Document:

<PAGE>   1
                                                                    EXHIBIT 10.2

                            TAX ALLOCATION AGREEMENT

                                 BY AND BETWEEN

                         WEATHERFORD INTERNATIONAL, INC.

                                       AND

                               GRANT PRIDECO, INC.

                                 APRIL __, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>

<S>                                                                    <C>
1.       Grant Group................................................  -2-

2.       Tax Returns................................................  -2-

3.       Obligation for Payment of Taxes............................  -4-

4.       No Weatherford Tax Payments................................  -5-

5.       Grant Tax Payments.........................................  -6-

6.       Tax Credits; Deferred Intercompany Gains...................  -7-

7.       Grant Tax Carryovers; Payment by Grant.....................  -8-

8.       Tax Audits.................................................  -8-

9.       Proposed Adjustments.......................................  -9-

10.      Notice of Settlement or Compromise.........................  -9-

11.      Grant's Right to Contest................................... -10-

12.      Subsequent Adjustments or Refunds.......................... -10-

13.      Grant Spin-Off Tax Indemnity............................... -11-

14.      Future Actions............................................. -11-

15.      Combined, Consolidated or Unitary Basis Returns............ -11-

16.      Earnings and Profits Information........................... -12-

17.      Tax Interpretation......................................... -12-

18.      Consistent Tax Treatment................................... -13-

19.      Retention of Records....................................... -13-

20.      Expenses................................................... -13-

21.      Definitions................................................ -14-
         "After-Tax Basis".......................................... -14-
         "Agreed Rate".............................................. -14-
</TABLE>

                                       -i-

<PAGE>   3

<TABLE>

<S>                                                                   <C>
         "Code"...................................................... -14-
         "Distribution Agreement".................................... -14-
         "Grant"..................................................... -14-
         "Grant Group"............................................... -14-
         "Interim Period"............................................ -14-
         "Returns"................................................... -14-
         "Ruling".................................................... -14-
         "Short Period".............................................. -15-
         "Spin-Off".................................................. -15-
         "Spin-Off Date"............................................. -15-
         "Spin-Off Tax".............................................. -15-
         "Tax Authority"............................................. -15-
         "Taxes"..................................................... -15-
         "Transfer Tax".............................................. -15-
         "Weatherford"............................................... -16-
         "Weatherford Group"......................................... -16-
         "WEI"....................................................... -16-

22.      Notices..................................................... -16-

23.      Binding Effect; Successors.................................. -16-

24.      Severability................................................ -17-

25.      Entire Agreement............................................ -17-

26.      Governing Law............................................... -17-

27.      Arbitration................................................. -18-
</TABLE>

EXHIBIT A - MEMBERS OF THE GRANT GROUP

                                      -ii-

<PAGE>   4

                            TAX ALLOCATION AGREEMENT

         THIS TAX ALLOCATION AGREEMENT, made and entered into as of the ____ day
of April, 2000, by and between WEATHERFORD INTERNATIONAL, INC., a Delaware
corporation ("Weatherford"), and GRANT PRIDECO, INC., a Delaware corporation
("Grant").

                              W I T N E S S E T H:

         WHEREAS, Weatherford is the common parent of an affiliated group of
corporations (hereinafter referred to as the "Weatherford Group") within the
meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), which affiliated group includes (x) corporations owned by Weatherford
(formerly known as EVI, Inc.) and (y) corporations owned by Weatherford Enterra,
Inc., a Delaware corporation ("WEI"), on May 27, 1998, the date on which WEI
merged with and into Weatherford, and (z) corporations acquired by Weatherford
or other members of the Weatherford Group subsequent to May 27, 1998, and the
members of the Weatherford Group have heretofore joined in filing consolidated
Federal income Tax Returns;

         WHEREAS, prior to May 27, 1998, Weatherford and its eligible
subsidiaries joined in filing consolidated Federal income Tax Returns as an
affiliated group and WEI and its eligible subsidiaries joined in filing
consolidated Federal income Tax Returns as an affiliated group;

         WHEREAS, Grant and its subsidiaries have been members of the
Weatherford Group;

         WHEREAS, on or about April __, 2000, certain assets associated with the
drilling products business conducted by the Weatherford Group, including the
stock of certain subsidiaries included in the Weatherford Group and engaged in
the drilling products business, will be contributed to the capital of Grant or
otherwise acquired by Grant or one or more of its subsidiaries;

         WHEREAS, Weatherford, on or about April __, 2000 (the "Spin-Off Date"),
will distribute to its stockholders all of the outstanding stock of Grant (the
"Spin-Off"), and thereafter Grant and

                                      -1-
<PAGE>   5

its subsidiaries will no longer be members of the Weatherford Group for Federal
income Tax purposes; and

         WHEREAS, the parties desire to provide for the sharing of the Federal,
state, local and foreign income Tax liabilities and benefits accrued prior to
the Spin-Off between Weatherford and its subsidiaries and Grant and its
subsidiaries;

         NOW, THEREFORE, the parties hereto agree as follows:

         1. Grant Group. For purposes of this Agreement, the "Grant Group" shall
mean (i) Grant, (ii) Grant's subsidiaries, and (iii) those corporations and
other entities whose stock or ownership interests will be contributed to Grant
prior to the Spin-Off Date, all of such subsidiaries of Grant and such
corporations and other entities being listed on Exhibit A attached hereto.
Unless otherwise specified, whenever items of income, gain, loss, deduction,
credit, or other Tax attributes of Grant are referred to in this Agreement, the
reference shall be to the collective amounts of such items for the Grant Group.

         2. Tax Returns. Weatherford shall prepare and file or cause to be
prepared and filed timely all appropriate Returns in respect of Grant and the
other members of the Grant Group that (i) are required to be filed on or before
the Spin-Off Date; or (ii) are required to be filed after the Spin-Off Date that
(A) are required to include, on a consolidated, combined or unitary basis, the
operations of Grant or any other member of the Grant Group for any Tax period or
portion thereof ending on or before the Spin-Off Date; or (B) are required to be
filed by Grant or any other member of the Grant Group on a separate return basis
for any Tax period ending on or before the Spin-Off Date. To the extent
requested by Weatherford, Grant shall participate in the filing of and shall
file any required Returns with respect to any Tax period that ends on or before
the Spin-Off Date. Grant shall prepare or cause to be prepared the schedules in
respect of Grant and other members of the

                                      -2-
<PAGE>   6

Grant Group containing the information necessary for Weatherford to prepare any
consolidated, combined or unitary Returns. If Weatherford, after consulting with
Grant, files any such consolidated, combined or unitary Return using information
with respect to Grant and the other members of the Grant Group that is different
from the information prepared and furnished by Grant and Weatherford and Grant
thereafter are unable to resolve such difference, such difference shall
constitute a claim for purposes of Paragraph 27 of this Agreement. Grant shall
also prepare or cause to be prepared and shall file or cause to be filed all
other Returns required of Grant or any other members of the Grant Group, or in
respect of its or any of their activities, for any Tax period ending after the
Spin-Off Date that includes the operations of Grant or any other member of the
Grant Group prior to the Spin-Off Date. The parties hereto will, to the extent
permitted by applicable law, elect with the relevant Tax Authority to treat for
all purposes the Spin-Off Date as the last day of a Tax period of Grant and the
other members of the Grant Group, and such period shall be treated as a "Short
Period" for purposes of this Agreement. In any case where applicable law does
not permit Grant to treat the Spin-Off Date as the last day of a Short Period,
then for purposes of this Agreement, the portion of such Taxes that is
attributable to the operations of Grant and the other members of the Grant Group
for such Interim Period (as defined below) shall be (i) in the case of Taxes
that are not based in whole or in part on income or gross receipts, the total
amount of such Taxes for the period in question multiplied by a fraction, the
numerator of which is the number of days in the Interim Period, and the
denominator of which is the total number of days in the entire period in
question, and (ii) in the case of Taxes that are based in whole or in part on
income or gross receipts, the Taxes that would be due with respect to the
Interim Period, if such Interim Period were a Short Period. "Interim Period"
means with respect to any Taxes imposed on Grant or any other members of the
Grant Group for which the Spin-Off Date is not the last day of a Short Period,
the

                                      -3-
<PAGE>   7

period of time beginning on the first day of the actual Tax period that includes
(but does not end on) the Spin-Off Date and ending on and including the Spin-Off
Date. Any franchise Tax shall be allocated to the Tax period or portion thereof
during which the right to do business obtained by the payment of such franchise
Tax relates, regardless of whether such franchise Tax is measured by income,
operations, assets or capital relating to another Tax period.

