Exhibit 10.5


 


 


 


 


 


 


Form
of


SHAREHOLDERS
AGREEMENT


 


 


 


 


 


 


 






 


Dated as of August 15, 2006


 










 















 


	
  ARTICLE 1

  	
   

  	
  DEFINITIONS

  	
   

  	
  1

  
	
  ARTICLE 2

  	
   

  	
  MANAGEMENT OF THE
  COMPANY

  	
   

  	
  4

  
	
  2.1

  	
   

  	
  Initial Capitalization

  	
   

  	
  4

  
	
  2.2

  	
   

  	
  Company Board
  Representation

  	
   

  	
  4

  
	
  2.3

  	
   

  	
  Removal and Vacancies

  	
   

  	
  4

  
	
  2.4

  	
   

  	
  Voting of Shares

  	
   

  	
  4

  
	
  2.5

  	
   

  	
  Quorum

  	
   

  	
  4

  
	
  2.6

  	
   

  	
  Board Actions

  	
   

  	
  5

  
	
  2.7

  	
   

  	
  Costs and Expenses

  	
   

  	
  5

  
	
  ARTICLE 3

  	
   

  	
  BOARD APPROVAL OF
  CERTAIN ACTIONS

  	
   

  	
  5

  
	
  3.1

  	
   

  	
  Board Approval

  	
   

  	
  5

  
	
  ARTICLE 4

  	
   

  	
  TRANSFER RESTRICTIONS

  	
   

  	
  6

  
	
  4.1

  	
   

  	
  Restrictions on
  Transfer

  	
   

  	
  6

  
	
  4.2

  	
   

  	
  Restrictive Legends

  	
   

  	
  6

  
	
  4.3

  	
   

  	
  Transfer and Exchange

  	
   

  	
  7

  
	
  4.4

  	
   

  	
  Replacement Shares

  	
   

  	
  7

  
	
  ARTICLE 5

  	
   

  	
  COVENANTS

  	
   

  	
  7

  
	
  5.1

  	
   

  	
  Delivery of Financial
  Statements

  	
   

  	
  7

  
	
  5.2

  	
   

  	
  Compliance

  	
   

  	
  8

  
	
  5.3

  	
   

  	
  Inspection

  	
   

  	
  8

  
	
  5.4

  	
   

  	
  Confidentiality

  	
   

  	
  8

  
	
  ARTICLE 6

  	
   

  	
  TERMINATION

  	
   

  	
  9

  
	
  ARTICLE 7

  	
   

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  	
  9

  
	
  7.1

  	
   

  	
  Due Organization and
  Good Standing

  	
   

  	
  9

  
	
  7.2

  	
   

  	
  Authority Relative to
  this Agreement

  	
   

  	
  9

  
	
  7.3

  	
   

  	
  No Conflict

  	
   

  	
  9

  
	
  7.4

  	
   

  	
  Ownership of Shares

  	
   

  	
  10

  
	
  ARTICLE 8

  	
   

  	
  COMMERCIAL MATTERS

  	
   

  	
  10

  
	
  8.1

  	
   

  	
  Marketing Agreement

  	
   

  	
  10

  
	
  8.2

  	
   

  	
  Profit Distribution

  	
   

  	
  10

  
	
  8.3

  	
   

  	
  Commercial Arrangements with LST and Other Third Parties

  	
   

  	
  10

  



 



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  ARTICLE 9

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  10

  
	
  9.1

  	
   

  	
  Notices

  	
   

  	
  10

  
	
  9.2

  	
   

  	
  Parties in Interest

  	
   

  	
  11

  
	
  9.3

  	
   

  	
  Entire Agreement

  	
   

  	
  11

  
	
  9.4

  	
   

  	
  Severability

  	
   

  	
  11

  
	
  9.5

  	
   

  	
  Governing Law

  	
   

  	
  12

  
	
  9.6

  	
   

  	
  Arbitration and
  Attorney Fees

  	
   

  	
  12

  
	
  9.7

  	
   

  	
  Compliance with
  Anti-Money Laundering Laws

  	
   

  	
  12

  
	
  9.8

  	
   

  	
  Compliance with Foreign
  Corrupt Practices Law

  	
   

  	
  12

  
	
  9.9

  	
   

  	
  Amendment; Waiver

  	
   

  	
  13

  
	
  9.10

  	
   

  	
  No Deemed Waivers

  	
   

  	
  13

  
	
  9.11

  	
   

  	
  Date for any Action

  	
   

  	
  13

  
	
  9.12

  	
   

  	
  Headings

  	
   

  	
  13

  
	
  9.13

  	
   

  	
  Interpretation

  	
   

  	
  13

  
	
  9.14

  	
   

  	
  Counterparts

  	
   

  	
  13

  
	
  9.15

  	
   

  	
  Conflicts Between
  Different Translations

  	
   

  	
  13

  
	
  EXHIBIT A OWNERSHIP OF
  SHARES

  	
   

  	
   

  
	
  EXHIBIT B APPLICABLE
  MARGIN SPLIT

  	
   

  	
   

  
	
  EXHIBIT C SALE,
  MARKETING AND SUPPLY AGREEMENT

  	
   

  	
   

  
	
  EXHIBIT D MEMORANDUM &
  ARTICLES OF ASSOCIATION

  	
   

  	
   

  



 


 



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SHAREHOLDERS AGREEMENT


THIS SHAREHOLDERS AGREEMENT, dated as of August 15, 2006,
is entered into by and between Star China Ltd., a legally established and lawfully existing corporation under the Laws
of the Cayman Islands (“LST”), and Hunan Valin Steel Tube &
Wire Co., Ltd., a joint stock company organized and existing under the Laws of
the People’s Republic of China (“VTW”).


WHEREAS, in connection with the formation of the JV
Company (as defined below), LST or one of its Affiliates, including but not
limited to Lone Star Technologies (as defined below), and VTW shall establish a company limited by shares incorporated and
existing under the laws of the Cayman Islands, the name of which shall be
agreed to between the Shareholders (together with its successors, the “Company”);
and


WHEREAS, upon the establishment of the Company, the
Shareholders hereby agree to be bound by the terms and conditions of this
Agreement, to cause the Company to become a party to this Agreement and that
this Agreement shall be the Shareholders Agreement of the Company.


NOW THEREFORE, in consideration of the premises,
mutual covenants and agreements hereinafter contained and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:


ARTICLE 1



DEFINITIONS


“Affiliate” means any company or enterprise
which is directly or indirectly controlled by, under common control with or
controlling a party, and its officers, directors, managers, and employees.  The term “control” shall mean the holding of
more than fifty percent (50%) equity interests or of the power to appoint the
majority of directors.


“Agreement” means this Shareholders Agreement,
as the same may be amended from time to time and, where applicable, the
Exhibits attached hereto.


“API” means the American Petroleum Institute.


“Applicable Anti-Bribery Laws” shall have the
meaning set forth in Section 10.8.


“Applicable Margin Split” shall have the
meaning set forth in Exhibit B.


“ASTM” means the American Society for Testing
and Materials.


“Business Day” means any day except a Saturday,
Sunday or any other day on which banking institutions in New York, New York,
the Cayman Islands, or the People’s Republic of China are authorized or
required by Law to close.



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“China” or “PRC” means the People’s
Republic of China, for purpose of this Agreement only, excluding Hong Kong
Special Administrative Region, Macau Special Administrative Region and Taiwan.


“Commission” means the United States Securities
and Exchange Commission or any successor agency.


“Company” shall have the meaning set forth in
the introductory paragraph hereof.


“Company Board” means the Board of Directors of
the Company as nominated and elected from time to time in accordance with this
Agreement.


“Company Directors” means the LST Directors and
the VTW Directors.


“Confidential Information” shall have the
meaning set forth in Section 6.4.


“Contributed Capital” means all consideration
paid or delivered by any Shareholder in exchange for the issuance of any
Shares.


“Dispute” shall have the meaning set forth in Section
10.6.


“Effective Date” shall be the date that this
Agreement shall be approved by the relevant authorities of the PRC.


“FCPA” shall have the meaning set forth in Section
10.8.


“GAAP” means generally accepted accounting
principles in the United States, or in China, as the case may be.


“Governmental Authority” means any foreign,
federal, state, local or other governmental or quasi-governmental authority or
regulatory body or stock exchange or listing authority.


“Hong Kong” shall have the meaning set forth in
Section 10.5.


“ICC Rules” shall have the meaning set forth in
Section 10.6.


“including” means including, without
limitation.


“JV Company” means
Hengyang Valin MPM Co., Ltd., a Sino-foreign equity joint venture formed
pursuant to the terms of the JV Contract.


“JV Contract” means the Joint Venture Contract
of Hengyang Valin MPM Co., Ltd. between LST and Hengyang Valin Steel Tube Co.,
Ltd. dated August 15, 2006.


“Law” or “Laws” means all statutes,
codes, constitutions, ordinances, regulations, statutory rules, published
policies, published guidelines and terms and conditions of any grant of
approval, permission, authority or license of any Governmental Authority, and
the term “applicable” with respect to such Laws, and in the context that refers
to one or more Persons, 



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means that such Laws apply to such Person or Persons
or its or their business, undertaking, property or securities and emanate from
a Governmental Authority having jurisdiction over the Person or Persons or its
or their business, undertaking, property or securities.  Unless specified otherwise, reference in this
Agreement to any Law refers to that Law as it may be amended from time to time,
or to any restated or successor legislation of comparable effect.


“Line Pipe” means finished or unfinished line
pipe manufactured by the JV Company or its Subsidiaries based upon, at a
minimum, the latest version of the standards promulgated by the API and/or the
ASTM.


“Lone
Star Technologies” means Lone Star Technologies, Inc., a Delaware
corporation.


“LST” shall have the meaning set forth in the
introductory paragraph hereof.


“LST Directors” shall have the meaning set
forth in Section 3.1(a).


“Marketing Agreement” shall mean the Sale,
Marketing and Supply Agreement between the Company, Lone Star Technologies, the
JV Company and VTW, in substantially the form attached hereto as Exhibit C.


“Oil Country Tubular Goods” means
casing, tubing, drill pipe, semi-finished and unfinished green tubes, coupling
stock and finished couplings manufactured by the JV Company or its Subsidiaries
based upon, at a minimum, the latest version of the standards promulgated by
the API and/or the ASTM.


“Permitted Transfer” shall have the meaning set
forth in Section 5.1.


“Person” means any individual, firm,
partnership, joint venture, venture capital fund, association, trust, trustee,
executor, administrator, legal personal representative, estate, group,
corporate body (including a limited liability company and an unlimited
liability company), corporation, unincorporated association or organization,
Governmental Authority, syndicate or other entity, whether or not having legal
status.


“Policies”
shall have the meaning set forth in Section 6.2.


“Preferred Return Period” shall have the
meaning set forth in Section 9.2.


“Price Adjustment” means an adjustment to the
price or imputed price of the Tubular Products, sold by the JV Company to the
Company that is required by the Tax Authorities.


“Representatives” shall have the meaning set
forth in Section 6.4.


“Shareholder” or “Shareholders” means
LST and VTW, individually or together, as applicable, and their respective
permitted successors and other legal representatives and their permitted
assigns and transferees.


“Shares” means the shares of the Company issued
and outstanding from time to time.


“Specialty Tubing” means mechanical and
pressure tubes, cold drawn and hot finished tubes, shells for redraw and other
boiler tubes manufactured by the JV Company or its 



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Subsidiaries based upon, at a minimum, the latest
version of the standards promulgated by the API and/or the ASTM.


“Subsidiary” of any Person means a subsidiary in which such Person owns
more than 50% equity interest.


“Tax Authorities” means the PRC tax authorities
having the power to tax the JV Company in accordance with the then applicable
PRC tax laws, rules or practies.


“Territory” means North America (Canada, the
United States of America and Mexico, which includes any offshore drilling
within the territorial waters of such countries) and any other countries that
LST and VTW mutually agree to include.


“Transfer” shall have the meaning set forth in Section 5.1.


“Tubular Products” means Line Pipe, Oil Country
Tubular Goods, Specialty Tubing and/or all other tubular products manufactured
by the JV Company or its Subsidiaries.


“VTW” shall have the meaning set forth in the
introductory paragraph hereof.


“VTW Directors” shall have the meaning set
forth in Section 3.1(b).


ARTICLE 2


CAPITALIZATION


2.1           Incorporation.  LST and VTW shall establish the Company
pursuant to this Agreement no later than the Funding Date (as defined in the JV
Contract). The form of the Memorandum and Articles of Association of the
Company is attached hereto as Exhibit D.


