EXHIBIT 10.1
TOWER PRODUCTION AGREEMENT
TOWER PRODUCTION AGREEMENT
This Agreement, dated this 11th day of May. 2005, by and between TOWER TECH
SYSTEMS, INC., a Wisconsin corporation (hereinafter "TTSI") and VESTAS Towers
Inc., a foreign corporation (hereinafter "VESTAS");
WHEREAS, TTSI is engaged in the manufacturing of wind towers (towers) at its
plant located in Manitowoc, Wisconsin, USA, more particularly located at 000 X.
00xx Xxxxxx, and VESTAS desires to contract with TTTSI to have TTSI become an
exclusive tower supplier to VESTAS under the terms and conditions contained
herein; and
WHEREAS, TTSI desires to enter into a contract with VESTAS whereby TTSI becomes
an exclusive supplier of towers to VESTAS pursuant to the terms and conditions
of the Agreement; and
WHEREAS, VESTAS and TTSI will form a strategic alliance whereby VESTAS will
supply TTSI with certain fabrication and production support and a minimum number
of towers to construct for each year of the Agreement at agreed upon prices for
labor and materials and TTSI will furnish the towers pursuant to the Agreement
and not manufacture towers for any other company unless allowed by this
Agreement or VESTAS breaches the Agreement; and
NOW, THEREFORE, the parties to this Agreement hereby agree that:
1. VESTAS SHALL:
a) provide all materials except those required to be provided by
TTSI. The term of this Agreement shall be for two (2) years
commencing the date this Agreement is executed. For the first year
of the Agreement, VESTAS shall order, accept delivery of and pay
for a minimum of seventy-two (72) towers. For the second year of
this Agreement, VESTAS shall order, accept delivery of and pay for
a minimum of seventy-five (75) towers. The towers shall be equal
to 300 sections, with a minimum of 12 sections per month.
b) issue individual purchase orders for each tower series that it
orders from TTSI including the necessary approved final plans and
specifications for the towers being ordered as well as the
delivery schedules;
c) issue the first purchase order for twenty-two (22) towers to be
delivered pursuant to the delivery schedule contained in the
purchase order at a cost of $135,000.00 per tower. This price
includes partial costs for material for door frame and oscillation
damper and the cost of the same will be negotiated by both
parties, when the prices are known. Upon completion of said first
order, VESTAS will issue additional purchase orders for at least
the minimum number of towers required for year one of this
Agreement at:
o 1.75 times the man-hours VESTAS uses in their Denmark
tower manufacturing facility to produce the same series
of tower. This applies for the production of the "black
tower".
o USD 12.70 per square meter, which includes sweep
blasting, metalizing and painting according to VESTAS
specification 900960
o 1 times the man-hours VESTAS uses in their Denmark tower
manufacturing facility for installation of internals
d) issue purchase orders to TTSI for the second year of this
Agreement of at least the minimum number of towers required under
this Agreement priced at:
o 1.5 times the man-hours VESTAS uses in their Denmark
tower manufacturing facility to produce the same series
tower. This applies for the production of the "black
tower".
o USD 12.70 per square meter, which includes sweep
blasting, metalizing and painting according to VESTAS
specification 900960
o 1 time the man hours VESTAS uses in their Denmark tower
manufacturing facility for installation of internals
e) have the ability once production starts to negotiate costs due to
changes.
f) have a right to furnish all material,. Plate will, if furnished
Vestas, be delivered to TTSI already pre-blasted and primed (to be
determined at time of order.)
g) supply all paint used for painting towers based on Vestas
Calculation of usage per square meter. Any additional paint
required over and above this calculation shall be paid for by
TTSI.
h) begin negotiating an extension of this Agreement or a new
Agreement with TTSI upon the conclusion of (18) months from the
date of this Agreement.
i) issue purchase orders to TTSI for the minimum number of towers
required under this Agreement plus at the discretion Vestas any
additional purchase orders.
j) during week twenty-two-(22) through week thirty (30) of calendar
year 2005, VESTAS shall supply TTSI, at the sole cost and expense
of VESTAS, one (1) project manager and three (3)floor supervisors
to assist TTSI and it's employees in the fabrication and assembly
process. During this time period, the VESTAS supplied supervisors
shall be available to consult and train TTSI employees in all
aspects of the tower manufacturing process.