         3. Obligation for Payment of Taxes. Weatherford shall be entitled to
receive from Grant amounts calculated in accordance with Paragraphs 5, 7 and 12
hereof. Except as otherwise provided in Paragraph 5, the amounts, if any, that
Grant shall be obligated to pay Weatherford pursuant to Paragraph 5, with
respect to Tax periods of the Weatherford Group ending on or prior to the Spin-
Off Date, shall be paid (i) within 120 days after the Spin-Off Date where the
Taxes were paid by Weatherford on or before the Spin-Off Date and shall include
interest thereon calculated for the period from the Spin-Off Date to the date of
payment at a per annum rate of interest (computed on the basis of the actual
number of days elapsed (including the Spin-Off Date but excluding the payment
date) over a year of 365 or 366 days, as the case may be) equal to 10 percent,
or (ii) within 30 days after the date of payment where the Taxes are paid by
Weatherford after the Spin-Off Date. This initial settlement shall be based on
the Returns as they have been filed and shall include any amendments of or
adjustments to such Returns that have been finally settled. Except as otherwise
provided in Paragraph 5, any amounts that Grant shall be obligated to pay
Weatherford pursuant to Paragraph 5 with respect to Tax periods of the
Weatherford Group ending after the Spin-Off Date shall be paid within 30 days
after filing of the Returns for such Tax periods. In the event of an adjustment
to the amount of payment for any Tax period as determined under Paragraph 12,
Weatherford shall be entitled to receive from Grant such payment within 30 days
after payment of a deficiency to or receipt of a refund from the Tax Authority.
In the event of an adjustment under

                                      -4-
<PAGE>   8

Paragraph 12 resulting in no additional payment to or receipt of a refund from
the Tax Authority, settlement shall be made within 30 days after filing of the
amended Return or final settlement of the adjustment. In the event that Grant is
delinquent in paying to Weatherford any amount due pursuant to this Paragraph 3,
including any interest accrued thereon pursuant to this Paragraph 3, or
Paragraph 7 hereof, such unpaid amount shall bear interest from the original due
date until paid at a per annum rate equal to the lesser of (a) 12 percent and
(b) the maximum lawful non-usurious rate of interest, if any, which under
applicable law Weatherford is permitted to charge Grant thereon from time to
time.

         4. No Weatherford Tax Payments. Except as otherwise provided in
Paragraph 12 hereof, Weatherford shall not be obligated to pay Grant for any Tax
credits of the Grant Group or any losses or deductions of the Grant Group used
by the Weatherford Group to reduce its Federal income Tax liability or Federal
taxable income for any Tax period ending on or before the Spin-Off Date. For
purposes of these computations, the allocation of Tax attributes to the Grant
Group and absorption thereof by the Weatherford Group for each Tax period shall
be determined in accordance with the Treasury Regulations under Section 1502 of
the Code, applied in a manner consistent with practices and methods followed in
reporting the Federal income Tax liability of the Weatherford Group for such Tax
periods. In any instance where a Tax attribute must be characterized, the
characterization prescribed by the aforementioned Treasury Regulations will
control.

         5. Grant Tax Payments. For each Tax period of the Weatherford Group
which includes income of the Grant Group, Grant shall be obligated to pay
Weatherford an amount equal to the product of (i) the net taxable income of the
Grant Group included in the consolidated Federal income Tax Return of the
Weatherford Group for such period, multiplied by (ii) the highest marginal
statutory Federal corporate income Tax rate applicable to such income for such
period; provided,

                                      -5-
<PAGE>   9

however, that no payment shall be required pursuant to this Paragraph 5 to the
extent such payments have previously been made by the Grant Group to members of
the Weatherford Group other than the Grant Group under any Tax sharing agreement
or arrangement (whether written or oral) or any other similar system of payments
with respect to Federal income Taxes of the Weatherford Group in existence prior
to the Spin-Off Date, including, but not limited to, any estimated Tax payments.
For purposes of these computations, the allocation of Tax attributes to the
Weatherford Group and absorption thereof by the Grant Group for each Tax period
shall be determined in accordance with the Treasury Regulations under Section
1502 of the Code, applied in a manner consistent with practices and methods
followed in reporting the Federal income Tax liability of the Weatherford Group
for such Tax periods. In any instance where a Tax attribute must be
characterized, the characterization prescribed by the aforementioned Treasury
Regulations will control. To the extent, if any, that the amount of Taxes
Weatherford is required to pay with respect to the net taxable income of the
Grant Group for a Tax period is less than the amount calculated as owed by Grant
to Weatherford under this Paragraph 5, the amount owed by Grant to Weatherford
shall be (i) reduced to the extent that such difference is attributable to Tax
benefits of the Weatherford Group used which would have otherwise expired unused
but for the fact that the Grant Group had net taxable income for such Tax
period, or (ii) deferred to the extent such difference is attributable to Tax
benefits of the Weatherford Group used which would have otherwise carried
forward to a subsequent year or years but for the fact that the Grant Group had
net taxable income for such Tax period. In the event an amount otherwise payable
by Grant to Weatherford is deferred pursuant to clause (ii) of the immediately
preceding sentence, such amount shall be paid by Grant to Weatherford within 30
days after the filing of the Tax Return for the Tax period in which such Tax
benefits of the Weatherford Group previously used would have been used. Any
amount payable by Grant to Weatherford pursuant to

                                      -6-
<PAGE>   10

the immediately preceding sentence shall not be greater than the amount of Tax
paid by Weatherford as a consequence of the Tax benefits of the Weatherford
Group previously having been used to offset taxable income of the Grant Group.

         6. Tax Credits; Deferred Intercompany Gains. For purpose of the
calculations under this Agreement, any loss of Tax credits resulting from or
attributable to the transfer of assets to Grant or any other member of the Grant
Group in connection with the Spin-Off shall be ignored and all calculations
shall be made as though all such tax credits were available for use by the
Weatherford Group. In the event any deferred intercompany gain attributable to
assets transferred to Grant or any other members of the Grant Group by other
members of the Weatherford Group is recognized by the Weatherford Group by
reason of the Spin-Off, such deferred intercompany gain, if any, shall be deemed
to be a gain of the Grant Group for its taxable year ending on the Spin-Off Date
for purposes of all calculations under this Agreement, including the calculation
of Taxes owed by Grant to Weatherford pursuant to Paragraphs 3 and 5 hereof.