2.2           Initial
Capitalization.  The
Company has authorized capital of US$30,000,000, divided into 30,000,000 shares
with par value of US$1.00 each (the “Ordinary Shares”).  Each of LST and VTW shall initially subscribe
for Fifteen Million (15,000,000) Ordinary Shares for an aggregate consideration
of US$15 million each.


ARTICLE 3



MANAGEMENT OF THE COMPANY


3.1           Company Board Representation.  The Company Board shall at all times consist
of six (6) members who shall be nominated as follows:


(a)           three (3) individuals as may be designated
from time to time in writing by LST (the “LST Directors”); and


(b)           three (3) individuals as may be designated
from time to time in writing by VTW (the ”VTW Directors”).


3.2           Removal and Vacancies.  Any director elected in accordance with this Article 3
shall, and may only, be removed from office upon the written request of the
Shareholder entitled to nominate such director. 
In the case of any vacancy in the office of a director, by death,
resignation, removal or otherwise, only the Shareholder entitled to nominate
such director shall be entitled to nominate a successor to hold office for the
unexpired term of the director whose place shall be vacant.



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3.3           Voting of Shares.  Each Shareholder shall, at any time it is
then entitled to vote for the election of directors to the Company Board, vote
all of its Shares, by proxy, written consent or at a meeting of shareholders,
as the case may be, and take all other necessary action (including causing the
Company to call a special meeting of shareholders if necessary) in order to
give effect to the provisions in this Article 3 and to ensure that
the Memorandum & Articles of Association of the Company as in effect
immediately following the Effective Date do not, at any time thereafter,
conflict in any respect with the provisions of this Agreement.


3.4           Quorum.   The presence of at least a majority of the
members of the Company Board and at least a majority of each of the LST
Directors and VTW Directors shall be required to constitute a quorum at any
meeting of the Company Board.  A quorum
must exist at all times during any meeting of the Company Board, including the
reconvening of a meeting adjourned, in order for any action taken at such
meeting to be valid.


3.5           Board Actions.  Unless the act of a greater number is
required by Law or the Memorandum & Articles of Association of the Company,
or this Agreement, the act of a majority of the Company Directors present at a
meeting at which a quorum is in attendance shall be the act of the Company
Board.  In the case of an equality of
votes, the chairman, which shall be appointed by LST, shall have a second or
casting vote (which vote shall be consistent with his prior vote).


3.6           Costs and Expenses.  The Company will pay all reasonable
out-of-pocket expenses incurred by the Company Directors in connection with
their participation in meetings of the Company Board and any committees of such
boards.


3.7           Management.


(a)           The Company’s Chief Executive Officer
(the “CEO”) and Chief Financial Officer (the “CFO”) shall be recruited by the
Company Board from suitable candidates in the same industry, and the final
candidates for such positions shall be approved by the Company Board pursuant
to Section 4.1.


(b)           VTW shall be entitled to appoint one
person with competent language capability and international trade skills to
serve in a non-executive senior managerial position at the Company to better
understand major business decisions to be made by CEO and CFO, and shall assist
in the coordination of the sale relationship with the JV Company and who shall
report to the CEO of the Company.


ARTICLE 4



BOARD
APPROVAL OF CERTAIN ACTIONS


4.1           Board Approval.  After the date hereof, the Company will not,
and will not permit any of its Subsidiaries to, take any of the following
actions without the affirmative vote of at least the majority of each of the
VTW Directors and the LST Directors in favor of such action:



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(a)           approval of the annual operating plan
of the Company and/or any of its Subsidiaries; provided, that if the Company
Board is not able to agree on an acceptable operating plan, the Company shall,
and shall procure its Subsidiaries to, utilize its prior year operating plan
with no changes to the Company’s and its Subsidiaries’ business strategy;


(b)           acquisitions of, or investments in,
businesses (or part thereof) by the Company or its Subsidiaries (whether
through the purchase of assets, shares or other securities or by merger,
consolidation or amalgamation);


(c)           unless otherwise set forth in the
then-current annual operating plan, dispositions of any business or investment
(or part thereof) by the Company or its Subsidiaries (whether through the sale
of assets, shares or other securities or by merger, consolidation or
amalgamation);


(d)           any material change in the nature of
the business of the Company’s Subsidiaries;


(e)           approval of any transactions to be
entered into by the Company with LST, VTW, or any Affiliate of LST or VTW;


(f)            the creation, issuance, or
authorization (by reclassification or otherwise) of any class or series of
shares in the Company, or any additional securities exercisable, convertible or
exchangeable for any shares in the Company, or the sale of any shares on which
the Company has a lien pursuant to Article 14 of the Memorandum and Articles of
Association, or issue or redeem redeemable shares pursuant to Article 43 of the
Memorandum and Articles of Association;


(g)           the merger, amalgamation or
consolidation (or other similar transaction) of the Company or any Subsidiary
with any party;


(h)           any filing for any bankruptcy,
voluntary dissolution, winding-up, liquidation, recapitalization,
reorganization, split-up or spin-off, with respect to any Subsidiary;


(i)            any appointment or dismissal of the
outside independent auditors of the Company or any Subsidiary;


(j)            any material change to the Company’s
or any Subsidiary’s accounting policies, practices, methods or principles that
is not (i) required by applicable Governmental Authorities, (ii) otherwise
required to comply with applicable Law, or (iii) required due to changes in United States
or Chinese GAAP;


(k)           entry into any indebtedness or
assumption of any financial obligation, or otherwise the issuance, assumption,
guarantee or creation of any liability for borrowed money, that individually or
in the aggregate results in a deviation of more than 10% from the planned
amounts for incurrence of indebtedness set forth in the then-current annual
operating plan;



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(l)            any capital expenditure or any
purchase of intangible assets that results, individually or in the aggregate,
in a deviation of more than 10% from the planned capital expenditure or planned
purchase of intangible assets set forth in the annual operating plan; and


(m)          any actual change in expenditures that
results in a deviation of more than 10% from the planned expenditures set forth
in the annual operating plan.


(n)           the establishment of any Subsidiary
from the date hereof.


(o)           distribution of Net Sales Profits in
terms of dividends, provided however that the VTW Directors and the LST
Directors attending the meeting shall cast affirmative votes approving such
distribution if the distribution is made in accordance with Section 9.2 hereof.


(p)           the appointment of the CEO and CFO of
the Company, provided however that VTW Directors attending the meeting shall
cast affirmative votes for the CEO and/or CFO candidate(s) recommended by the
LST Directors if the VTW Directors do not recommend suitable or comparable
candidates for the Board to consider.


(q)           the purchase of Tubular Products by
the Company from areas outside the PRC and the expansion into other business
activities.


ARTICLE 5



TRANSFER RESTRICTIONS


5.1           Restrictions on Transfer.  No Shareholder shall sell, transfer, assign,
pledge, convey or otherwise dispose of, including by operation of Law or by
gift (collectively, “Transfer”), any Shares held by it, except that a
Shareholder may Transfer all of the Shares held by it in connection with a
Transfer of all of such Shareholder’s interest in the JV Company in accordance
with the terms of the JV Contract (a “Permitted Transfer”).  Any Shareholder proposing to undertake a
Permitted Transfer shall provide written notice to the Company and each other
Shareholder at least thirty (30) Business Days prior to effecting
such Permitted Transfer.  Such notice
shall state the amount of Shares to be Transferred, identify the direct and
beneficial holders of such Shares and provide the name(s) of the proposed
transferee(s).


5.2           Restrictive Legends.  Each Share held by a Shareholder, and each
Share issued to any subsequent transferee of such, shall be stamped or
otherwise imprinted with a legend in substantially the following form:


THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO RESTRICTIONS ON TRANSFER, VOTING AND OTHER TERMS AND CONDITIONS SET FORTH IN
A SHAREHOLDERS AGREEMENT, AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME, A
COPY OF WHICH MAY BE OBTAINED FROM [THE COMPANY] AT ITS PRINCIPAL EXECUTIVE
OFFICES.



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5.3           Transfer and Exchange.  Upon the consummation of any Transfer in
accordance with this Article 5, a transferring Shareholder may
present its Shares to the Company with a request to register or reflect the
Transfer of such Shares and the Company shall register or reflect such
Transfer; provided, however, that the Shares surrendered for
transfer shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company, duly executed by the
Shareholder thereof or its attorney who has been duly authorized in
writing.  No service charge shall be made
for any registration of Transfer, but the Company may require payment of a sum
sufficient to cover any transfer tax or similar charge of any Governmental
Authority in connection therewith.


5.4           Replacement Shares.  If a mutilated Share is surrendered to the
Company or if a Shareholder claims and submits an affidavit or other evidence,
satisfactory to the Company, to the effect that a Share has been lost,
destroyed or wrongfully taken, the Company shall issue a replacement Share if
the Company’s reasonable requirements are met. 
If required by the Company, such Shareholder must provide an indemnity
bond, or other form of indemnity, sufficient in the judgment of the Company to
protect the Company against any loss which may be suffered.  The Company may charge such Shareholder for
its reasonable out-of-pocket expenses in replacing a Share which has been
mutilated, lost, destroyed or wrongfully taken.


ARTICLE 6



COVENANTS


6.1           Delivery of Financial Statements.  The Company shall deliver to each of LST and
VTW the following:


(a)           as soon as practicable, but in any
event within twenty-one (21) days after the end of each fiscal
year of the Company, (i) an income statement of the Company for such fiscal
year, (ii) a balance sheet and statement of shareholders’ equity for the
Company as of the end of such year and (iii) a statement of cash flows for the
Company for such year, in each case in reasonable detail and prepared in
accordance with United States GAAP and separate version converted into Chinese GAAP,
and audited and certified by independent public accountants selected by the
Company and approved by the Shareholders;


(b)           as soon as practicable, but in
any event within seven (7) days after the end of each of the first three (3)
quarters of each fiscal year of the Company, (i) an unaudited income statement
of the Company for such fiscal quarter, (ii) an unaudited balance sheet and
statement of shareholders’ equity for the Company as of the end of such fiscal
quarter and (iii) an unaudited statement of cash flows for the Company for such
fiscal quarter, in each case prepared in accordance with US GAAP and a separate
version converted into Chinese GAAP together with comparisons to the same
period in the prior fiscal year and the operating plan of the Company;


(c)           as soon as practicable, but in
any event at least thirty (30) days prior to the end of each fiscal year of the
Company, an annual operating plan of the Company for the succeeding fiscal
year; and



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(d)           such other information (including non-financial
information) as either VTW or LST may
reasonably request from time to time.


6.2           Compliance.


(a)           Each Shareholder acknowledges that Lone Star Technologies,
the ultimate parent corporation of LST, will be required to consolidate the
financial results of the Company and its Subsidiaries with its own financial
results and will be required to ensure that the Company and each of its
Subsidiaries is operated in accordance with the laws and regulations that are
applicable to companies that are publicly traded in the United States of
America.  Each Shareholder shall cause
the Company and its Subsidiaries to implement, monitor and maintain compliance
with all policies, procedures and controls that Lone Star Technologies requires
of its other subsidiaries (the “Policies”).  Such Policies shall include, but may not be
limited to, internal and financial controls for compliance with (i) the
Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder
(ii) all of the applicable rules and regulations promulgated by the Commission
and (iii) Lone Star Technologies’ code of conduct and other financial,
treasury, legal, compliance and accounting policies (including United States GAAP).


(b)           Each Shareholder acknowledges that VTW will be required to consolidate the financial results of the Company and
its Subsidiaries with VTW’s own financial results
and will be required to ensure that the Company and each of its Subsidiaries is
operated in accordance with the laws and regulations that are applicable to
subsidiaries of companies that are publicly traded in China.  Each Shareholder shall cause the
Company and its Subsidiaries to implement, monitor and maintain compliance with
all policies, procedures and controls that VTW requires of its other
subsidiaries, which shall include, but may not limited to,
internal and financial controls for compliance with (i) all of the applicable rules
and regulations promulgated by China Securities Regulatory Commission, and (ii)
VTW’s code of conduct and other financial, treasury, legal, compliance and
accounting policies (including PRC GAAP).


6.3           Inspection.  The Company shall, and shall cause its
Subsidiaries to, permit each Shareholder, at such Shareholders’ expense, to
visit and inspect the Company’s and its Subsidiaries’ properties, to examine
its and their books of account and records and to discuss its and their
affairs, finances and accounts with its and their officers, all at such
reasonable times as may be requested by the Shareholder upon reasonable advance
notice to the Company.


