter referred to
as the "Parties" and each a "Party") wish
to enter into this exclusive supply
agreement (hereinafter referred to as
"Supply Agreement") on a long-term basis
establishing the terms and conditions of
the purchase which will be applicable
to these transactions.
NOW THEREFORE, it is agreed as follows:
1. SALE
AND PURCHASE
1.1 Seller
herewith grants to Purchaser the right to purchase on a
worldwide basis green pipes (hereinafter referred to as "Green
Pipes")
intended for the further processing into drill pipe and other
Oil
Country Tubular Goods (hereinafter referred to a "OCTG"). The sale
of
Green Pipes by or on behalf of Seller to other persons requires
the
prior written consent of Purchaser. If Seller sells Green Pipes
to
third persons without the prior written consent of Purchaser, any
such
sale shall be credited against Purchaser's Annual Minimum
Purchase
Obligation pursuant to Section 2.1.
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For the purposes of this Supply Agreement, Green Pipes shall mean
pipes
used to
manufacture drill pipe, tubing and casing, provided that plain
end casing and tubing already produced to grade and requiring only
end
finishing to be converted to finished OCTG are expressly excluded
from
the term "Green Pipes" used in this Supply Agreement.
1.2 Seller
grants to Purchaser the right, but Purchaser shall not be
obligated, to purchase API couplings on an exclusive basis in
North,
Central and South America (Green Pipes and API couplings are
hereinafter collectively referred to as the "Material").
1.3 Seller and
Purchaser agree that Purchaser shall have the sole right to
sell drill pipe and drill pipe hollows in the world. The Seller
shall
not, directly or indirectly, sell any drill pipe or drill pipe
hollows
without the written consent of the Purchaser.
2.
ANNUAL MINIMUM PURCHASE OBLIGATION
2.1 Subject to
the provisions of Section 13, Purchaser shall place orders
for purchase and Seller shall sell and deliver Green Pipes in a
minimum
quantity of (i) 56,667 for the calendar year of 2003 (7/12 x
60,000
(original agreement ending July 2003)) + (5/12 x 52,000 (the
agreement
beginning August 2003)); (ii) _52,000 metric tons for each year on
a
calendar year basis thereafter during the term of the Agreement
("Annual Minimum Purchase Obligation"). For the purposes of Section
2
and Section 13 of this Agreement, purchases of Materials made by
an
Affiliate of Purchaser shall be attributed to Purchaser. The
term
"Affiliate" shall mean, with respect to Purchaser, any
individual,
firm, corporation, division, association, partnership, joint
venture,
limited liability company, organization or business
(collectively
"Entity") that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control
with Purchaser. For purposes of this definition, "control" means
the
ownership, directly or indirectly of 50% or more of the voting
securities of an Entity or the possession of the power to direct,
or
cause the direction of, the management and policies of that
Entity,
whether through the ownership of voting stock, by contract or
otherwise.
2.2 Subject to
the provisions of Section 2.1 and Section 13, Purchaser
shall use good faith efforts to place orders in monthly lot
amounts
that are consistent
with the Annual Minimum Purchase Obligations of
this agreement, with a minimum of 100 metric tons per dimension
upon
individual purchase orders placed by Purchaser. The Parties agree
from
time to time that Purchaser's monthly purchase (lot amounts) may
vary
based on Purchaser's good faith needs, provided, however, that
without
the consent of Seller, each order shall not deviate from the
previous
order by more than 2,000 metric tons. Purchaser's failure to
place
orders of Green Pipe in an amount equal to the Annual Minimum
Purchase
Obligation shall not constitute a default under this Supply
Agreement
and Seller's only remedy for that failure will be the right to
receive
the penalties provided for under Section 13 and no more.
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2.3 Purchaser
shall be entitled to order in excess of its Annual Minimum
Purchase Obligation up to 80,000 metric tons per year. Orders
exceeding
80,000 metric tons require the prior consent of Seller.
3. TERM
AND TERMINATION
3.1 This
Supply Agreement shall commence on August 1, 2003 (the
"Effective
Date"), and shall be
concluded for an original term on July 31, 2007.
This Supply Agreement shall automatically be renewed for
successive
one-year periods, unless terminated at the end of the original term
or
any renewal period in writing, subject to a six-month
termination
period. Nine months prior to the expiration of the original term
the
Parties shall meet to negotiate terms and conditions for a renewal
of
the Supply Agreement.
3.2 If either
Party is in material default of any of its obligations under
this Supply Agreement and such default continues unremedied for 90
days
after written notice thereof by the Party not in default, such
non-defaulting Party may cancel this Supply Agreement and/or any
orders
which may be affected by such default and shall have the right, in
its
sole discretion, to exercise all rights and remedies available to
it
under this Supply Agreement, including, but not limited to Section
13,
or to exercise such rights and remedies as provided for in
other
agreements concluded between the Parties or their affiliates,
including
but not limited to the Operating Agreement dated July 23, 1999
concluded between VOEST-ALPINE SCHIENEN GmbH & Co KG and GRANT
PRIDECO,
INC.
3.3 An uncured
failure to pay any amounts due to Seller under this Supply
Agreement which is not contested within 90 days of submission of
the
invoice therefor as provided in Section 4.3 hereof shall be
considered
a material default by Purchaser in the meaning of Section 3.2.
3.4 Continued
failure by Seller to materially meet the quality and
specification requirements of the delivery requirements under
this
Supply Agreement or breach by Seller of the exclusivity provisions
of
Section 1.1 and Section 1.3 hereof shall be considered a
material
default by Seller in the meaning of Section 3.2.