         7. Grant Tax Carryovers; Payment by Grant. Notwithstanding anything in
this Agreement to the contrary, with respect to items of loss or other Tax
benefits apportioned to and carried over by the Grant Group after the Spin-Off
(under the Treasury Regulations governing Federal consolidated income Tax
Returns) and regardless of whether such Tax benefits (x) are used by the Grant
Group to reduce its Federal income Tax liability after the Spin-Off or (y)
expire unused by the Grant Group, Grant shall pay to Weatherford an amount equal
to any such item of loss or other Tax benefit multiplied by the highest marginal
statutory Federal corporate income Tax rate in effect on the Spin-Off Date. Any
payment due from Grant to Weatherford pursuant to this Paragraph 7 shall be
payable on the earlier of 30 days after (x) the date of filing of the Return
which includes such item of loss or other Tax benefit or (y) the end of the Tax
year in which such item of loss or

                                      -7-
<PAGE>   11

other Tax benefit expires unused. Weatherford agrees to cooperate with Grant in
determining the amount of such items of loss or other Tax benefits apportioned
to and carried over by the Grant Group after the Spin-Off.

         8. Tax Audits. In the event of an audit by any Tax Authority of a
Return filed by Weatherford for any Tax period ending prior to or on the
Spin-Off Date (or any Tax period thereafter in which a carryforward of the Grant
Group's Tax benefits is used), Weatherford shall give Grant timely and
reasonable notice of such audit proceedings and Grant shall have the right to
participate in any such audit; provided, however, that Weatherford shall have
the full power and authority to control such audit. In connection with any such
audit, Grant will provide all necessary information and other assistance
reasonably requested by Weatherford with respect to issues concerning the
activities of the Grant Group. All communications with any such Tax Authority
and its employees concerning any such audit will be made by Weatherford unless
otherwise agreed between the parties hereto. In connection with its
participation in any audit, Grant shall be given reasonable notice of all
material meetings, investigations, field examinations and similar events and
copies of all relevant material correspondence between the Tax Authority
conducting the audit and Weatherford.

         9. Proposed Adjustments. Weatherford shall give prompt notice to Grant
of any adjustment or adjustments proposed by any Tax Authority relating to the
activities of the Grant Group for any Tax period ending prior to or on the
Spin-Off Date. After consulting with Grant, Weatherford shall determine in its
sole discretion the nature of all action to be taken to contest such proposed
adjustment, including whether any such action shall initially be contested by
way of judicial or administrative proceedings, or both, whether any such
proposed adjustment shall be contested by resisting payment thereof or by paying
the same and seeking a refund thereof, and if Weatherford shall undertake to
contest such proposed adjustment, the court or other judicial body

                                      -8-
<PAGE>   12

before which such action will be commenced. Weatherford shall have full control
over any contest or administrative proceeding pursuant to this Paragraph, but
Grant, at its expense and subject to approval by Weatherford, which approval
shall not be unreasonably withheld, may participate in any proceedings
contesting any proposed adjustment relating to the activities of the Grant
Group.

         10. Notice of Settlement or Compromise. Weatherford shall give prompt
notice to Grant of any proposal made to it at the time of an audit or otherwise,
to settle or compromise issues relating to the Tax liabilities of the Grant
Group for any Tax period ending prior to or on the Spin-Off Date. Weatherford
will not accept or offer any settlement or compromise of such issues without the
consent of Grant, and such consent shall not be unreasonably withheld. If, in
Weatherford's opinion, Grant unreasonably withholds such consent, Weatherford
shall have the right to settle or compromise such issues on the basis contained
in the notice to Grant. If Grant thereafter desires to dispute such settlement
or compromise, Grant's claim with respect thereto shall constitute a claim for
purposes of Paragraph 27 of this Agreement.

         11. Grant's Right to Contest. Should Weatherford decline or cease to
contest any proposed adjustment relating to the activities of the Grant Group
for any Tax period ending prior to or on the Spin-Off Date, Weatherford shall so
notify Grant. Grant, at its expense and upon providing reasonable assurances to
Weatherford of Grant's ability to pay any Taxes resulting from any such proposed
adjustment, may contest such proposed adjustment; but in no event shall Grant be
permitted to accept or offer any settlement or compromise that would require the
settlement or compromise of issues relating to the Tax liabilities of members of
the Weatherford Group other than the Grant Group.

         12. Subsequent Adjustments or Refunds. With respect to any Tax period
of the Weatherford Group for which Weatherford received from Grant a payment
pursuant to Paragraph 5,

                                      -9-
<PAGE>   13

Paragraph 7 or this Paragraph 12, if the filing of an amended income Tax Return,
final determination of any adjustment made by any Tax Authority or the receipt
of a refund by Weatherford occurs with respect to such period and such event
would cause a difference in the amount of payment required for such period as
previously calculated pursuant to Paragraph , Paragraph 7 or this Paragraph 12,
Weatherford shall give Grant prompt notice of such difference and Weatherford
shall be obligated to pay or entitled to receive from Grant the amount of such
difference. Any amount required to be paid pursuant to this Paragraph 12 shall
include any interest imposed by or received from the Tax Authority if the
adjustment results in the payment of Tax to or receipt of Tax from the Tax
Authority.

         13. Grant Spin-Off Tax Indemnity. Notwithstanding any other provision
of this Agreement to the contrary, Grant shall be liable for, shall pay and
shall indemnify and hold Weatherford and the other members of the Weatherford
Group harmless, on an After-Tax Basis, against (A) any Transfer Taxes and other
Taxes which may be imposed or assessed as a result of the contribution by
Weatherford to the capital of Grant or the acquisition (by sale or purchase or
otherwise) by Grant or one or more of the other members of the Grant Group of
assets associated with the drilling products business conducted by the
Weatherford Group, including the stock of certain subsidiaries included in the
Weatherford Group and engaged in the drilling products business, (B) any Taxes
resulting from the recognition of deferred intercompany gains as contemplated by
Paragraph 6 hereof and (C) any Spin-Off Tax. In determining the amount of, and
the time of payment of, any such Transfer Taxes, other Taxes or Spin-Off Tax
owed by Grant to Weatherford, the principles set forth in the last three
sentences of Paragraph 5 shall apply.

         14. Future Actions. Grant agrees that, during the three-year period
following the Spin-Off, it will not engage in any transaction that could
adversely affect the tax treatment of the Spin-Off

                                      -10-
<PAGE>   14

without the prior written consent of Weatherford, which consent may be withheld
in Weatherford's discretion, unless Grant delivers to Weatherford a supplemental
ruling from the Internal Revenue Service or a tax opinion acceptable to
Weatherford of nationally recognized tax counsel to the effect that the proposed
transaction would not adversely affect the tax treatment of the Spin-Off.
Weatherford agrees to cooperate with and provide reasonable assistance to Grant
in the event that Grant requests a supplemental ruling from the Internal Revenue
Service.

         15. Combined, Consolidated or Unitary Basis Returns. The parties
acknowledge that certain state, local or foreign Tax Authorities may require, or
one of the parties may desire, to file amended or original state, local or
foreign income Tax Returns on a combined, consolidated or unitary basis. Such
filing may result in an aggregate decrease in the state, local or foreign income
Tax of both parties; however, one party may suffer a Tax increase compared to
its state, local or foreign income Tax liability calculated on a separate
company basis, while the other party enjoys a Tax decrease. In any such event,
the parties intend that the required calculations for determining which party
owes Taxes to the other with respect thereto be made by utilizing the principles
set forth in Paragraphs 3, 4, 5, 7 and 12 hereof.