6.4           Confidentiality.  The Company and the Shareholders hereby
agree, and agree to cause their respective officers, directors, employees,
advisors, agents and representatives to which they provide Confidential
Information (as defined below) (collectively, the “Representatives”), to
keep the terms of this Agreement and all information (together, the “Confidential
Information”) received by them in connection with this Agreement and in
their course of dealing during the term of this Agreement (regardless of the
manner in which the information is furnished and together with any analyses,
compilations, studies or other documents or files, whether in paper or
electronic form, containing or otherwise reflecting, or that were generated
from, such information) confidential and agree not to, in any manner, either
directly or indirectly, divulge, disclose or communicate to any Person, other
than their respective 



 9
 






 



 


Representatives, any Confidential Information or utilize
such information for any purpose other than monitoring the Shareholder’s
investment in the Company.  For purposes
of this Section 6.4, “Confidential Information” shall not include
information which was or becomes generally available to the public, other than
as a result of a violation of this Section 6.4.  The provisions of this Section 6.4
shall not prohibit the disclosure of Confidential Information by the Company or
any Shareholder to the extent required by any Governmental Authority or by
Law.  If the Company or any Shareholder
receives such a demand for disclosure: (i) such party shall give written notice
thereof to the Company and each Shareholder as promptly as is reasonably
practicable after such party learns of any such demand, (ii) such party agrees
to cooperate with the Company and the Shareholders to prevent or limit such
disclosure and (iii) such party agrees to only disclose that amount of
Confidential Information that is expressly required to be disclosed.


6.5           Confidentiality Agreement. The
employees of the Company shall, as a condition to employment by the Company,
execute an agreement in form and substance acceptable to the CEO that contains
provisions prohibiting the disclosure of confidential information, including
technology and intellectual property, obtained during the course of employment
with the Company.


ARTICLE 7



TERMINATION


This Agreement, and all of the rights and obligations
of the parties hereto set forth herein, shall terminate and be of no further
force and effect upon the Transfer of all of the Shares held by either LST or
VTW in accordance with Article 5.


ARTICLE 8



REPRESENTATIONS AND WARRANTIES


Except as otherwise specified below, as of the
Effective Date, each Shareholder represents and warrants solely with respect to
itself to each of the other Shareholders as follows:


8.1           Due Organization and Good Standing.  Such Shareholder is an entity duly organized or
formed, validly existing and in good standing under the laws of the
jurisdiction of its organization or formation.


8.2           Authority Relative to this
Agreement.  Such Shareholder has
all necessary power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.  The
execution and delivery of this Agreement by such Shareholder has been duly and validly
authorized by all requisite action and no other proceedings on its part are
necessary to authorize this Agreement. 
This Agreement has been duly and validly executed and delivered by such Shareholder and,
assuming the due authorization, execution and delivery by the other Shareholders and
the Company, constitutes a legal, valid and binding obligation of such Shareholder,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium 



 10
 






 



 


and similar laws of general applicability relating to
or affecting creditors’ rights and to general equity principles.


8.3           No Conflict.  The execution, delivery and performance by
such Shareholder
of this Agreement do not and shall not violate any applicable Law or
conflict with or constitute a default, breach or violation of the terms,
conditions or provisions of any contract, agreement or instrument to which such
Shareholder is
subject which would prevent such Shareholder from performing any of its
obligations hereunder or thereunder.


8.4           Ownership of Shares.  Such Shareholder
is the sole record owner and beneficial owner of the Shares listed
beside such Shareholder’s name
on Exhibit A hereto.


ARTICLE 9



COMMERCIAL
MATTERS


9.1           Marketing Agreement.  Each of LST and VTW shall cause the LST Directors
and the VTW Directors respectively to authorize the Company to enter into the
Marketing Agreement.


9.2           Profit Distribution.  


(a)           It is the intention of the parties that any Price
Adjustment will be disregarded for purposes of calculating distributions
hereunder during the Preferential Return Period.  The Company shall distribute the Net Sales
Profits (as defined in the Marketing Agreement) to LST and VTW in accordance
with the Applicable Margin Split attached hereto as Exhibit B until the
earlier of (i) ten (10) years from the date hereof or (ii) such time as the
aggregate of (x) dividend payments received by LST from the JV Company and (y)
dividends or other distributions declared and payable and declared and paid to
LST from the Company out of the Net Sales Profits in accordance with the
Applicable Margin Split are equal to the sum of LST’s or its Affiliate’s (i)
capital contribution in the JV Company pursuant to the Capital Increase
Agreement, (ii) investment in acquiring additional equity interest in JV
Company, if any, immediately after the Funding Date (as defined in the JV
Contract) and (ii) Contributed Capital in the Company (the “Preferred Return
Period”).  After the Preferred Return
Period, the Margin shall be split in accordance with each Shareholder’s
Contributed Capital in the Company.  To
the extent permissible under applicable laws, the Company shall declare all the
Net Sales Profits in a quarter as dividends to its Shareholders, unless the
Board determines otherwise.


(b)           During the Preferential Return Period and following a
Price Adjustment required by the Tax Authorities, the Cost Plus charged by the JV
Company shall be recalculated in accordance with the Price Adjustment as
follows: each percentage amount in the column labeled “Cost Plus (F)” on
Exhibit B hereto shall be revised to add to each percentage amount in such
column a percentage amount equal to (i) the amount of the price increase caused
by such Price Adjustment divided by (ii) the Company’s selling price to its
direct customers in effect immediately prior to the price increase. This
adjusted Cost Plus shall be applied in Exhibit B, and shall result in a
recalculation of the Net Sales Profit Margin (as defined in the Sales and
Marketing Agreement) split (as indicated in columns (B), (C), (D), (E) and
(G)); however, the distribution ratio of Net Sales Profit (as indicated in
columns (H), (I), (J) and (K)) shall be the same as before the Price
Adjustment.


9.3           Commercial
Arrangements with Lone Star Technologies and Other Third Parties.  LST and VTW shall cause the LST Directors and
the VTW Directors to authorize the Chief Executive Officer or such other
persons acting on behalf of the Company to further negotiate and enter into all
necessary agreements with Lone Star Technologies and other third party service providers
to carry out the purpose and intent of this Agreement and Marketing Agreement.


 



 11














 


ARTICLE 10



MISCELLANEOUS


10.1         Notices.  Any notices or other communications required
or permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by overnight courier, by facsimile or by registered or
certified mail, postage prepaid, return receipt requested, addressed as follows
(or at such other address as may be substituted by notice given as herein
provided):


If to LST:


c/o Lone Star Technologies,
Inc.

Attention:  General Counsel

15660 N. Dallas Pkwy., Ste. 500, 

Dallas, TX 75248, U.S.A.

Fax:   +1-972-770-6474


With copies to (which shall not constitute notice):


Weil, Gotshal & Manges LLP

200 Crescent Court, Suite 300

Dallas, Texas 75201, U.S.A.

Attention:  Mary R. Korby

Fax:   +1-214-746-7777


If to VTW:


Hunan Valin Steel
Tube & Wire Co., Ltd.


Hua Ling Tower, No. 111 Fu Rong Road (M)

Changsha Municipality, Hunan Province

People’s Republic of China

Attention:  Head of Securities Department

Facsimile No: (86)731-2245196; (86)731-4447112


Any notice or communication hereunder shall be deemed
to have been given or made (i) as of the date so delivered if delivered by hand
or international courier or (ii) when receipt is acknowledged, if delivered by
facsimile.  Failure to mail a notice or
communication to the 



 12
 






 



 


Company or any Shareholder or any defect in it shall
not affect its sufficiency with respect to other parties.


10.2         Parties in Interest.  Except as expressly set forth herein, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto and its successors and permitted assigns and transferees, and nothing in
this Agreement, express or implied, is intended to or shall confer upon any other
Person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.


10.3         Entire Agreement.  This Agreement, together with
its exhibits and schedules, constitutes the entire agreement and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties with respect to the subject matter hereof.


10.4         Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated and the parties
shall negotiate in good faith to modify the Agreement to preserve each party’s
anticipated benefits under the Agreement.


10.5         Governing Law.  This Agreement shall be governed by and
construed exclusively in accordance the internal laws of the Hong Kong Special
Administrative Region of the People’s Republic of China (“Hong Kong”)
without giving effect to any choice of law rule that would cause the
application of the laws of any jurisdiction other than the internal laws of
Hong Kong to the rights and duties of the parties hereunder.


10.6         Arbitration and Attorney Fees.  The
parties shall make every effort to settle amicably any and all disputes,
controversies and conflicts arising out of or relating to or in connection with
this Agreement, the performance or non-performance of the obligations set forth
herein (including any questions regarding its existence, validity or
termination) (a “Dispute”). 
Disputes or claims, if any, which cannot be settled amicably between the
parties, within thirty (30) days after written notice of such Dispute has been
given by one party to the other party(ies), shall be referred to and finally
resolved by arbitration in Hong Kong under the Rules of Arbitration of the
International Chamber of Commerce (“ICC Rules”) for the time being in
force.  The ICC Rules shall be deemed to
be incorporated by reference into this Section within this Agreement.  The Tribunal shall consist of one (1)
arbitrator who shall be appointed by the Chairman of the International Chamber
of Commerce.  Such arbitrator shall not
be a citizen of the United States of America or the People’s Republic of
China.  The costs of the arbitration,
including administrative and arbitrator’s fees, shall be shared equally by the
parties.  Each party shall bear the costs
of its own attorney’s fees and expert witness fees.  The arbitration proceedings shall be in both
English and Chinese and all pleadings and written evidence shall be in English
and Chinese.  The decision of the
arbitrator shall be final, binding and enforceable upon the parties and
judgment upon any award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.  In the
event that the failure of a party to this Agreement to comply with the decision
of the arbitrator requires the other party(ies) to apply to any court for
enforcement of such award, the non-complying party shall be liable to the other
party(ies) for all 



 13
 






 



 


costs of such litigation including attorneys’
fees.  The parties may apply to any court
of competent jurisdiction in accordance with this Section 10.6 for
temporary or permanent injunctive relief, without breach of this Section
10.6 or abridgement of the powers of the arbitrator.  No party shall be entitled to commence or
maintain any action in any court of law upon any matter in dispute until such
matter shall have been submitted to, and finally determined under, the dispute
resolution and arbitration procedures in this Section 10.6, and then
only for the enforcement of any arbitral award. 
Process may be served on any party in the manner set forth in this
Agreement and by such other method authorized by applicable Law or court rule.


10.7         Compliance with Anti-Money
Laundering Laws.  Each of the parties
shall comply with anti-money laundering laws, rules, and regulations of its own
jurisdiction, has established and maintains an anti-money laundering program in
accordance with laws, rules and regulations of its jurisdiction, and does not
to its knowledge have, and will cause the Company not to have, a business
relationship with any persons subject to any sanctions list.


10.8         Compliance with Foreign Corrupt
Practices Law.  Compliance with
Foreign Corrupt Practices Law.  Each of
the parties (i) acknowledges that it is aware of and familiar with the
provisions of the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”),
and its purposes and all laws, regulations, notices, decrees and decisions in
applicable jurisdictions concerning bribery issues (the “Applicable
Anti-Bribery Laws”) and (ii) agrees that it will not cause the Company not
to take any action or make any payment (including promises to take action or to
make payments) in violation of, or that might cause any other party or its
affiliates or subsidiaries to be in violation of, the FCPA, Applicable
Anti-Bribery Laws or any other applicable Laws.


10.9         Amendment; Waiver.  Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and
is signed by the Company, LST and VTW.


10.10       No Deemed Waivers.  No failure or delay on the part of the
Company or any Shareholder in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.  The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or any Shareholder at Law or in equity or otherwise.


10.11       Date for any Action.  In the event that any date on which any
action is required to be taken hereunder by the Company or the Shareholders is
not a Business Day, such action shall be required to be taken on the next
succeeding day which is a Business Day.


10.12       Headings.  The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.


10.13       Interpretation.  References to sections and articles refer to
sections and articles of this Agreement unless otherwise stated.  Unless the context otherwise requires, the
terms used herein beginning with initial capitals shall have the respective
meanings specified or referred to 



 14
 






 



 


herein and all grammatical variations of such terms
shall have corresponding meanings.  Words
importing the singular number include the plural and vice versa and words
importing gender include the masculine, feminine and neuter genders.  In the event of any conflict between general
provisions and specific provisions in this Agreement, the specific provisions shall
govern.  The words “herein,” “hereof” and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.  All references herein to “$” shall refer to
lawful money of the United States of America.


10.14       Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which taken together shall be deemed to constitute one and the same instrument.


10.15       Conflicts Between Different
Translations.  This Agreement shall
be executed in English and Chinese.  Both
languages shall be of equal effect.


10.16       Conflicts With Articles.  In the event of any discrepancy between this
Agreement and the Memorandum and Articles of Association of the Company, the
Parties hereto agree to vote for in a shareholders’ meeting, and shall take all
necessary actions relating to the amendment of the Memorandum and Articles to
conform to the relevant terms in this Agreement.