2. TTSI SHALL:
a) until VESTAS orders are completed devote all of its tower
production to VESTAS according to the plans and specifications
that VESTAS supplies to TTSI, and build no towers for competitors
of VESTAS in the wind energy business without the expressed
written consent of VESTAS unless allowed herein
b) provide "as built" towers for VESTAS pursuant to the terms and
conditions of the purchase orders supplied to TTSI by VESTAS.
c) give VESTAS the first right of refusal to utilize and additional
tower production capacity that TTSI has or develops.
d) be paid $31 per ton to cut and bevel steel plates for towers.
Furthermore for any additional material beyond what is included
the original scope of work TTSI shall be paid at cost plus 25% on
secondary materials and consumables including welding materials
and at cost plus 6% for primary materials that TTSI is required to
purchase and finance under any VESTAS purchase order.
e) be paid USD$65 per hour for all production work carried out for
VESTAS. At each one year anniversary of the Agreement, the hourly
rate paid by VESTAS for work carried out by TTSI shall be adjusted
by the yearly average of Consumer Price Index as published by the
U.S. Department of Commerce or other official source of such
information
f) provide the appropriate production, engineering and quality
support as is required in the industry. TTSI shall, at its cost,
hire Xxxxxxx Xxxxxxxxx and his associate as consultant for a
period of up to 12 weeks to assist TTSI in organizing the
fabrication and assembly areas and to assist TTSI in establishing
the efficiencies necessary to efficiently and expeditiously
produce quality towers
g) hire and train the necessary manpower required to produce at least
75 towers pr year. The manpower has to be trained and ready for
production in week 19-2005
h) set up QS-system compliant to VESTAS's guidelines.
i) after completion of an order, inform VESTAS about the production
hours used to produce this specific order.
j) within 2 months from signing this Agreement, Vestas and TTSI shall
complete negotiations and execute the VESTAS Tower Purchase
Agreement.
k) have the ability once production starts to negotiate costs due to
changes
3. REMEDIES FOR TTSI'S BREACH
Should TTSI, during the term of this Agreement, produce any towers not
ordered by VESTAS while VESTAS orders are uncompleted or without the
expressed written consent of VESTAS, TTSI shall pay VESTAS the sum of
Five Hundred Thousand and 00/100ths Dollars $500,000.00) (US) to VESTAS
as liquidated damages for violation of the Agreement. Said liquidated
damage payment shall be made to VESTAS within fourteen (14) days of the
notice to TTSI by VESTAS of TTSI's breach of this
Agreement. The payment of the liquidated damage to VESTAS shall release
TTSI from the first right of refusal to utilize any additional tower
production capacity that TTSI has or develops, given to VESTAS.
4. REMEDIES FOR VESTAS BREACH
Should VESTAS fail to issue TTSI the purchase orders necessary to comply
with the minimum requirements for towers under this Agreement, the
Agreement shall terminate and all obligations of TTSI hereunder shall be
null and void. For purposes of this paragraph, if VESTAS has not issued
purchase orders to TTSI for the minimum number of towers according to
this agreement then TTSI shall issue a notice of default and VESTAS
shall, within five (5) days, issue a purchase order or purchase orders
for at least the minimum number of towers to be in compliance with this
Agreement or be in default as indicated hereunder and TTSI shall be free
to solicit other tower orders without penalty.
5. INTERPRETATION
This Agreement shall be interpreted under the laws of the State of
Wisconsin, United States of America, and be venued in the Circuit Court
of Manitowoc County, Wisconsin.
6. AMENDMENTS OR MODIFICATIONS
All amendments or modifications hereto shall be in writing and signed by
all parties hereto. There shall be no oral modification of this
Agreement.
Dated this 11th day of May, 2005.
TOWER TECH SYSTEMS, INC. VESTAS Towers Inc.
By /s/ XXXXXXX X. XXX By /s/ XXXXXXXXX XXXXXXXX
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Xxxxxxx X. Xxx, General Counsel Xxxxxxxxx Xxxxxxxx
VESTAS Towers A/S
By /s/ XXXXX XXXXX KRISTENSIN
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Xxxxx Xxxxx Kristensin, President