         16. Earnings and Profits Information. The parties agree to share such
information as is necessary to properly allocate the earnings and profits of the
Grant Group in accordance with the Code and Treasury Regulations for Tax periods
prior to or ending on the Spin-Off Date. After the Spin-Off, Weatherford agrees
to provide Grant and Grant's independent auditors with such information as is
necessary to verify amounts received or receivable or paid or payable by Grant
under this Agreement. Grant agrees to make available to Weatherford, upon
request, all Federal, state, local and foreign Tax Returns, work papers and
other documents pertaining to the activities of the Grant Group prior to the
Spin-Off.

                                      -11-
<PAGE>   15

         17. Tax Interpretation. For all Tax purposes and notwithstanding any
other provision of this Agreement, to the extent permitted by applicable law,
the parties hereto shall treat any payment made pursuant to this Agreement as a
capital contribution or dividend distribution, as the case may be, immediately
prior to the Spin-Off Date and, accordingly, as not includible in the taxable
income of the recipient. If it is finally determined that the receipt or accrual
of any payment made under this Agreement is taxable to the recipient, the payor
shall pay to the recipient, on an After-Tax Basis, an amount equal to any
increase in the Taxes of the recipient as a result of receiving the payment from
the payor.

         18. Consistent Tax Treatment. To the extent that assets are assigned,
sold, transferred or conveyed by a member of the Weatherford Group to Grant or
another member of the Grant Group in contemplation of the Spin-Off and any such
transaction is treated as a sale for Tax purposes, the aggregate purchase price
shall be allocated among the assets assigned, sold, transferred or conveyed as
determined by Weatherford in its sole discretion. Each of Weatherford and Grant
agrees to report and, where applicable, to cause the members of their respective
groups to report, the purchase prices of such assets as determined by
Weatherford.

         19. Retention of Records. Each party hereto agrees, to the extent
potentially relevant to the other party, to (1) retain records, documents,
accounting and other information (including computer data) necessary for the
preparation and filing of all Returns or the audit of such Returns, and (2) give
to the other party reasonable access to such records, documents, accounting
data, Returns and related books and records and other information (including
computer data) and to its personnel (insuring their cooperation) and premises,
for purposes of the review or audit of such Returns to the extent relevant to an
obligation or liability of a party under this Agreement.

                                      -12-
<PAGE>   16

         20. Expenses. Each party will bear its own expenses in complying with
this Agreement, including but not limited to the cost of employee work hours.
The sharing of fees and expenses of nonemployees and independent contractors
mutually engaged by the parties shall be agreed upon before such persons are
engaged.

         21. Definitions.

             (a) "After-Tax Basis" means, with respect to any payment, an amount
calculated by taking into account the Tax consequences of the receipt of such
payment, as well as any Tax benefit associated with the liability giving rise to
the payment, in each case calculated on a present value basis using the Agreed
Rate.

             (b) "Agreed Rate" means the annual rate of interest quoted, from
time to time, by _____________________, N.A. in Houston, Texas as its prime rate
of interest for the purpose of determining the interest rates charged by it for
United States dollar commercial loans made in the United States.

             (c) "Code" has the meaning set forth in the first recital hereof.

             (d) "Distribution Agreement" means that certain Distribution
Agreement dated as of April __, 2000, by and between Weatherford and Grant, as
the same may be amended or otherwise modified from time to time pursuant to the
terms thereof.

             (e) "Grant" has the meaning set forth in the preamble hereto.

             (f) "Grant Group" has the meaning set forth in Section 1 hereof.

             (g) "Interim Period" has the meaning set forth in Section 2 hereof.

             (h) "Returns" means all returns, declarations, reports, statements
and other documents required to be filed in respect of Taxes, and the term
"Return" means any one of the foregoing Returns.

                                      -13-
<PAGE>   17

             (i) "Ruling" means the private letter ruling to be issued by the
Internal Revenue Service with respect to the Spin-Off and relating to the tax
consequences associated with the distribution of all outstanding shares of Grant
common stock.

             (j) "Short Period" has the meaning set forth in Section 2 hereof.

             (k) "Spin-Off" has the meaning set forth in the fifth recital
hereof.

             (l) "Spin-Off Date" has the meaning set forth in the fifth recital
hereof.

             (m) "Spin-Off Tax" means any Tax to which Weatherford or any member
of the Weatherford Group is subject as a result of the application of any
provision of the Code to the Spin- Off, including without limitation, Section
311(b), Section 355(c)(2), Section 355(e) or Section 361(c)(2) of the Code (or
any corresponding or similar provision of state, local or foreign law), other
than any such Tax which results solely from the fact that one or more persons
acquire after the Spin- Off Date directly or indirectly stock representing a
50-percent or greater interest in Weatherford and such acquisition is subject to
Section 355(e) of the Code.

             (n) "Tax Authority" means the United States Internal Revenue
Service or any other comparable state, local or foreign governmental authority.

             (o) "Taxes" means all federal, state, local, foreign and other
taxes, duties, levies, imposts, customs or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, profit share, license, value added,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, premium, property, windfall profits, or other taxes, of any kind
whatsoever, together with any interest, penalties, additions to tax, fines or
other additional amounts imposed thereon or related thereto, and the term "Tax"
means any one of the foregoing Taxes.

                                      -14-

<PAGE>   18

             (p) "Transfer Tax" means any excise, sales, use, transfer,
documentary, filing, recordation or other similar tax or fee, together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties.

             (q) "Weatherford" has the meaning set forth in the preamble hereto.

             (r) "Weatherford Group" has the meaning set forth in the first
recital hereto.

             (s) "WEI" has the meaning set forth in the first recital hereto.

         22. Notices. All notices and other communications to be given or made
hereunder shall be in writing and shall be (a) personally delivered with signed
receipt obtained acknowledging delivery; (b) transmitted by postage prepaid
registered mail, return receipt requested (air mail if international); or (c)
transmitted by facsimile; to a party at the address set out below (or at such
other address as it may have provided notification for the purposes hereof to
the other party hereto in accordance with this Section).

         If to Grant:                   Grant Prideco, Inc.
                                        1450 Lake Robbins Drive, Suite 600
                                        The Woodlands, Texas 77380
                                        Fax number:  (281) 297-8569
                                        Attention:   President

         If to Weatherford:             Weatherford International, Inc.
                                        515 Post Oak Boulevard, Suite 600
                                        Houston, Texas 77027
                                        Fax number:  (713) 693-4484
                                        Attention:   General Counsel

         23. Binding Effect; Successors. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and any
successor, by merger, acquisition of substantially all of a party's assets or
otherwise, to either of the parties hereto (including but not limited to any
successor of Weatherford or Grant succeeding to the Tax attributes of
Weatherford or Grant under Section 381 of the Code), to the same extent as if
such successor had been an original

                                      -15-
<PAGE>   19

party to this Agreement. In addition, in the event of an acquisition of
substantially all of the assets of Grant in which gain or loss is not
recognized, in whole or in part, for Federal income Tax purposes, Grant shall
ensure that any purchaser of such assets shall assume the obligations set forth
in this Agreement.

         24. Severability. Any provision of this Agreement that is determined by
arbitration as provided herein or a court of competent jurisdiction to be
invalid, illegal or unenforceable shall be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provision of this Agreement invalid, illegal or unenforceable, so long as the
material purposes of this Agreement can be determined and effectuated. Should
any provision of this Agreement be so declared invalid, illegal or
unenforceable, the parties shall agree on a valid provision to substitute for
it.