*      *      *


 


 



 15















IN WITNESS WHEREOF, the parties hereto have caused
this Shareholders Agreement to be duly executed as of the date first written
above.


	
  

  	
   

  	
  STAR CHINA LTD.:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HUNAN VALIN STEEL TUBE & WIRE CO., LTD.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  



 


 


 


[Shareholders Agreement
Signature Page]









 



 


EXHIBIT A


OWNERSHIP OF SHARES


 




	
  

  	
  Shareholder

  	
   

  	
   

  	
  Shares

  	
   

  
	
  Star China Ltd.

  	
   

  	
  15,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hunan Valin Steel Tube
  & Wire Co., Ltd.

  	
   

  	
  15,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  30,000,000

  	
   

  






 



 17
 






 



 


EXHIBIT
B


Margin
Split for the North America Market


	
  Net

  Sales

  Profit

  Margin

  (A)

  	
   

  	
  Net Sales

  Profit

  Margin

  Split to

  Buyer (B)

  	
   

  	
  Percentage

  of

  Buyer’s

  Net Sales

  Profit

  Split to

  VTW (C)

  	
   

  	
  Percentage

  of

  Buyer’s

  Net Sales

  Profit

  Split to

  LST (D)

  	
   

  	
  Net

  Sales

  Profit

  Margin

  to VTW

  Through

  Buyer

  (E)

  	
   

  	
  Cost Plus

  (F)

  	
   

  	
  Net Sales

  Profit

  Margin to

  LST

  Through

  Buyer(G)

  	
   

  	
  Net Sales

  Profit

  Margin to

  VTW

  Through

  Supplier

  and

  Buyer (H)

  	
   

  	
  Net Sales

  Profit

  Margin to

  LST

  Through

  Supplier

  and

  Buyer (I)

  	
   

  	
  All In LST

  (J)

  	
   

  	
  All In

  VTW (K)

  	
   

  
	
  5

  	
  %

  	
  5.00

  	
  %

  	
  32.61

  	
  %

  	
  67.39

  	
  %

  	
  1.63

  	
  %

  	
  0.00

  	
  %

  	
  3.37

  	
  %

  	
  1.63

  	
  %

  	
  3.37

  	
  %

  	
  67.39

  	
  %

  	
  32.61

  	
  %

  
	
  8

  	
  %

  	
  7.95

  	
  %

  	
  32.42

  	
  %

  	
  67.58

  	
  %

  	
  2.58

  	
  %

  	
  0.05

  	
  %

  	
  5.37

  	
  %

  	
  2.60

  	
  %

  	
  5.40

  	
  %

  	
  67.46

  	
  %

  	
  32.54

  	
  %

  
	
  11

  	
  %

  	
  10.74

  	
  %

  	
  32.22

  	
  %

  	
  67.78

  	
  %

  	
  3.46

  	
  %

  	
  0.26

  	
  %

  	
  7.28

  	
  %

  	
  3.60

  	
  %

  	
  7.40

  	
  %

  	
  67.28

  	
  %

  	
  32.72

  	
  %

  
	
  14

  	
  %

  	
  13.41

  	
  %

  	
  32.03

  	
  %

  	
  67.97

  	
  %

  	
  4.30

  	
  %

  	
  0.59

  	
  %

  	
  9.12

  	
  %

  	
  4.61

  	
  %

  	
  9.39

  	
  %

  	
  67.09

  	
  %

  	
  32.91

  	
  %

  
	
  17

  	
  %

  	
  15.98

  	
  %

  	
  31.84

  	
  %

  	
  68.16

  	
  %

  	
  5.09

  	
  %

  	
  1.02

  	
  %

  	
  10.89

  	
  %

  	
  5.63

  	
  %

  	
  11.37

  	
  %

  	
  66.89

  	
  %

  	
  33.11

  	
  %

  
	
  20

  	
  %

  	
  18.44

  	
  %

  	
  31.65

  	
  %

  	
  68.35

  	
  %

  	
  5.84

  	
  %

  	
  1.56

  	
  %

  	
  12.60

  	
  %

  	
  6.66

  	
  %

  	
  13.34

  	
  %

  	
  66.69

  	
  %

  	
  33.31

  	
  %

  
	
  23

  	
  %

  	
  20.79

  	
  %

  	
  31.46

  	
  %

  	
  68.54

  	
  %

  	
  6.54

  	
  %

  	
  2.21

  	
  %

  	
  14.25

  	
  %

  	
  7.71

  	
  %

  	
  15.29

  	
  %

  	
  66.48

  	
  %

  	
  33.52

  	
  %

  
	
  26

  	
  %

  	
  23.04

  	
  %

  	
  31.26

  	
  %

  	
  68.74

  	
  %

  	
  7.20

  	
  %

  	
  2.96

  	
  %

  	
  15.83

  	
  %

  	
  8.77

  	
  %

  	
  17.23

  	
  %

  	
  66.26

  	
  %

  	
  33.74

  	
  %

  
	
  29

  	
  %

  	
  25.17

  	
  %

  	
  31.07

  	
  %

  	
  68.93

  	
  %

  	
  7.82

  	
  %

  	
  3.83

  	
  %

  	
  17.35

  	
  %

  	
  9.85

  	
  %

  	
  19.15

  	
  %

  	
  66.03

  	
  %

  	
  33.97

  	
  %

  
	
  32

  	
  %

  	
  27.20

  	
  %

  	
  30.88

  	
  %

  	
  69.12

  	
  %

  	
  8.40

  	
  %

  	
  4.80

  	
  %

  	
  18.80

  	
  %

  	
  10.94

  	
  %

  	
  21.06

  	
  %

  	
  65.80

  	
  %

  	
  34.20

  	
  %

  
	
  35

  	
  %

  	
  29.90

  	
  %

  	
  31.24

  	
  %

  	
  68.76

  	
  %

  	
  9.34

  	
  %

  	
  5.10

  	
  %

  	
  20.56

  	
  %

  	
  12.04

  	
  %

  	
  22.96

  	
  %

  	
  65.59

  	
  %

  	
  34.41

  	
  %

  
	
  38

  	
  %

  	
  32.60

  	
  %

  	
  31.61

  	
  %

  	
  68.39

  	
  %

  	
  10.30

  	
  %

  	
  5.40

  	
  %

  	
  22.30

  	
  %

  	
  13.17

  	
  %

  	
  24.83

  	
  %

  	
  65.35

  	
  %

  	
  34.65

  	
  %

  
	
  41

  	
  %

  	
  35.30

  	
  %

  	
  31.97

  	
  %

  	
  68.03

  	
  %

  	
  11.29

  	
  %

  	
  5.70

  	
  %

  	
  24.01

  	
  %

  	
  14.31

  	
  %

  	
  26.69

  	
  %

  	
  65.10

  	
  %

  	
  34.90

  	
  %

  
	
  43

  	
  %

  	
  37.10

  	
  %

  	
  32.34

  	
  %

  	
  67.66

  	
  %

  	
  12.00

  	
  %

  	
  5.90

  	
  %

  	
  25.10

  	
  %

  	
  15.12

  	
  %

  	
  27.88

  	
  %

  	
  64.83

  	
  %

  	
  35.17

  	
  %

  
	
  44

  	
  %

  	
  38.00

  	
  %

  	
  32.70

  	
  %

  	
  67.30

  	
  %

  	
  12.43

  	
  %

  	
  6.00

  	
  %

  	
  25.57

  	
  %

  	
  15.61

  	
  %

  	
  28.39

  	
  %

  	
  64.53

  	
  %

  	
  35.47

  	
  %

  
	
  45

  	
  %

  	
  38.90

  	
  %

  	
  33.06

  	
  %

  	
  66.94

  	
  %

  	
  12.86

  	
  %

  	
  6.10

  	
  %

  	
  26.04

  	
  %

  	
  16.09

  	
  %

  	
  28.91

  	
  %

  	
  64.23

  	
  %

  	
  35.77

  	
  %

  
	
  46

  	
  %

  	
  39.80

  	
  %

  	
  33.43

  	
  %

  	
  66.57

  	
  %

  	
  13.30

  	
  %

  	
  6.20

  	
  %

  	
  26.50

  	
  %

  	
  16.59

  	
  %

  	
  29.41

  	
  %

  	
  63.93

  	
  %

  	
  36.07

  	
  %

  
	
  47

  	
  %

  	
  40.70

  	
  %

  	
  33.79

  	
  %

  	
  66.21

  	
  %

  	
  13.75

  	
  %

  	
  6.30

  	
  %

  	
  26.95

  	
  %

  	
  17.09

  	
  %

  	
  29.91

  	
  %

  	
  63.63

  	
  %

  	
  36.37

  	
  %

  
	
  48

  	
  %

  	
  41.60

  	
  %

  	
  34.16

  	
  %

  	
  65.84

  	
  %

  	
  14.21

  	
  %

  	
  6.40

  	
  %

  	
  27.39

  	
  %

  	
  17.60

  	
  %

  	
  30.40

  	
  %

  	
  63.33

  	
  %

  	
  36.67

  	
  %

  
	
  49

  	
  %

  	
  42.50

  	
  %

  	
  34.52

  	
  %

  	
  65.48

  	
  %

  	
  14.67

  	
  %

  	
  6.50

  	
  %

  	
  27.83

  	
  %

  	
  18.12

  	
  %

  	
  30.88

  	
  %

  	
  63.03

  	
  %

  	
  36.97

  	
  %

  
	
  50

  	
  %

  	
  43.40

  	
  %

  	
  34.88

  	
  %

  	
  65.12

  	
  %

  	
  15.14

  	
  %

  	
  6.60

  	
  %

  	
  28.26

  	
  %

  	
  18.64

  	
  %

  	
  31.36

  	
  %

  	
  62.72

  	
  %

  	
  37.28

  	
  %

  
	
  51

  	
  %

  	
  44.30

  	
  %

  	
  35.25

  	
  %

  	
  64.75

  	
  %

  	
  15.61

  	
  %

  	
  6.70

  	
  %

  	
  28.69

  	
  %

  	
  19.17

  	
  %

  	
  31.83

  	
  %

  	
  62.42

  	
  %

  	
  37.58

  	
  %

  
	
  52

  	
  %

  	
  45.20

  	
  %

  	
  35.61

  	
  %

  	
  64.39

  	
  %

  	
  16.10

  	
  %

  	
  6.80

  	
  %

  	
  29.10

  	
  %

  	
  19.70

  	
  %

  	
  32.30

  	
  %

  	
  62.11

  	
  %

  	
  37.89

  	
  %

  
	
  53

  	
  %

  	
  46.10

  	
  %

  	
  35.98

  	
  %

  	
  64.02

  	
  %

  	
  16.58

  	
  %

  	
  6.90

  	
  %

  	
  29.52

  	
  %

  	
  20.24

  	
  %

  	
  32.76

  	
  %

  	
  61.81

  	
  %

  	
  38.19

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  First Allocation to JV

  	
   

  	
  0.60

  	
  %

  	
  0.75

  	
  %

  	
  Average

  	
   

  	
  65.00

  	
  %

  	
  35.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 



 18















 


EXHIBIT
C


SALE,
MARKETING AND SUPPLY AGREEMENT


 















 


 


EXHIBIT D


MEMORANDUM
& ARTICLES OF ASSOCIATION











 


IN THE MATTER
OF


THE COMPANIES
LAW (AS AMENDED)


AND


IN THE MATTER


OF


[TRADING COMPANY]


AFFIDAVIT


I, Anne Todd,
of George Town, Grand Cayman, Cayman Islands, MAKE OATH
AND SAY as follows:


1.                                       I am a Subscriber of  [Trading Company], a Company applying for
registration under the Companies Law (as amended).


2.                                       The operation of the Company will be conducted mainly
outside the Cayman Islands.


3.                                       I make this Affidavit pursuant to Section 184 of the
Companies Law (as amended), in support of the application of the Company to be
registered as an Exempted Company.


	
  SWORN and DECLARED before me at

  	
    )

  	
   

  
	
  George
  Town, Grand Cayman, Cayman Islands

  	
    )

  	
  Anne Todd

  
	
  on [       ],
  2006

  	
    )

  	
   

  
	
   

  	
    )

  	
   

  
	
   

  	
    )

  	
   

  
	
   

  	
    )

  	
   

  
	
   

  	
    )

  	
   

  
	
   

  	
   

  	
   

  
	
  Notary Public

  	
   

  	
   

  




 2














 


 


THE COMPANIES LAW (AS AMENDED)


COMPANY LIMITED BY SHARES


MEMORANDUM & ARTICLES OF ASSOCIATION


OF


[TRADING COMPANY]











 


THE COMPANIES
LAW (AS AMENDED)


COMPANY
LIMITED BY SHARES


MEMORANDUM OF
ASSOCIATION


OF


[TRADING COMPANY]


1.                                       The name of the Company is  [Trading Company]


2.                                       The Registered Office of the Company will be situated
at the offices of Walkers SPV Limited,
Walker House, PO Box 908GT, Mary Street, George Town, Grand Cayman, Cayman
Islands or at such other location as the Directors may from time to
time determine.