3.5
Furthermore, Seller may by written notice to Purchaser
forthwith
terminate this Supply Agreement;
(a) if bankruptcy proceedings are opened against Purchaser, or
Purchaser is insolvent; or
(b) if Purchaser or an affiliated entity no longer holds any
limited partnership interest in Seller.
3.6
Furthermore, Purchaser may by written notice to Seller
forthwith
terminate this Supply Agreement:
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(a) if bankruptcy proceedings are opened against Seller, or
Seller is insolvent, or
(b) if Purchaser or an affiliated entity no longer holds any
limited partnership interest in Seller.
3.7 (i) If an
event of force majeure occurs, the affected Party shall
promptly give notice thereof to the other Party and use its
best
efforts to cure or correct such event of force majeure. Seller
may,
during a period of shortage or delay due to any such causes,
prorate
its supply in such a manner as deemed equitable in the judgement
of
Seller. The Annual Minimum Purchase Obligation and the term of
this
Supply agreement as provided in Section 3.1 herein shall be
adjusted
accordingly based upon the duration of any force majeure event. If
the
event of force majeure shall continue for a period of twelve
months,
either Party
shall have the right to forthwith terminate this Supply
Agreement.
(ii) For the purpose of the Supply Agreement "force majeure" shall
mean
all circumstances which are beyond the control of a Party
exercising a
normal standard of care and which prevents such Party from
complying
with its contractual obligations hereunder. Subject to the
foregoing
and without limiting the generality of the foregoing, the
following
circumstances in particular shall be regarded as force majeure:
acts of
God; hurricane, tornado; labor strike, lockout or other
industrial
disturbance; war, riot, sabotage, act of public enemy, terrorist
act or
gang violence, blockade; serious epidemic; earthquake or other
earth
movement, flood or other natural disaster; bomb blast or other
explosion; fire, shortage of goods essential to a Party's
performance
of this Agreement, or their delay by a carrier; or, government
action
that prevents performance. It is explicitly agreed among the
parties
that any changes in market conditions or the institution of
U.S.
Antidumping and Countervailing Duty proceeding shall (subject to
the
provisions of Section 12) not be considered as force majeure
events.
3.8 Any
termination of this Supply Agreement will not affect any
individual
purchase order which may have been issued by Purchaser prior to
the
date of termination, unless stated otherwise herein. The provisions
of
Sections 8, 9, 10, 11, 12, 13, 15, and 16.3 shall survive any
termination of this Supply Agreement. In case this Supply Agreement
is
terminated, Purchaser shall pay within 60 (sixty) days after the
date
of termination any still outstanding Purchase Price or penalty
payments
due to Seller. In the event this Supply Agreement is terminated
by
Purchaser pursuant to this Section 3 as a result of a material
default
by Seller, any penalty payments due to Seller pursuant to Section
13
accruing on or after the date of such material default shall not
be
paid and shall be deemed to be forfeited by Seller.
4.
PURCHASE PRICE/INVOICE
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4.1 The base
purchase price for the Green Pipes is the same price utilized
in the predecessor contract ("Purchase Price") and shall
include
European sales tax and all export taxes and duties if applicable
to
Green Pipes. The Purchase Price is based on Purchaser's
specifications
in Purchaser's specification No. 359 (1), rev. O, dated May 7,
1998. To
the extent there are deviations from this specification, the
Purchase
Price shall be adjusted as set forth on ANNEX A, to the extent
provided
in ANNEX A. ANNEX B sets forth length requirements for ANNEX A.
Deviations not contemplated by ANNEXES A AND B shall result in
an
adjustment to the Purchase Price that reflects the differential
in
costs of manufacture of the product from Purchaser's specification
No.
359 (1). Purchaser shall consult with Seller on any change in
specifications and will not request specifications which Seller
cannot
fulfill with commercially reasonable efforts. The Purchase Price
is
calculated on the basis of C.I.F. Houston in accordance with
Incoterms
2000. Upon Purchaser's request, the Green Pipes shall be delivered
to a
destination port other than Houston. If any change in delivery
terms
pursuant to Purchaser's request results in a higher or lower cost
to
Seller, the Purchase Price shall be increased or decreased
accordingly.
4.2 During the
term of this Supply Agreement (including the renewal
periods), the Purchase Price shall be subject to adjustment on
a
semi-annual basis (starting on the first day of the sixth
calendar
month following the Effective Date of this Supply Agreement).
The
adjustment shall be computed on the basis of the average of
seamless
alloy casing and tubing prices as reported by the Preston Pipe
Report
or any report replacing it at the time of order placement and shall
be
effected for all purchase orders given on or after the first day of
the
calendar month following the issuance of such Preston Pipe Report.
The
basis of assessment shall be the average of seamless alloy casing
and
tubing prices as reported in the Preston Pipe Report published
in
January 1999 and reflecting actual October 1998 prices. This
report
shall be regarded as the 100 Index. The index figure, however,
is
limited to upward fluctuations of not more than 5%, based on the
100
Index during the term of this Supply Agreement. Downwards
fluctuations
may be made, but not below the 100 Index.
4.3 Invoices
will be submitted by Seller to Purchaser. Invoices will
reference Purchaser's purchase order number and will contain such
other
information as Purchaser may reasonably request. Purchaser shall
effect
payment within sixty (60) calendar days after the vessel arrival in
the
port of destination or net 105 days from ocean bill of lading
date,
whichever comes first. Purchaser shall pay interest on o