         25. Entire Agreement. This Agreement, including the exhibit and other
writings referred to herein or delivered pursuant hereto and the Distribution
Agreement, as well as the other agreements entered into by and between
Weatherford and Grant in connection with the Spin-Off, constitutes the entire
agreement between Weatherford and Grant with respect to the subject matter
hereof and supersedes all other agreements, representations, warranties,
statements, promises and undertakings, whether oral or written, with respect to
the subject matter hereof, including, without limitation, any and all Tax
sharing agreements or arrangements (whether oral or written) between Weatherford
and the other members of the Weatherford Group (other than the Grant Group) on
the one hand and Grant and the other members of the Grant Group on the other
hand, that require payments or indemnities to be made with respect to Taxes.
This Agreement may not be amended, altered or modified except by a writing
signed by duly authorized officers of Weatherford and Grant.

                                      -16-
<PAGE>   20

         26. Governing Law. All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach, shall be governed by and construed in
accordance with the internal laws of the State of Texas, without regard to or
the application of the rules of conflicts of laws set forth in such laws.

         27. Arbitration. The parties agree that any claim arising out of or
related to this Agreement shall be governed by the dispute resolution,
arbitration and choice of forum provisions set forth in Section 8.3 of the
Distribution Agreement.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

                                        WEATHERFORD INTERNATIONAL, INC.

                                        By:
                                           ------------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------

                                        GRANT PRIDECO, INC.

                                        By:
                                           ------------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------

                                      -17-
<PAGE>   21

                                                                       EXHIBIT A
                           MEMBERS OF THE GRANT GROUP

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------
                                                                                              %
                      Name                           Incorporation Jurisdiction           Controlled
----------------------------------------------------------------------------------------------------
<S>                                                  <C>                                  <C>
Channelview Real Property, Inc.                           Delaware                           100
----------------------------------------------------------------------------------------------------
Citra Grant Prideco Marketing Ltd.                        Jersey Islands                     100
----------------------------------------------------------------------------------------------------
Drill Tube International, Inc.                            Texas                              100
----------------------------------------------------------------------------------------------------
Enerpro de Mexico, S.A. de C.V                            Mexico                             100
----------------------------------------------------------------------------------------------------
EVI Oil Tools Ltd.                                        Scotland                           100
----------------------------------------------------------------------------------------------------
Grant Austria, Inc.                                       Delaware                           100
----------------------------------------------------------------------------------------------------
Grant Prideco (Singapore) Pte Ltd.                        Singapore                          100
----------------------------------------------------------------------------------------------------
Grant Prideco Canada Ltd.                                 Alberta, Canada                    100
----------------------------------------------------------------------------------------------------
Grant Prideco de Venezuela, S.A                           Venezuela                          100
----------------------------------------------------------------------------------------------------
Grant Prideco Holding, L.L.C                              Delaware                           100
----------------------------------------------------------------------------------------------------
Grant Prideco Limited                                     Scotland                           100
----------------------------------------------------------------------------------------------------
Grant Prideco Technology, Inc.                            Delaware                           100
----------------------------------------------------------------------------------------------------
Grant Prideco U.S., L.L.C                                 Delaware                           100
----------------------------------------------------------------------------------------------------
Grant Prideco, Inc.                                       Delaware                           100
----------------------------------------------------------------------------------------------------
Grant Prideco, L.P.                                       Delaware                           100
----------------------------------------------------------------------------------------------------
Grant Prideco, S.A                                        Switzerland                         99
----------------------------------------------------------------------------------------------------
Grant Prideco, S.A. de C.V                                Mexico                             100
----------------------------------------------------------------------------------------------------
Inmobiliaria Industrial de Veracruz, S.A. de C.V          Mexico                             100
----------------------------------------------------------------------------------------------------
Jiangsu Shuguang Grant Prideco Tubular Company            Peoples Republic of China        21.48
----------------------------------------------------------------------------------------------------
Petro-Drive, Inc.                                         Louisiana                          100
----------------------------------------------------------------------------------------------------
Petroleum Equipment Supply Company                        Louisiana                          100
----------------------------------------------------------------------------------------------------
Pridecomex Holding, S.A de C.V                            Mexico                             100
----------------------------------------------------------------------------------------------------
PT H-Tech Oilfield Equipment                              Indonesia                        54.03
----------------------------------------------------------------------------------------------------
TA Industries, Inc.                                       Delaware                           100
----------------------------------------------------------------------------------------------------
Texas Arai, Inc.                                          Delaware                           100
----------------------------------------------------------------------------------------------------
TF de Mexico, S.A de C.V                                  Mexico                           95.36
----------------------------------------------------------------------------------------------------
Tube Alloy Capital Corporation                            Texas                              100
----------------------------------------------------------------------------------------------------
Tube Alloy Corporation                                    Louisiana                          100
----------------------------------------------------------------------------------------------------
Tube Alloy Corporation International                      Texas                              100
----------------------------------------------------------------------------------------------------
Voest-Alpine Middle East Free Establishment Zone          United Arab Emirates                50
----------------------------------------------------------------------------------------------------
Voest-Alpine South America, S.A                           Venezuela                           50
----------------------------------------------------------------------------------------------------
Voest-Alpine Stahlrohr Kindberg GmbH                      Austria                             50
----------------------------------------------------------------------------------------------------
Voest-Alpine Stahlrohr Kindberg GmbH & Co. KG             Austria                             51
----------------------------------------------------------------------------------------------------
Weatherford Mauritius Limited                             Mauritius                          100
----------------------------------------------------------------------------------------------------
XL Systems International, Inc.                            Delaware                           100
----------------------------------------------------------------------------------------------------
XL Systems, Inc.                                          Texas                              100
----------------------------------------------------------------------------------------------------
XLS Holding, Inc.                                         Texas                              100
----------------------------------------------------------------------------------------------------
XLS Systems Antilles, N.V                                 Netherlands Antilles               100
----------------------------------------------------------------------------------------------------
XLS Systems Europe, B.V                                   Netherlands                        100
----------------------------------------------------------------------------------------------------
</TABLE>

                                      -18-<PAGE>   1
                                                                    EXHIBIT 10.3

                         TRANSITION SERVICES AGREEMENT

         This Transition Services Agreement (this "Agreement") is entered into
as of April __, 2000, between Weatherford International, Inc., a Delaware
corporation ("Weatherford"), and Grant Prideco, Inc., a Delaware corporation, on
behalf of itself and each of its Affiliates (collectively, "Grant Prideco").

                               W I T N E S S E T H

         WHEREAS, Weatherford and Grant Prideco are parties to the Distribution
Agreement and other related agreements; and

         WHEREAS, Weatherford and Grant Prideco desire for Weatherford and its
Affiliates to provide certain services to Grant Prideco;

         NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Weatherford and Grant Prideco, each on behalf of itself and its
Affiliates, hereby covenant and agree as follows:

                                   ARTICLE 1
                                   DEFINITIONS

         All capitalized terms or other defined terms used but not defined in
this Agreement are used in this Agreement with the following meanings:

         "AFFILIATE" means, with respect to Weatherford or Grant Prideco, any
Person, that directly or indirectly, is in control of, is controlled by,
controls or is under common control of Weatherford or Grant Prideco, as the case
may be. For purposes of this definition, control shall include the ownership of
50% or more of the legal or beneficial interest in any Person or the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise. A
Person who is an Affiliate shall only be considered an Affiliate for so long as
that Person meets the definition of an Affiliate. An officer, director, general
partner, managing member or trustee of a Person or Affiliate of such Person
shall not be considered to be an Affiliate unless such Person is under the
direct or indirect control or common control of Weatherford or Grant Prideco, as
the case may be. For purposes of clarity, neither Weatherford nor Grant Prideco
shall be considered to be an Affiliate of the other, nor shall National Oilwell,
Grey Wolf Inc. or any other company in which a director or officer of
Weatherford is also a director, officer or shareholder be considered an
Affiliate of Weatherford unless Weatherford itself controls such company.