3.                                       The objects for which the Company is established are
unrestricted and the Company shall have full power and authority to carry out
any object not prohibited by any law as provided by Section 7(4) of the
Companies Law (as amended).


4.                                       The Company shall have and be capable of exercising
all the functions of a natural person of full capacity irrespective of any
question of corporate benefit as provided by Section 27(2) of the Companies Law
(as amended).


5.                                       Nothing in the preceding sections shall be deemed to
permit the Company to carry on the business of a Bank or Trust Company without
being licensed in that behalf under the provisions of the Banks & Trust
Companies Law (as amended), or to carry on Insurance Business from within the
Cayman Islands or the business of an Insurance Manager, Agent, Sub-agent or
Broker without being licensed in that behalf under the provisions of the
Insurance Law (as amended), or to carry on the business of Company Management without
being licensed in that behalf under the provisions of the Companies Management
Law (as amended).


6.                                       The Company will not trade in the Cayman Islands with
any person, firm or corporation except in furtherance of the business of the
Company carried on outside the Cayman Islands; provided that nothing in this
section shall be construed as to prevent the Company effecting and concluding
contracts in the Cayman Islands, and exercising in the Cayman Islands all of
its powers necessary for the carrying on of its business outside the Cayman
Islands.












 


7.                                       The liability of the members is limited to the amount,
if any, unpaid on the shares respectively held by them.


8.                                       The capital of the Company is
US$30,000,000.00 divided into 30,000,000 shares
of a nominal or par value of US$1.00 each
provided always that subject to the provisions of the Companies Law (as
amended) and the Articles of Association the Company shall have power to redeem
or purchase any of its shares and to sub-divide or consolidate the said shares
or any of them and to issue all or any part of its capital whether original,
redeemed, increased or reduced with or without any preference, priority or
special privilege or subject to any postponement of rights or to any conditions
or restrictions whatsoever and so that unless the conditions of issue shall
otherwise expressly provide every issue of shares whether stated to be
Ordinary, Preference or otherwise shall be subject to the powers on the part of
the Company hereinbefore provided.


9.                                       The Company may exercise the power contained in
Section 226 of the Companies Law (as amended) to deregister in the Cayman
Islands and be registered by way of continuation in some other jurisdiction.












 


THE COMPANIES LAW (AS AMENDED)


COMPANY
LIMITED BY SHARES


ARTICLES OF ASSOCIATION


OF


[TRADING COMPANY]


TABLE A


The Regulations contained or
incorporated in Table ‘A’ in the First Schedule of the Companies Law (as
amended) shall not apply to this Company and the following Articles shall
comprise the Articles of Association of the Company:


INTERPRETATION


1.                                       In these Articles:


“Companies
Law” means the Companies Law (as amended) of the Cayman Islands;


“Directors”
and “Board of Directors”
means the Directors of the Company for the time being, or as the case may be,
the Directors assembled as a Board;


“JV Contract”
means the Joint Venture Contract of Valin MPM between Star China Ltd., VTW and
Hengyang Valin Steel Tube Co., Ltd.


“LST”
means Lone Star Technologies, a corporation organized under the laws of the
State of Delaware (USA), with its legal address at 15660 N. Dallas Pkwy., Ste.
500, Dallas, TX 75248, United States of America.


“Member”
means a person whose name is entered in the Register of Members and includes
each subscriber to the Memorandum of Association pending the issue to him of
the subscriber share or shares;


“Memorandum
of Association” means the Memorandum of Association of the Company,
as amended and re-stated from time to time;


“Ordinary
Resolution” means a resolution:












 


(a)                                  passed by a simple majority of such Members as, being
entitled to do so, vote in person or, where proxies are allowed, by proxy at a
general meeting of the Company and where a poll is taken regard shall be had in
computing a majority to the number of votes to which each Member is entitled;
or


(b)                                 approved in writing by all of the Members entitled to
vote at a general meeting of the Company in one or more instruments each signed
by one or more of the Members and the effective date of the resolution so
adopted shall be the date on which the instrument, or the last of such
instruments if more than one, is executed;


“paid up”
means paid up as to the par value and any premium payable in respect of the
issue of any shares and includes credited as paid up;


“Register of
Members” means the register to be kept by the Company in accordance
with Section 40 of the Companies Law;


“Seal”
means the Common Seal of the Company (if adopted) including any facsimile
thereof;


“share”
means any share in the capital of the Company, including a fraction of any
share;


“Shareholders
Agreement” means the shareholders agreement dated as of         ,
2006,  entered into by and among LST and
VTW.


“signed”
includes a signature or representation of a signature affixed by mechanical
means;


“Special
Resolution” means a resolution passed in accordance with Section 60
of the Companies Law, being a resolution:


(a)                                  passed by a majority of not less than two-thirds of
such Members as, being entitled to do so, vote in person or, where proxies are
allowed, by proxy at a general meeting of the Company of which notice
specifying the intention to propose the resolution as a Special Resolution has
been duly given and where a poll is taken regard shall be had in computing a
majority to the number of votes to which each Member is entitled; or


(b)                                 approved in writing by all of the Members entitled to
vote at a general meeting of the Company in one or more instruments each signed
by one or more of the Members and the effective date of the Special Resolution
so adopted shall be the












 


date on which the instrument
or the last of such instruments if more than one, is executed.


“Subsidiary” of
any Person means a subsidiary in which such Person owns more than 50% equity
interest.


“Valin MPM”
means Hengyang Valin MPM Co., Ltd.


“VTW” means
Hunan Valin Tube & Wire Joint Stock Co. Ltd., a joint stock company
organized and existing under the Laws of the People’s Republic of China.


2.                                       In these Articles, save where the context requires
otherwise:


(a)                                  words importing the singular number shall include the
plural number and vice versa;


(b)                                 words importing the masculine gender only shall
include the feminine gender;


(c)                                  words importing persons only shall include companies
or associations or bodies of persons, whether corporate or not;


(d)                                 “may” shall be
construed as permissive and “shall” shall be
construed as imperative;


(e)                                  references to a “dollar” or “dollars” or “$” is a
reference to dollars of the United States; and


(f)                                    references to a statutory enactment shall include
reference to any amendment or re-enactment thereof for the time being in force.


3.                                       Subject to the last two preceding Articles, any words
defined in the Companies Law shall, if not inconsistent with the subject or
context, bear the same meaning in these Articles.


PRELIMINARY


4.                                       The business of the Company may be commenced as soon
after incorporation as the Directors see fit.


5.                                       The registered office of the Company shall be at such
address in the Cayman Islands as the Directors shall from time to time
determine. The Company may in addition establish and maintain such other
offices and places of business and agencies in such places as the Directors may
from time to time determine.












 


SHARES


6.                                       Except as otherwise provided in these Articles, all
shares for the time being and from time to time unissued shall be under the
control of the Directors, and may be re-designated, allotted or disposed of in
such manner, to such persons and on such terms as the Directors in their
absolute discretion may think fit.


7.                                       [Intentionally omitted.]


VARIATION OF RIGHTS ATTACHING TO SHARES


8.                                       If at any time the share capital is divided into
different classes of shares, the rights attaching to any class (unless
otherwise provided by the terms of issue of the shares of that class) may be
varied or abrogated with the consent in writing of the holders of two-thirds of
the issued shares of that class, or with the sanction of a resolution passed by
at least a two-thirds majority of the holders of shares of the class present in
person or by proxy at a separate general meeting of the holders of the shares
of the class.  To every such separate
general meeting the provisions of these Articles relating to general meetings
of the Company shall mutatis mutandis apply.


9.                                       The rights conferred upon the holders of the shares of
any class issued with preferred or other rights shall not, unless otherwise
expressly provided by the terms of issue of the shares of that class, be deemed
to be varied or abrogated by the creation or issue of further shares ranking pari passu therewith or the redemption or purchase of shares
of any class by the Company.


CERTIFICATES


10.                                 Every person whose name is entered as a member in the
Register of Members shall, without payment, be entitled to a certificate in the
form determined by the Directors. Such certificate may be under the Seal. All
certificates shall specify the share or shares held by that person and the
amount paid up thereon, provided that in respect of a share or shares held
jointly by several persons the Company shall not be bound to issue more than
one certificate, and delivery of a certificate for a share to one of several
joint holders shall be sufficient delivery to all.


11.                                 If a share certificate is defaced, lost or destroyed
it may be renewed on such terms, if any, as to evidence and indemnity as the
Directors think fit.












 


FRACTIONAL SHARES


12.                                 The Directors may issue fractions of a share of any
class of shares, and, if so issued, a fraction of a share (calculated to three
decimal points) shall be subject to and carry the corresponding fraction of
liabilities (whether with respect to any unpaid amount thereon, contribution,
calls or otherwise), limitations, preferences, privileges, qualifications,
restrictions, rights (including, without limitation, voting and participation
rights) and other attributes of a whole share of the same class of shares.


LIEN


13.                                 The Company shall have a first priority lien and
charge on every partly paid share for all moneys (whether presently payable or
not) called or payable at a fixed time in respect of that share, and the
Company shall also have a first priority lien and charge on all partly paid
shares standing registered in the name of a Member (whether held solely or
jointly with another person) for all moneys presently payable by him or his
estate to the Company, but the Directors may at any time declare any share to
be wholly or in part exempt from the provisions of this Article.  The Company’s lien, if any, on a share shall
extend to all distributions payable thereon.


14.                                 Subject to Article 79, the Company may sell any shares
on which the Company has a lien, but no sale shall be made unless an amount in
respect of which the lien exists is presently payable nor until the expiration
of 14 days after a notice in writing, stating and demanding payment of such
part of the amount in respect of which the lien exists as is presently payable,
has been given to the registered holder for the time being of the share, or the
persons entitled thereto by reason of his death or bankruptcy.


15.                                 For giving effect to any such sale the Directors may
authorise some person to transfer the shares sold to the purchaser
thereof.  The purchaser shall be
registered as the holder of the shares comprised in any such transfer and he
shall not be bound to see to the application of the purchase money, nor shall
his title to the shares be affected by any irregularity or invalidity in the
proceedings in reference to the sale.


16.                                 The proceeds of the sale after deduction of expenses,
fees and commission incurred by the Company shall be received by the Company
and applied in payment of such part of the amount in respect of which the lien
exists as is presently payable, and the residue shall (subject to a like lien
for sums not presently payable as existed upon the shares prior to the sale) be
paid to the person entitled to the shares at the date of the sale.












 


CALLS ON SHARES


17.                                 The Directors may from time to time make calls upon
the Members in respect of any moneys unpaid on their partly paid shares, and
each Member shall (subject to receiving at least 14 days notice specifying the
time or times of payment) pay to the Company at the time or times so specified
the amount called on such shares.


18.                                 [Intentionally Omitted]


19.                                 If a sum called in respect of a share is not paid
before or on the day appointed for payment thereof, the person from whom the
sum is due shall pay interest upon the sum at the rate of eight per centum per
annum from the day appointed for the payment thereof to the time of the actual
payment, but the Directors shall be at liberty to waive payment of that
interest wholly or in part.


20.                                 [Intentionally Omitted]


21.                                 The Directors may make arrangements on the issue of
partly paid shares for a difference between the Members, or the particular
shares, in the amount of calls to be paid and in the times of payment.


22.                                 The Directors may, if they think fit, receive from any
Member willing to advance the same all or any part of the moneys uncalled and
unpaid upon any partly paid shares held by him, and upon all or any of the
moneys so advanced may (until the same would, but for such advance, become
presently payable) pay interest at such rate (not exceeding without the
sanction of an Ordinary Resolution, eight per cent. per annum) as may be agreed
upon between the Member paying the sum in advance and the Directors.


FORFEITURE OF SHARES


23.                                 If a Member fails to pay any call or instalment of a
call in respect of partly paid shares on the day appointed for payment, the
Directors may, at any time thereafter during such time as any part of such call
or instalment remains unpaid, serve a notice on him requiring payment of so
much of the call or instalment as is unpaid, together with any interest which
may have accrued.


24.                                 The notice shall name a further day (not earlier than
the expiration of 14 days from the date of the notice) on or before which the
payment required by the notice is to be made, and shall state that in the event
of non-payment at or before the time appointed the shares in respect of which
the call was made will be liable to be forfeited.