         "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in Houston, Texas are authorized or required
to close.

         "CLOSING DATE" shall mean the effective date of the Distribution
Agreement or such other date as the parties shall agree to in writing.

<PAGE>   2

                                   ARTICLE 1
                                   DEFINITIONS

         All capitalized terms or other defined terms used but not defined in
this Agreement are used in this Agreement with the following meanings:

         "AFFILIATE" means, with respect to Weatherford or Grant Prideco, any
Person, that directly or indirectly, is in control of, is controlled by,
controls or is under common control of Weatherford or Grant Prideco, as the case
may be. For purposes of this definition, control shall include the ownership of
50% or more of the legal or beneficial interest in any Person or the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise. A
Person who is an Affiliate shall only be considered an Affiliate for so long as
that Person meets the definition of an Affiliate. An officer, director, general
partner, managing member or trustee of a Person or Affiliate of such Person
shall not be considered to be an Affiliate unless such Person is under the
direct or indirect control or common control of Weatherford or Grant Prideco, as
the case may be. For purposes of clarity, neither Weatherford nor Grant Prideco
shall be considered to be an Affiliate of the other, nor shall National Oilwell,
Grey Wolf Inc. or any other company in which a director or officer of
Weatherford is also a director, officer or shareholder be considered an
Affiliate of Weatherford unless Weatherford itself controls such company.

         "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in Houston, Texas are authorized or required
to close.

         "CLOSING DATE" shall mean the effective date of the Distribution
Agreement or such other date as the parties shall agree to in writing.

<PAGE>   3

         "DISTRIBUTION AGREEMENT" shall mean that certain Distribution Agreement
dated as of April __, 2000, by and between Weatherford and Grant Prideco, as the
same may be amended or otherwise modified from time to time pursuant to the
terms thereof.

         "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

         "PERSON" shall mean an individual, partnership, corporation, business
trust, limited liability company, limited liability partnership, joint stock
company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.

                                   ARTICLE II
                              WEATHERFORD SERVICES

         2.1      SERVICES. Weatherford agrees to provide, or cause its
Affiliates to provide, the services described below to Grant Prideco:

                  (a)      Treasury Services. Weatherford will provide, or cause
to be provided, the treasury services set forth on ANNEX A (the "Treasury
Services"). Weatherford will allocate to Grant Prideco a proportional amount of
the costs and expenses of Weatherford's Treasury Department to the extent they
relate to matters associated with the Treasury Services. Grant Prideco agrees to
pay Weatherford for such proportional amount and for all additional costs, fees,
expenses, penalties, taxes and interest incurred by Weatherford relating to the
provision of the Treasury Services.

                  (b)      Insurance and Risk Management Services. Weatherford
will provide, or cause to be provided, the insurance and risk management
services set forth on ANNEX B (the "Insurance and Risk Management Services").
Weatherford will allocate to Grant Prideco a proportional amount of the costs
and expenses of Weatherford's Risk Management Department to the extent they
relate to matters associated with the Insurance and Risk Management Services.
Grant Prideco agrees to pay Weatherford for such proportional amount and for all
additional costs, fees, expenses, penalties, taxes and interest incurred by
Weatherford relating to the provision of the Insurance and Risk Management
Services. Grant Prideco shall be solely responsible for, and shall reimburse
Weatherford for, the amount of any retentions, deductibles or any other payments
for any claims relating to Grant Prideco.

                  (c)      Tax Services. Weatherford will provide general tax
supervision and oversight and assistance relating to the tax accounting of Grant
Prideco, including assistance with the preparation and filing of the state,
federal and foreign tax returns and assistance with the maintenance of tax
records (collectively, the "Tax Services"). Weatherford will allocate to Grant
Prideco a proportional amount of the costs and expenses of Weatherford's Tax
Department to the extent they relate to matters associated with the Tax
Services, including the costs of the preparation and filing of state, federal
and foreign tax returns. Grant Prideco agrees to pay Weatherford for such
proportional amount and for all additional costs, fees, expenses, penalties,
taxes and interest incurred by Weatherford relating to the provision of the Tax
Services.

                                       2
<PAGE>   4

                  (d)      Management Information Systems Services. Weatherford
will provide the management information system services set forth on ANNEX C
(the "MIS Services"). Weatherford will allocate to Grant Prideco a proportional
amount of the costs and expenses of Weatherford's MIS Department to the extent
they relate to matters associated with the MIS Services. Grant Prideco agrees to
pay Weatherford for such proportional amount and for all additional costs, fees,
expenses, penalties, taxes and interest incurred by Weatherford relating to the
provision of the MIS Services.

                  (e)      Accounting Services. Weatherford will make its
Accounting Department available to Grant Prideco on a reasonable basis (the
"Accounting Services", and, collectively with the Treasury Services, the
Insurance and Risk Management Services, the Legal Services, the Tax Services and
the MIS Services, the "Services"). Weatherford will allocate to Grant Prideco a
proportional amount of the costs and expenses of Weatherford's Accounting
Department to the extent they relate to matters associated with the Accounting
Services. Grant Prideco agrees to pay Weatherford for such proportional amount
and for all additional costs, fees and expenses incurred by Weatherford relating
to the provision of the Accounting Services.

         2.2      Early Termination of Services. With respect to any Service
(or portion thereof) that Grant Prideco no longer requires Weatherford (or its
Affiliates) to perform, Grant Prideco shall promptly notify Weatherford that
such Service (or portion thereof) is no longer required, and 30 Business Days
following receipt by Weatherford of such notice, such Service (or portion
thereof) will no longer be provided by Weatherford (or its Affiliates) under
this Agreement and Weatherford will have no further obligation with respect
thereto.

         2.3      Management Fee and Reimbursement. Weatherford will prepare and
submit to Grant Prideco a monthly statement of account and invoice setting forth
in reasonable detail the amounts owed by Grant Prideco for the Services pursuant
to this Agreement for the immediately preceding month and the method and basis
of their calculation. In consideration for Weatherford's agreement to provide
and administer the Services under this Agreement, Grant Prideco also agrees to
pay to Weatherford a management fee equal to 10% of the total amount of the
proportional amount of the costs and expenses of the various Weatherford
departments allocated to Grant Prideco. Such management fee shall be added to
each monthly statement of account and invoice sent to Grant Prideco. Grant
Prideco agrees to pay to Weatherford, by wire transfer in immediately available
U.S. funds, all amounts owed and due under this Agreement within 30 days of
receipt of such monthly statement of account and invoice. Interest at the rate
of 10% per annum, compounded monthly, will accrue and will be payable with
respect to any amounts due and not paid by Grant Prideco until such amounts, and
any interest thereon, have been paid.

         2.4      Adjustments. All costs, expenses and fees associated with the
Services are subject to change and adjustment based upon changes in
Weatherford's internal cost structure and the cost of outside services utilized
by Weatherford.

         2.5      Term and Termination. Subject to the provisions of Section 2.2
hereof, the term of this Agreement shall commence on the Closing Date and shall
continue until, and terminate on, the first anniversary following the Closing
Date. The termination of this Agreement shall not release (i) either party from
its liability to the other party under this Agreement arising from a

                                       3
<PAGE>   5

breach of this Agreement, (ii) either party from its rights and obligations
under Article III or (iii) Grant Prideco from its payment obligations under
Sections 2.1 and 2.3.