 


25.                                 If the requirements of any such notice as aforesaid
are not complied with, any share in respect of which the notice has been given
may at any time thereafter, before the payment required by notice has been
made, be forfeited by a resolution of the Directors to that effect.


26.                                 A forfeited share may be sold or otherwise disposed of
on such terms and in such manner as the Directors think fit, and at any time
before a sale or disposition the forfeiture may be cancelled on such terms as
the Directors think fit.


27.                                 A person whose shares have been forfeited shall cease
to be a Member in respect of the forfeited shares, but shall, notwithstanding,
remain liable to pay to the Company all moneys which at the date of forfeiture
were payable by him to the Company in respect of the shares forfeited, but his
liability shall cease if and when the Company receives payment in full of the
amount unpaid on the shares forfeited.


28.                                 A statutory declaration in writing that the declarant
is a Director, and that a share has been duly forfeited on a date stated in the
declaration, shall be conclusive evidence of the facts in the declaration as
against all persons claiming to be entitled to the share.


29.                                 The Company may receive the consideration, if any,
given for a share on any sale or disposition thereof pursuant to the provisions
of these Articles as to forfeiture and may execute a transfer of the share in
favour of the person to whom the share is sold or disposed of and that person
shall be registered as the holder of the share, and shall not be bound to see
to the application of the purchase money, if any, nor shall his title to the
shares be affected by any irregularity or invalidity in the proceedings in
reference to the disposition or sale.


30.                                 The provisions of these Articles as to forfeiture
shall apply in the case of non-payment of any sum which by the terms of issue
of a share becomes due and payable, whether on account of the amount of the
share, or by way of premium, as if the same had been payable by virtue of a
call duly made and notified.


TRANSFER OF SHARES


31.                                 No Member shall sell, transfer, assign, pledge, convey
or otherwise dispose of, including by operation of Law or by gift
(collectively, “Transfer”), any shares held by it, except that a Member may
Transfer all the shares held by it in connection with a Transfer of all of such
Member’s interest in Valin MPM in accordance with the terms of the JV Contract
(“Permitted Transfer”).  Any Member
proposing to undertake a Permitted Transfer shall provide written notice to the
Company and each other Member at least thirty (30) Business Days prior to
effecting such Permitted Transfer.  Such
notice shall state the












 


amount of shares to be transferred, identify the
direct and beneficial holders of such shares and provide the name(s) of the
proposed transferee(s).


32.                                 Restrictive Legends. 
Each share certificate held by a Member, and each share issued to any
subsequent transferee of such, shall be stamped or otherwise imprinted with a
legend in substantially the following form:


THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT
TO RESTRICTIONS ON TRANSFER, VOTING AND OTHER TERMS AND CONDITIONS SET FORTH IN
A SHAREHOLDERS AGREEMENT, DATED AS OF         ,
2006, AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH MAY
BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.


33.                                 Transfer and Exchange. 
The instrument of transfer of any share
shall be in any usual or common form or such other form as the Directors may,
in their absolute discretion, approve and be executed by or on behalf of the
transferor and if in respect of a nil or partly paid up share, or if so
required by the Directors, shall also be executed on behalf of the transferee,
shall be accompanied by the certificate (if any) of the shares to which it relates
and such other evidence as the Directors may reasonably require to show the
right of the transferor to make the transfer. Upon the consummation of
any Permitted Transfer, a transferring Member may present its shares to the
Company with a request to register or reflect the Transfer of such shares or to
exchange such shares for shares of other authorized denominations and the
Company shall register or reflect such Transfer; provided, however, that the
shares surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer duly executed by the holder
thereof or its attorney who has been duly authorized in writing.  No service charge shall be made for any
registration of Transfer, exchange or exercise, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar charge of any
Governmental Authority in connection therewith. 
The Transferring Member shall be deemed to remain a holder of the share
until the name of the transferee is entered in the Register of Members in
respect thereof.


34.                                 The Directors may in their absolute discretion decline
to register any transfer of shares not in compliance with these Articles or the
Shareholders Agreement (as amended from time to time). If the Directors refuse
to register a transfer of any shares, they shall within two months after the
date on which the transfer was lodged with the Company send to the transferee
notice of the refusal.


35.                                 The
registration of transfers may be suspended at such times and for such periods
as the Directors may, in their absolute discretion, from time to time
determine, provided always that such registration shall not be suspended for
more than 45 days in any year.

















 


 


36.                                 All instruments of transfer which are registered shall
be retained by the Company, but any instrument of transfer which the Directors
decline to register shall (except in any case of fraud) be returned to the
person depositing the same.


REPLACEMENT OF SHARES


37.                                 If a mutilated share certificate is surrendered to the
Company or if a Member claims and submits an affidavit or other evidence,
satisfactory to the Company, to the effect that a share has been lost,
destroyed or wrongfully taken, the Company shall issue a replacement share
certificate if the Company’s reasonable requirements are met.  If required by the Company, such Member must
provide an indemnity bond, or other form of indemnity, sufficient in the
judgment of the Company to protect the Company against any loss which may be
suffered.  The Company may charge such
Member for its reasonable out-of-pocket expenses in replacing a share
certificate which has been mutilated, lost, destroyed or wrongfully taken.


TRANSMISSION OF SHARES


38.                                 Any person becoming entitled to a share in consequence
of the death or bankruptcy of a Member shall upon such evidence being produced
as may from time to time be required by the Directors, have the right either to
be registered as a Member in respect of the share or, instead of being
registered himself, to make such transfer of the share as the deceased or
bankrupt person could have made; but the Directors shall, in either case, have
the same right to decline or suspend registration as they would have had in the
case of a transfer of the share by the deceased or bankrupt person before the
death or bankruptcy.


39.                                 A person becoming entitled to a share by reason of the
death or bankruptcy of the holder shall be entitled to the same dividends and
other advantages to which he would be entitled if he were the registered holder
of the share, except that he shall not, before being registered as a Member in
respect of the share, be entitled in respect of it to exercise any right
conferred by membership in relation to meetings of the Company.


ALTERATION OF CAPITAL


40.                                 [Intentionally Omitted]


41.                                 The Company may by Special Resolution:


(a)                                  increase the share capital by such sum, to be divided
into shares of such classes and amount, as the resolution shall prescribe;









 



 


(b)                                 consolidate and divide all or any of its share capital
into shares of a larger amount than its existing shares;


(c)                                  convert all or any of its paid up shares into stock
and reconvert that stock into paid up shares of any denomination;


(d)                                 subdivide its existing shares, or any of them into
shares of a smaller amount provided that in the subdivision the proportion
between the amount paid and the amount, if any, unpaid on each reduced share
shall be the same as it was in case of the share from which the reduced share is
derived;


(e)                                  cancel any shares which, at the date of the passing of
the resolution, have not been taken or agreed to be taken by any person and
diminish the amount of its share capital by the amount of the shares so
cancelled.


42.                                 The Company may by Special Resolution reduce its share
capital and any capital redemption reserve in any manner authorised by law.


REDEMPTION AND PURCHASE OF OWN SHARES


43.                                 Subject to the provisions of the Companies Law and
Article 79, the Company may:


(a)                                  issue shares on terms that they are to be redeemed or
are liable to be redeemed at the option of the Company or the Member on such
terms and in such manner as the Directors may, before the issue of such shares,
determine;


(b)                                 purchase its own shares (including any redeemable shares)
on such terms and in such manner as the Directors may determine and agree with
the Member; and


(c)                                  make a payment in respect of the redemption or
purchase of its own shares otherwise than out of profits or the proceeds of a
fresh issue of shares.


44.                                 Any share in respect of which notice of redemption has
been given shall not be entitled to participate in the profits of the Company
in respect of the period after the date specified as the date of redemption in
the notice of redemption.


45.                                 The redemption or purchase of any share shall not be
deemed to give rise to the redemption or purchase of any other share.


46.                                 The Directors may when making payments in respect of
redemption or purchase of shares, if authorised by the terms of issue of the
shares being redeemed or purchased or with the agreement of the holder of such
shares, make such payment either in cash or in specie.









 



 


CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE


47.                                 For the purpose of determining those Members that are
entitled to receive notice of, attend or vote at any meeting of Members or any
adjournment thereof, or those Members that are entitled to receive payment of
any dividend, or in order to make a determination as to who is a Member for any
other purpose, the Directors may provide that the Register of Members shall be
closed for transfers for a stated period which shall not exceed in any case 40
days.  If the Register of Members shall
be so closed for the purpose of determining those Members that are entitled to
receive notice of, attend or vote at a meeting of Members the register shall be
so closed for at least 10 days immediately preceding such meeting and the
record date for such determination shall be the date of the closure of the
Register of Members.


48.                                 In lieu of or apart from closing the Register of
Members, the Directors may fix in advance a date as the record date for any
such determination of those Members that are entitled to receive notice of,
attend or vote at a meeting of the Members and for the purpose of determining those
Members that are entitled to receive payment of any dividend the Directors may,
at or within 90 days prior to the date of declaration of such dividend fix a
subsequent date as the record date for such determination.


49.                                 If the Register of Members is not so closed and no
record date is fixed for the determination of those Members entitled to receive
notice of, attend or vote at a meeting of Members or those Members that are
entitled to receive payment of a dividend, the date on which notice of the
meeting is posted or the date on which the resolution of the Directors
declaring such dividend is adopted, as the case may be, shall be the record
date for such determination of Members. When a determination of those Members
that are entitled to receive notice of, attend or vote at a meeting of Members
has been made as provided in this Article, such determination shall apply to
any adjournment thereof.


GENERAL MEETINGS


50.                                 The Directors may, whenever they think fit, convene a
general meeting of the Company.


51.                                 General meetings shall also be convened on the written
requisition of any Member or Members entitled to attend and vote at general
meetings of the Company who hold not less than 10 per cent of the paid up
voting share capital of the Company deposited at the registered office of the
Company specifying the objects of the meeting for a date no later than 21 days
from the date of deposit of the requisition signed by the requisitionists, and
if the Directors do not convene such meeting for a date not later than 45 days
after the date of such deposit, the requisitionists themselves may convene the
general meeting in the same manner, as nearly as possible, as that in which
general meetings may be convened by the Directors, and all reasonable expenses
incurred by the requisitionists as









 



 


a result of the failure of the Directors to convene
the general meeting shall be reimbursed to them by the Company.


52.                                 If at any time there are no Directors, any two Members
(or if there is only one Member then that Member) entitled to vote at general
meetings of the Company may convene a general meeting in the same manner as
nearly as possible as that in which meetings may be convened by the Directors.


NOTICE OF GENERAL MEETINGS


53.                                 At least seven days notice counting from the date service
is deemed to take place as provided in these Articles specifying the place, the
day and the hour of the meeting and, in case of special business, the general
nature of that business, shall be given in the manner hereinafter provided or
in such other manner (if any) as may be prescribed by the Company by Ordinary
Resolution to such persons as are, under these Articles, entitled to receive
such notices from the Company, but with the consent of all the Members entitled
to receive notice of some particular meeting and attend and vote thereat, that
meeting may be convened by such shorter notice or without notice and in such
manner as those Members may think fit.


54.                                 [Intentionally Omitted]


PROCEEDINGS AT GENERAL MEETINGS


55.                                 All business carried out at a general meeting shall be
deemed special with the exception of sanctioning a dividend, the consideration
of the accounts, balance sheets, and any report of the Directors or of the
Company’s auditors, the appointment and removal of Directors and the fixing of the
remuneration of the Company’s auditors. 
No special business shall be transacted at any general meeting without
the consent of all Members entitled to receive notice of that meeting unless
notice of such special business has been given in the notice convening that
meeting.


56.                                 No business shall be transacted at any general meeting
unless a quorum of Members is present at the time when the meeting proceeds to
business.  Save as otherwise provided by
these Articles, one or more Members holding at least a majority of the paid up
voting share capital of the Company present in person or by proxy shall be a
quorum.


57.                                 If within half an hour from the time appointed for the
meeting a quorum is not present, the meeting, if convened upon the requisition
of Members, shall be dissolved.  In any
other case it shall stand adjourned to the same day in the next week, at the
same time and place, and if at the adjourned meeting a quorum is not present
within half an hour from









 



 


the time appointed for
the meeting the Member or Members present and entitled to vote shall be a
quorum.


58.                                 If the Directors wish to make this facility available
to Members for a specific or all general meetings of the Company, a Member may
participate in any general meeting of the Company, by means of a telephone or
similar communication equipment by way of which all persons participating in
such meeting can hear each other and such participation shall be deemed to
constitute presence in person at the meeting.


59.                                 The chairman, if any, of the Board of Directors shall
preside as chairman at every general meeting of the Company.


60.                                 If there is no such chairman, or if at any general
meeting he is not present within fifteen minutes after the time appointed for
holding the meeting or is unwilling to act as chairman, the Members present
shall choose one of their number to be chairman of that meeting.


61.                                 The chairman may with the consent of any general
meeting at which a quorum is present (and shall if so directed by the meeting)
adjourn a meeting from time to time and from place to place, but no business
shall be transacted at any adjourned meeting other than the business left
unfinished at the meeting from which the adjournment took place.  When a meeting is adjourned for 14 days or
more, notice of the adjourned meeting shall be given as in the case of an
original meeting.  Save as aforesaid it
shall not be necessary to give any notice of an adjournment or of the business
to be transacted at an adjourned meeting.


62.                                 At any general meeting a resolution put to the vote of
the meeting shall be decided on a show of hands, unless a poll is (before or on
the declaration of the result of the show of hands) demanded by one or more
Members present in person or by proxy entitled to vote, and unless a poll is so
demanded, a declaration by the chairman that a resolution has, on a show of
hands, been carried, or carried unanimously, or by a particular majority, or
lost, and an entry to that effect in the book of the proceedings of the
Company, shall be conclusive evidence of the fact, without proof of the number
or proportion of the votes recorded in favour of, or against, that resolution.


63.                                 If a poll is duly demanded it shall be taken in such
manner as the chairman directs, and the result of the poll shall be deemed to
be the resolution of the meeting at which the poll was demanded.


64.                                 In the case of an equality of votes, whether on a show
of hands or on a poll, the chairman of the meeting at which the show of hands
takes place or at which the poll is demanded, shall be entitled to a second or
casting vote.









 



 


65.                                 A poll demanded on the election of a chairman of the
meeting or on a question of adjournment shall be taken forthwith.  A poll demanded on any other question shall
be taken at such time as the chairman of the meeting directs.


VOTES OF MEMBERS


66.                                 Subject to any rights and restrictions for the time
being attached to any class or classes of shares, on a show of hands every
Member present in person and every person representing a Member by proxy shall
at a general meeting of the Company have one vote and on a poll every Member
and every person representing a Member by proxy shall have one vote for each
share of which he or the person represented by proxy is the holder.


67.                                 A Member of unsound mind, or in respect of whom an
order has been made by any court having jurisdiction in lunacy, may vote,
whether on a show of hands or on a poll, by his committee, or other person in
the nature of a committee appointed by that court, and any such committee or
other person may vote by proxy.


68.                                 No Member shall be entitled to vote at any general
meeting unless all calls or other sums presently payable by him in respect of
shares carrying the right to vote held by him have been paid.


69.                                 On a poll votes may be given either personally or by
proxy.


70.                                 The instrument appointing a proxy shall be in writing
under the hand of the appointor or of his attorney duly authorised in writing
or, if the appointor is a corporation, either under seal or under the hand of
an officer or attorney duly authorised. 
A proxy need not be a Member.


71.                                 An instrument appointing a proxy may be in any usual
or common form or such other form as the Directors may approve.


72.                                 The instrument appointing a proxy shall be deemed to
confer authority to demand or join in demanding a poll.


73.                                 Subject to Article 79, resolution in writing signed by
all the Members for the time being entitled to receive notice of and to attend
and vote at general meetings (or being corporations by their duly authorised
representatives) shall be as valid and effective as if the same had been passed
at a general meeting of the Company duly convened and held.









 



 


CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS


74.                                 Any corporation which is a Member or a Director may by
resolution of its directors or other governing body authorise such person as it
thinks fit to act as its representative at any meeting of the Company or of any
class of Members or of the Board of Directors, and the person so authorised
shall be entitled to exercise the same powers on behalf of the corporation
which he represents as that corporation could exercise if it were an individual
Member or Director.


DIRECTORS


75.                                 The initial Director(s) shall either be determined in
writing by a majority (or in the case of a sole subscriber that subscriber) of,
or elected at a meeting of, the subscribers of the Memorandum of Association.


76.                                 The Board shall at all times consist of six (6)
members who shall be nominated as follows: (a) three (3) individuals as may be
designated from time to time in writing by LST (the “LST Directors”); and (b)
three (3) individuals as may be designated from time to time in writing by VTW
(the “VTW Directors”).  A Director
appointed by a Member pursuant to this Article shall cease to be a Director
from the date on which the Member concerned at the time of his appointment
ceases to be a Member. Any appointment or removal of a Director shall be made
by notice in writing served on the Company and signed by the persons appointing
or removing the Director. In the case of a corporation the notice may be signed
by a director or the secretary of the corporation or by its duly appointed
attorney or duly authorized representative.


77.                                 Any director elected in accordance with Article 76
shall, and may only, be removed from office upon the written request of the
Member entitled to nominate such director. 
In the case of any vacancy in the office of a director, by death,
resignation, removal or otherwise, only the Member entitled to nominate such
director shall be entitled to nominate a successor to hold office for the
unexpired term of the director whose place shall be vacant.


78.                                 The presence of at least a majority of the members of
the Board and at least a majority of each of the LST Directors and VTW
Directors shall be required to constitute a quorum at any meeting of the
Board.  A Director represented by proxy
or by an Alternate Director at any meeting shall be deemed to be present for
the purposes of determining whether or not a quorum is present. A quorum must
exist at all times during any meeting of the Board, including the reconvening
of a meeting adjourned, in order for any action taken at such meeting to be
valid.









 



 


79.                                 Unless the act of a greater number is required by the
Companies Law or these Articles, the act of a majority of the directors present
at a meeting at which a quorum is in attendance shall be the act of the Board,
provided however that the Company will not, and will not permit any of its
Subsidiaries to, take any of the following actions without the affirmative vote
of at least the majority of each of the VTW Directors and the LST Directors in
favor of such action:


(a)            approval of the annual operating
plan of the Company and/or any of its Subsidiaries; provided, that if the Board
is not able to agree on an acceptable operating plan, the Company shall and
shall procure its Subsidiaries to utilize its prior year operating plan with no
changes to the Company’s and its Subsidiaries’ business strategy;


(b)           acquisitions of, or investments in,
businesses (or part thereof) by the Company or its Subsidiaries (whether
through the purchase of assets, shares or other securities or by merger,
consolidation or amalgamation);


(c)            unless otherwise set forth in the
then-current annual operating plan, dispositions of any business or investment
(or part thereof) by the Company or its Subsidiaries (whether through the sale
of assets, shares or other securities or by merger, consolidation or
amalgamation);


(d)           any material change in the nature of
the business of the Company’s Subsidiaries;


(e)            approval of any transactions to be
entered into by the Company with LST, VTW, or any Affiliate of LST or VTW;


(f)            the creation, issuance, or
authorization (by reclassification or otherwise) of any class or series of
shares, or any additional securities exercisable, convertible or exchangeable
for shares, or the sale of any shares on which the Company has a lien pursuant
to Article 14, or issue or redeem redeemable shares pursuant to Article 43;


(g)           the merger, amalgamation or
consolidation (or other similar transaction) of the Company or any Subsidiary
with any party;


(h)           any filing for any bankruptcy,
voluntary dissolution, winding-up, liquidation, recapitalization,
reorganization, split-up or spin-off, with respect to any Subsidiary;


(i)             any appointment or dismissal of the
outside independent auditors of the Company or any Subsidiary;









 



 


(j)             any material change to the Company’s
or any Subsidiary’s accounting policies, practices, methods or principles that
is not (i) required by applicable Governmental Authorities, (ii) otherwise
required to comply with applicable Law, or (iii) required due to changes in
United States or Chinese GAAP;


(k)            entry into any indebtedness or
assumption of any financial obligation, or otherwise the issuance, assumption,
guarantee or creation of any liability for borrowed money, that individually or
in the aggregate results in a deviation of more than 10% from the planned
amounts for incurrence of indebtedness set forth in the then-current annual
operating plan;


(l)             any capital expenditure or any
purchase of intangible assets that results, individually or in the aggregate,
in a deviation of more than 10% from the planned capital expenditure or planned
purchase of intangible assets set forth in the annual operating plan; and


(m)           any actual change in expenditures
that results in a deviation of more than 10% from the planned expenditures set
forth in the annual operating plan.


(n)           the establishment of any Subsidiary
from the date hereof.


(o)           distribution of the profits of the
Company, provided however that either VTW Directors or LST Directors attending
the meeting shall cast affirmative vote if the distribution is made in
accordance with Article 107.


(p)           the appointment of a chief executive
officer (“CEO”) and chief financial officer (“CFO”) of the Company, provided
however that VTW Directors attending the meeting shall cast affirmative votes
for the CEO and/or CFO candidate(s) recommended by LST Directors if VTW
Directors do not recommend suitable or comparable candidates for the Board to
consider.


(q)           the
purchase of Tubular Products by the Company from areas outside the PRC and the
expansion into other business activities.


80.                                 In case of an equality of votes, the chairman, which shall be appointed
by LST, shall have a second or casting vote (which vote shall be consistent
with his prior vote).


81.                                 The Company will pay all reasonable out-of-pocket
expenses incurred by the Directors in connection with their participation in
meetings of the Board.


82.                                 There shall be no shareholding qualification for
Directors unless determined otherwise by the Company by Ordinary Resolution.









 



 


ALTERNATE DIRECTOR


83.                                 Any Director may in writing appoint another person to
be his alternate to act in his place at any meeting of the Directors at which
he is unable to be present.  Every such
alternate shall be entitled to notice of meetings of the Directors and to
attend and vote thereat as a Director when the person appointing him is not
personally present and where he is a Director to have a separate vote on behalf
of the Director he is representing in addition to his own vote.  A Director may at any time in writing revoke
the appointment of an alternate appointed by him.  Such alternate shall not be an officer of the
Company and shall be deemed to be the agent of the Director appointing
him.  The remuneration of such alternate
shall be payable out of the remuneration of the Director appointing him and the
proportion thereof shall be agreed between them.


84.                                 Any Director may appoint any person, whether or not a
Director, to be the proxy of that Director to attend and vote on his behalf, in
accordance with instructions given by that Director, or in the absence of such
instructions at the discretion of the proxy, at a meeting or meetings of the
Directors which that Director is unable to attend personally.  The instrument appointing the proxy shall be
in writing under the hand of the appointing Director and shall be in any usual
or common form or such other form as the Directors may approve, and must be lodged
with the chairman of the meeting of the Directors at which such proxy is to be
used, or first used, prior to the commencement of the meeting.


POWERS AND DUTIES OF DIRECTORS


85.                                 Subject to the provisions of the Companies Law, these
Articles and to any resolutions made in a general meeting, the business of the
Company shall be managed by the Directors, who may pay all expenses incurred in
setting up and registering the Company and may exercise all powers of the
Company.  No resolution made by the
Company in general meeting shall invalidate any prior act of the Directors
which would have been valid if that resolution had not been made.


86.                                 Subject
to Article 79, the Directors may from time to time appoint any person, whether
or not a Director to hold such office in the Company as the Directors may think
necessary for the administration of the Company, and for such term and at such
remuneration (whether by way of salary or commission or participation in
profits or partly in one way and partly in another), and with such powers and
duties as the Directors may think fit. 
Any person so appointed by the Directors may be removed by the
Directors.  The Directors may also
appoint one or more of their number to the office of managing director upon
like terms, but any such appointment shall ipso facto determine if any managing
director ceases from any cause to be a Director, or if the Company by Ordinary
Resolution resolves that his tenure of office be terminated.















 


 


87.                                 The Directors may appoint a Secretary (and if need be
an Assistant Secretary or Assistant Secretaries) who shall hold office for such
term, at such remuneration and upon such conditions and with such powers as
they think fit.  Any Secretary or Assistant
Secretary so appointed by the Directors may be removed by the Directors.


88.                                 The Directors may from time to time and at any time by
power of attorney appoint any company, firm or person or body of persons,
whether nominated directly or indirectly by the Directors, to be the attorney
or attorneys of the Company for such purposes and with such powers, authorities
and discretion (not exceeding those vested in or exercisable by the Directors
under these Articles) and for such period and subject to such conditions as
they may think fit, and any such power of attorney may contain such provisions
for the protection and convenience of persons dealing with any such attorney as
the Directors may think fit, and may also authorise any such attorney to
delegate all or any of the powers, authorities and discretion vested in him.


89.                                 The Directors may from time to time provide for the
management of the affairs of the Company in such manner as they shall think fit
and the provisions contained in the three next following Articles shall not
limit the general powers conferred by this Article.