                                  ARTICLE III
           ALLOCATION OF LIABILITY; RELATIONSHIP; DELEGATION OF DUTY

         3.1      WAIVER AND INDEMNIFICATION. GRANT PRIDECO HEREBY WAIVES ANY
AND ALL CLAIMS AGAINST WEATHERFORD, ITS AFFILIATES AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS (THE "WEATHERFORD PARTIES") FOR
DAMAGES RESULTING FROM PERFORMANCE OF, ERROR OR DELAY IN PERFORMANCE, ATTEMPTING
TO PERFORM OR FAILING TO PERFORM, ANY RESPONSIBILITIES HEREUNDER, OR ANY DAMAGES
OF ANY KIND RELATED THERETO, INCLUDING CLAIMS ARISING AS A RESULT OF THE EXPRESS
NEGLIGENCE OF SUCH PERSONS UNLESS SUCH DAMAGES RESULTED FROM THE WILLFUL
MISCONDUCT OF SUCH PERSONS. FURTHER, GRANT PRIDECO HEREBY AGREES TO DEFEND,
INDEMNIFY AND HOLD THE WEATHERFORD PARTIES HARMLESS FROM AND AGAINST ANY AND ALL
CLAIMS, DAMAGES, CAUSES OF ACTION AND LEGAL LIABILITIES ARISING OUT OF, IN
CONNECTION WITH, OR AS AN INCIDENT TO, THIS AGREEMENT OR ANY ACT OR OMISSION IN
THE PERFORMANCE BY SUCH PERSONS OF THEIR RESPONSIBILITIES HEREUNDER, INCLUDING
DAMAGES, CAUSES OF ACTION AND LEGAL LIABILITIES ARISING AS A RESULT OF THE
NEGLIGENCE OF SUCH PERSONS, UNLESS SUCH DAMAGES RESULTED FROM THE WILLFUL
MISCONDUCT OF SUCH PERSONS SEEKING INDEMNIFICATION.

         3.2      LIMITATION ON WARRANTIES AND CONSEQUENTIAL DAMAGES. NONE OF
THE WEATHERFORD PARTIES MAKES ANY WARRANTIES OR REPRESENTATIONS REGARDING
SERVICES PROVIDED PURSUANT TO THIS AGREEMENT OTHER THAN THOSE EXPRESSED IN THIS
AGREEMENT AND NONE OF THE WEATHERFORD PARTIES MAKES ANY EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. SUCH
SERVICES ARE FURNISHED ON AN "AS IS" BASIS, AND NONE OF THE WEATHERFORD PARTIES
ASSUMES ANY RESPONSIBILITY FOR ANY DAMAGE OR LOSS (INCLUDING, WITHOUT
LIMITATION, ANY CONSEQUENTIAL, EXEMPLARY OR SPECIAL DAMAGES OR LOST PROFITS)
ARISING OUT OF, RESULTING FROM OR CAUSED BY SERVICES FURNISHED.

         3.3      EXPRESS NEGLIGENCE. THE INDEMNITIES SET FORTH IN THIS ARTICLE
III ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE
EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE RULE
OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES
BECAUSE OF THE SIMPLE OR GROSS NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR
PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE WEATHERFORD PARTIES.

                                       4
<PAGE>   6

         3.4      INDEPENDENT CONTRACTOR. UNLESS OTHERWISE AGREED BY THE PARTIES
WITH RESPECT TO LEGAL SERVICES, IN PERFORMING THE SERVICES HEREUNDER, GRANT
PRIDECO AND WEATHERFORD ACKNOWLEDGE AND AGREE THAT THE WEATHERFORD PARTIES AND
THEIR REPRESENTATIVES SHALL BE CONSIDERED INDEPENDENT CONTRACTORS WITH RESPECT
TO GRANT PRIDECO AND SHALL UNDER NO CIRCUMSTANCES BE DEEMED TO BE EMPLOYEES,
AGENTS, PARTNERS OR JOINT VENTURERS OF GRANT PRIDECO. ADDITIONALLY, WEATHERFORD
SHALL HAVE THE AUTHORITY AND RESPONSIBILITY TO SELECT THE MEANS, MANNER AND
METHOD OF PERFORMING THE SERVICES REQUIRED TO BE CAUSED TO BE PERFORMED BY IT
HEREUNDER.

         3.5      Delegation of Duty. In the performance of their respective
obligations under this Agreement, Weatherford and its Affiliates may act
directly or through agents, counsel (in-house or outside) or other persons, may
delegate the performance of functions and may consult with agents, counsel
(in-house or outside) and other persons. None of Weatherford or any of its
Affiliates will be liable for the default or misconduct of any persons employed,
consulted or engaged thereby. Weatherford and its Affiliates will be entitled to
conclusively rely for all purposes upon any notice, document, correspondence,
request or directive received by it from Grant Prideco, or any officer or
director of Grant Prideco, and shall not be obligated to inquire (a) as to the
authority or power of any person executing or presenting any such notice,
document, correspondence, request or directive, or (b) as to the truthfulness of
any statements set forth therein.

                                   ARTICLE IV
                                 MISCELLANEOUS

         4.1      Audit Right. Upon reasonable prior written request, Grant
Prideco shall have the right to audit Weatherford's calculations, and schedules
thereto, of the costs and expenses for the services provided hereunder. Upon the
request of Grant Prideco, Weatherford shall provide Grant Prideco with copies of
invoices relating to any third party costs and expenses relating to the
Services.

         4.2      Complete Agreement; Amendment. This Agreement, including the
Annexes and other writings referred to herein or delivered pursuant hereto,
constitutes the entire agreement between Weatherford and Grant Prideco with
respect to the subject matter hereof and supersedes all other agreements,
representations, warranties, statements, promises and understandings, whether
oral or written, with respect to the subject matter hereof. This Agreement may
not be amended, altered or modified except by a writing signed by duly
authorized officers of Weatherford and Grant Prideco.

         4.3      NOTICES. All notices under this Agreement must be in writing
and delivered by personal service; certified or registered mail, postage
prepaid, return receipt requested; nationally-recognized overnight courier,
courier charges prepaid; or facsimile transmission

                                       5
<PAGE>   7

(followed by telephone confirmation of receipt), to Weatherford or Grant
Prideco, as applicable, at the addresses herein set forth.

                  The addresses for notices are as follows:

                           Weatherford International, Inc.
                           515 Post Oak Boulevard, Suite 600
                           Houston, Texas  77027
                           Attention:    General Counsel
                           Facsimile:    (713) 693-4484
                           Confirm:      (713) 693-4102

                           Grant Prideco, Inc.
                           1450 Lake Robbins Dr., Suite 600
                           The Woodlands, Texas  77380
                           Attention:    President
                           Facsimile:    (281) 297-8569
                           Confirm:      (281) 297-8500

                           With a copy to:

                           Fulbright & Jaworski L.L.P.
                           1301 McKinney, Suite 5100
                           Houston, Texas  77010-3095
                           Attention:    Charles L. Strauss
                           Facsimile:    (713) 651-5246
                           Confirm:      (713) 651-5535

All notices, demands and requests will be effective upon actual receipt or, in
the case of delivery by facsimile transmission, the completion of such
transmission during the normal business hours of the recipient. Rejection or
other refusal to accept or the inability to deliver because of changed address
of which no notice was given as provided herein will be deemed to be receipt of
the notice, demand or request sent. By giving to the other party at least 10
Business Days' written notice thereof, a party and its respective permitted
successors and permitted assigns will have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
for notices and each will have the right to specify as its address for notices
any other address within the United States of America.

         4.4      SEVERABILITY. Any provision hereof that is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction.

         4.5      ASSIGNMENT; OTHER BENEFITS. This Agreement will be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors and

                                       6
<PAGE>   8

permitted assigns. Neither party to this Agreement may assign its rights under
this Agreement without the prior written consent of the other party; provided,
however, Weatherford may assign any of its rights and obligations under this
Agreement to any Weatherford Affiliate, of which Weatherford beneficially owns
or controls at least 50% of the equity or other interests of such Affiliate,
without the consent of Grant Prideco.

         4.6      GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with, the internal laws of the State of Texas, without
reference to or the application of the rules of conflicts of laws set forth in
such laws.

         4.7      WAIVER. No consent or waiver, express or implied, by a party
hereto to or of any breach or default by the other party hereto in the
performance by such other party of its obligations hereunder will be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other party of the same or any other obligations of such
other party hereunder. Failure on the part of a party to complain of any act or
failure to act of the other party or to declare the other party in default,
irrespective of how long such failure continues, will not constitute a waiver by
such party of its rights hereunder. The giving of consent by a party in any one
instance will not limit or waive the necessity to obtain such party's consent in
any future instance.

         4.8      TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, will include all other
genders; and the singular will include the plural and vice versa. The headings
of the Articles and Sections of this Agreement are included for convenience only
and will not be deemed to constitute part of this Agreement or to affect the
construction hereof or thereof.

         4.9      FORCE MAJEURE. Except for the obligation of Grant Prideco to
make payments hereunder when due and the indemnification obligations arising
hereunder, neither party shall be liable for delays in performance or for
non-performance, directly occasioned or caused by Force Majeure. Force Majeure
means any event beyond the reasonable control of the party claiming to be
affected thereby, including, without limitation, acts of God, storms, floods,
war, fire, strikes, lockouts or differences with workers, acts of the public
enemy, insurrections, riots or rules or regulations of any Governmental
Authority asserting jurisdiction or control, compliance with which makes
continuance of operations impossible. Inability of either party to secure funds
shall not be regarded as Force Majeure. Upon the occurrence of Force Majeure,
the party affected shall give prompt notice thereof to the other party and
shall, at its cost and expense, do all things reasonable to remove or mitigate
its effect.

         4.10     COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will for all purposes be deemed an original, but all
of which together will constitute one and the same agreement.

         4.11     FURTHER ASSURANCES. Each party hereto agrees to do all acts
and things and to make, execute and deliver such written instruments, as will
from time to time be reasonably required to carry out the terms and provisions
of this Agreement.

                                       7
<PAGE>   9

         4.12     ARBITRATION. The parties hereto agree that any claim arising
out of or related to this Agreement shall be governed by the dispute resolution,
arbitration and choice of forum provisions set forth in Section 8.3 of the
Distribution Agreement.

                                       8
<PAGE>   10

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth in the introduction to this Agreement.

                               WEATHERFORD INTERNATIONAL, INC.

                               By:
                                   -------------------------------------------
                                               Curtis W. Huff
                                   Executive Vice President, Chief Financial
                                    Officer,  General Counsel and Secretary

                               GRANT PRIDECO, INC.

                               By:
                                  --------------------------------------------
                                                  John C. Coble
                                                   President

                                       9
<PAGE>   11

                                                                         ANNEX A

                                TREASURY SERVICES

Letters of Credit

Weatherford Treasury will continue to maintain certain letters of credit that
are outstanding as of the date of this Agreement, a list of which is attached
hereto. As such letters of credit are required to be renewed, Grant Prideco
shall be required to cause replacement letters of credit to be issued; provided,
however, if the circumstances under which the letters of credit were initially
issued prohibit Weatherford or Grant Prideco from having a replacement letter of
credit issued, Weatherford shall cause such letters of credit to be renewed at
Grant Prideco's sole expense. Grant Prideco also shall cause there to be issued
to Weatherford within 90 days following the Closing Date a letter of credit from
a financial institution acceptable to Weatherford backing up any liability that
Weatherford may have with respect to any letter of credit issued by Weatherford
or any of its affiliates for Grant Prideco or any of its affiliates.

Guarantees

There are certain guarantees outstanding as of the date of this Agreement, a
list of which is attached hereto. As such leases with underlying guarantees are
required to be renewed, Grant Prideco shall be required to cause a replacement
guarantee to be issued, except for the SGD 6,500,000 line of credit in the name
of Grant Prideco (Singapore) Pte. Ltd. with Standard Chartered Bank, in which
Weatherford will release its guarantee not sooner than 60 days following the
Closing Date.

Miscellaneous

Other miscellaneous treasury services historically provided by Weatherford on
behalf of Grant Prideco that may be reasonably requested by Grant Prideco and
not unduly burdensome on Weatherford.

                                      A-1

<PAGE>   12

                                                                         ANNEX B

                     INSURANCE AND RISK MANAGEMENT SERVICES

Medical Insurance

Weatherford will continue to administer all medical claims relating to employees
of Grant Prideco that are for periods prior to the Closing Date and that are
covered under Weatherford's existing medical insurance program. All losses,
costs, fees and expenses relating to such claims, including the costs of
extending any of such coverage, and Weatherford's administration thereof shall
be the sole responsibility of Grant Prideco.

Risk Management

1.       Weatherford will continue to administer all claims relating to Grant
Prideco that are for periods prior to the Closing Date and that are covered
under Weatherford's existing insurance program. All losses, costs, fees and
expenses relating to such claims and Weatherford's administration thereof shall
be the sole responsibility of Grant Prideco.

2.       Grant Prideco also will be responsible for any shortfalls under the
current Weatherford insurance allocation method. Under such method, all
Weatherford entities receive an allocation based on their actual exposures and
historical loss experience. The insurance allocation represents the cost of the
actual insurance premiums and an estimate of losses that fall within
Weatherford's self-insured retentions and deductibles (Workers Compensation,
Auto Liability, Property and General Liability).

Actual insurance premiums are allocated on a pro-rata basis based on each unit's
percentage of total revenue, payroll, auto counts and property values. For
example, if a particular unit has 10% of all vehicles, the unit will pay 10% of
the auto liability premium. Estimated losses for a particular unit are allocated
on a formula basis outlined below:

         1.       Through a modeling process, losses are estimated for the
insurance year that will fall within Weatherford's deductibles and self-insured
retentions.

         2.       Total Weatherford losses are calculated for the prior
three-year period.

         3.       Each unit's losses are calculated for the same three-year
period (limited to $100,000 per loss).

         4.       Each unit's losses are calculated as a percentage of the total
three-year loss totals.

         5.       Each unit's percentage of losses is then applied against the
estimated losses establishing the unit's loss allocation for the coming
insurance year.

                                      B-1
<PAGE>   13

Miscellaneous

Other miscellaneous insurance and risk management services historically provided
by Weatherford on behalf of Grant Prideco that may be reasonably requested by
Grant Prideco and not unduly burdensome on Weatherford.

                                      B-2
<PAGE>   14

                                                                         ANNEX C

                     MANAGEMENT INFORMATION SYSTEMS SERVICES

Miscellaneous management information systems services historically provided by
Weatherford on behalf of Grant Prideco that may be reasonably requested by Grant
Prideco and not unduly burdensome on Weatherford.

Participation by Grant Prideco employees in software and other information
system training offered in the ordinary course to Weatherford's employees and
its affiliates' employees.

Network access in foreign locations where such access is being provided as of
the date of this Agreement and Grant Prideco has not yet obtained its own
independent network capability.

                                      C-1

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