90.                                 Any such delegates as aforesaid may be authorised by
the Directors to subdelegate all or any of the powers, authorities, and
discretion for the time being vested in them.


BORROWING POWERS OF DIRECTORS


91.                                 Subject to Article 79, the Directors may exercise all
the powers of the Company to borrow money and to mortgage or charge its
undertaking, property and uncalled capital or any part thereof, to issue
debentures, debenture stock and other securities whenever money is borrowed or
as security for any debt, liability or obligation of the Company or of any
third party.


THE SEAL


92.                                 The Seal shall not be affixed to any instrument except
by the authority of a resolution of the Board of Directors provided always that
such authority may be given prior to or after the affixing of the Seal and if
given after may be in general form confirming a number of affixings of the
Seal. The Seal shall be affixed in the presence of a Director or a Secretary (or
an Assistant Secretary) or in the presence of any one or more persons as the
Directors may appoint for the purpose and every person as aforesaid shall sign
every instrument to which the Seal is so affixed in their presence.









 



 


93.                                 The Company may maintain a facsimile of the Seal in
such countries or places as the Directors may appoint and such facsimile Seal
shall not be affixed to any instrument except by the authority of a resolution
of the Board of Directors provided always that such authority may be given
prior to or after the affixing of such facsimile Seal and if given after may be
in general form confirming a number of affixings of such facsimile Seal.  The facsimile Seal shall be affixed in the
presence of such person or persons as the Directors shall for this purpose
appoint and such person or persons as aforesaid shall sign every instrument to
which the facsimile Seal is so affixed in their presence and such affixing of
the facsimile Seal and signing as aforesaid shall have the same meaning and effect
as if the Seal had been affixed in the presence of and the instrument signed by
a Director or a Secretary (or an Assistant Secretary) or in the presence of any
one or more persons as the Directors may appoint for the purpose.


94.                                 Notwithstanding the foregoing, a Secretary or any
Assistant Secretary shall have the authority to affix the Seal, or the
facsimile Seal, to any instrument for the purposes of attesting authenticity of
the matter contained therein but which does not create any obligation binding
on the Company.


DISQUALIFICATION OF DIRECTORS


95.                                 The office of Director shall be vacated, if the
Director:


(a)                                  becomes bankrupt or makes any arrangement or
composition with his creditors;


(b)                                 is found to be or becomes of unsound mind;


(c)                                  resigns his office by notice in writing to the
Company; or


(d)                                 is removed from office pursuant to Article 77.


PROCEEDINGS OF DIRECTORS


96.                                 The Directors may meet together (either within or
without the Cayman Islands) for the despatch of business, adjourn, and
otherwise regulate their meetings and proceedings as they think fit.  Questions arising at any meeting shall be
decided by a majority of votes.  In case
of an equality of votes the chairman shall have a second or casting vote.  A Director may, and a Secretary or Assistant
Secretary on the requisition of a Director shall, at any time summon a meeting
of the Directors.


97.                                 A Director or Directors may participate in any meeting
of the Board of Directors, by means of telephone or similar communication
equipment by way of which all persons









 



 


participating in such meeting can hear each other and
such participation shall be deemed to constitute presence in person at the
meeting.


98.                                 The presence of at least a majority of the members of
the Board and at least a majority of each of the LST Directors and VTW
Directors shall be required to constitute a quorum at any meeting of the
Board.  A quorum must exist at all times
during any meeting of the Board, including the reconvening of a meeting
adjourned, in order for any action taken at such meeting to be valid.  A Director represented by proxy or by an
Alternate Director at any meeting shall be deemed to be present for the
purposes of determining whether or not a quorum is present.


99.                                 A Director who is in any way, whether directly or
indirectly, interested in a contract or proposed contract with the Company
shall declare the nature of his interest at a meeting of the Directors.  A general notice given to the Board of
Directors by any Director to the effect that he is a member of any specified
company or firm and is to be regarded as interested in any contract which may
thereafter be made with that company or firm shall be deemed a sufficient
declaration of interest in regard to any contract so made.  A Director may vote in respect of any
contract or proposed contract or arrangement notwithstanding that he may be
interested therein and if he does so his vote shall be counted and he may be
counted in the quorum at any meeting of the Directors at which any such
contract or proposed contract or arrangement shall come before the meeting for
consideration.


100.                           A Director may hold any other office or place of
profit under the Company (other than the office of auditor) in conjunction with
his office of Director for such period and on such terms (as to remuneration
and otherwise) as the Directors may determine and no Director or intending
Director shall be disqualified by his office from contracting with the Company
either with regard to his tenure of any such other office or place of profit or
as vendor, purchaser or otherwise, nor shall any such contract or arrangement
entered into by or on behalf of the Company in which any Director is in any way
interested, be liable to be avoided, nor shall any Director so contracting or
being so interested be liable to account to the Company for any profit realised
by any such contract or arrangement by reason of such Director holding that
office or of the fiduciary relation thereby established.  A Director, notwithstanding his interest, may
be counted in the quorum present at any meeting of the Directors whereat he or
any other Director is appointed to hold any such office or place of profit
under the Company or whereat the terms of any such appointment are arranged and
he may vote on any such appointment or arrangement.


101.                           The Directors shall cause minutes to be made in books
or loose-leaf folders provided for the purpose of recording:


(a)                                  all appointments of officers made by the Directors;









 



 


(b)                                 the names of the Directors present at each meeting of
the Directors;


(c)                                  all resolutions and proceedings at all meetings of the
Company, and of the Directors.


102.                           When the chairman of a meeting of the Directors signs
the minutes of such meeting those minutes shall be deemed to have been duly
held notwithstanding that all the Directors have not actually come together or
that there may have been a technical defect in the proceedings.


103.                           A resolution signed by all the Directors shall be as
valid and effectual as if it had been passed at a meeting of the Directors duly
called and constituted.  When signed a
resolution may consist of several documents each signed by one or more of the
Directors.


104.                           The continuing Directors may act notwithstanding any
vacancy in their body but if and so long as their number is reduced below the
number fixed by or pursuant to these Articles as the necessary quorum of
Directors, the continuing Directors may act for the purpose of increasing the
number, or of summoning a general meeting of the Company, but for no other
purpose.


105.                           LST may elect a chairman of their meetings and
determine the period for which he is to hold office but if at any meeting the
chairman is not present within fifteen minutes after the time appointed for
holding the meeting, LST Directors present may choose one of their number to be
chairman of the meeting.


106.                           All acts done by any meeting of the Directors, or by
any person acting as a Director, shall notwithstanding that it be afterwards
discovered that there was some defect in the appointment of any such Director
or person acting as aforesaid, or that they or any of them were disqualified,
be as valid as if every such person had been duly appointed and was qualified
to be a Director.


DIVIDENDS


107.                           Subject to any rights and restrictions for the time
being attached to any class or classes of shares, the Directors may from time
to time declare dividends (including interim dividends) and other distributions
on shares in issue and authorise payment of the same out of the funds of the
Company lawfully available therefor in the manner set forth in Section 9.2 of
the Shareholders Agreement.


108.                           Subject to Article 79 and Article 107 and any rights
and restrictions for the time being attached to any class or classes of shares,
the Company by Ordinary Resolution may









 



 


declare dividends, but
no dividend shall exceed the amount recommended by the Directors.


109.                           Subject to Article 79 and Article 107, the Directors
may, before recommending or declaring any dividend, set aside out of the funds
legally available for distribution such sums as they think proper as a reserve
or reserves which shall, in the absolute discretion of the Directors be
applicable for meeting contingencies, or for equalising dividends or for any
other purpose to which those funds may be properly applied and pending such
application may in the absolute discretion of the Directors, either be employed
in the business of the Company or be invested in such investments (other than
shares) as the Directors may from time to time think fit.


110.                           Any dividend may be paid by cheque sent through the
post to the registered address of the Member or person entitled thereto, or in
the case of joint holders, to any one of such joint holders at his registered
address or to such person and such address as the Member or person entitled, or
such joint holders as the case may be, may direct.  Every such cheque shall be made payable to
the order of the person to whom it is sent or to the order of such other person
as the Member or person entitled, or such joint holders as the case may be, may
direct.


111.                           The Company when paying dividends to the Members in
accordance with the provisions of these Articles shall make such payment in
cash.


112.                           Subject to any rights and restrictions for the time
being attached to any class or classes of shares, all dividends shall be
declared and paid according to the amounts paid on the shares, but if and so
long as nothing is paid up on any of the shares dividends may be declared and
paid according to the par value of the shares. 
No amount paid on a share in advance of calls shall, while carrying
interest, be treated for the purposes of this Article as paid on the share.


113.                           No dividend shall bear interest against the Company.


ACCOUNTS AND AUDIT


114.                           The books of account relating to the Company’s affairs
shall be kept in such manner as may be determined from time to time by the
Directors.


115.                           The books of account shall be kept at the registered
office of the Company, or at such other place or places as the Directors think
fit, and shall always be open to the inspection of the Directors.









 



 


116.                           The Directors shall from time to time determine
whether and to what extent and at what times and places and under what
conditions or regulations the accounts and books of the Company or any of them
shall be open to the inspection of Members not being Directors, and no Member
(not being a Director) shall have any right of inspecting any account or book
or document of the Company except as conferred by law or authorised by the
Directors (which authorization should not be unreasonably withheld) or by the
Company by Ordinary Resolution.  The cost
and expenses incurred by such inspection shall be borne by the requesting
Member.


117.                           The accounts relating to the Company’s affairs shall
only be audited if the Directors so determine, in which case the financial year
end and the accounting principles will be determined by the Directors.


CAPITALISATION OF PROFITS


118.                           Subject to the Companies Law, the Directors may, with
the authority of a Special Resolution:


(a)                                  resolve to capitalise an amount standing to the credit
of reserves (including a share premium account, capital redemption reserve and
profit and loss account), whether or not available for distribution;


(b)                                 appropriate the sum resolved to be capitalised to the
Members in proportion to the nominal amount of shares (whether or not fully
paid) held by them respectively and apply that sum on their behalf in or
towards:


(i)                                     paying up the amounts (if any) for the time being
unpaid on shares held by them respectively, or


(ii)                                  paying up in full unissued shares or debentures of a
nominal amount equal to that sum,


and allot the shares or debentures, credited as fully paid, to the
Members (or as they may direct) in those proportions, or partly in one way and
partly in the other, but the share premium account, the capital redemption
reserve and profits which are not available for distribution may, for the
purposes of this Article, only be applied in paying up unissued shares to be
allotted to Members credited as fully paid;


(c)                                  make any arrangements they think fit to resolve a
difficulty arising in the distribution of a capitalised reserve and in
particular, without limitation, where









 



 


shares or debentures become distributable in fractions
the Directors may deal with the fractions as they think fit;


(d)                                 authorise a person to enter (on behalf of all the
Members concerned) into an agreement with the Company providing for either:


(i)                                     the allotment to the Members respectively, credited as
fully paid, of shares or debentures to which they may be entitled on the
capitalisation, or


(ii)                                  the payment by the Company on behalf of the Members
(by the application of their respective proportions of the reserves resolved to
be capitalised) of the amounts or part of the amounts remaining unpaid on their
existing shares,


and
any such agreement made under this authority being effective and binding on all
those Members; and


(e)                                  generally do all acts and things required to give
effect to the resolution.


SHARE PREMIUM ACCOUNT


119.                           The Directors shall in accordance with Section 34 of
the Companies Law establish a share premium account and shall carry to the
credit of such account from time to time a sum equal to the amount or value of
the premium paid on the issue of any share.


120.                           There shall be debited to any share premium account on
the redemption or purchase of a share the difference between the nominal value
of such share and the redemption or purchase price provided always that at the
discretion of the Directors such sum may be paid out of the profits of the
Company or, if permitted by Section 37 of the Companies Law, out of capital.


NOTICES


121.                           Any notice or document may be served by the Company or
by the person entitled to give notice to any Member either personally, by
facsimile or by sending it through the post in a prepaid letter or via a
recognised courier service, fees prepaid, addressed to the Member at his
address as appearing in the Register of Members.


122.                           Any Member present, either personally or by proxy, at
any meeting of the Company shall for all purposes be deemed to have received
due notice of such meeting and, where requisite, of the purposes for which such
meeting was convened.









 



 


123.                           Any notice or other document, if served by (a) post,
shall be deemed to have been served five days after the time when the letter
containing the same is posted, or, (b) facsimile, shall be deemed to have been
served upon production by the transmitting facsimile machine of a report
confirming transmission of the facsimile in full to the facsimile number of the
recipient or (c) recognised courier service, shall be deemed to have been
served 48 hours after the time when the letter containing the same is delivered
to the courier service.  In proving
service by post or courier service it shall be sufficient to prove that the
letter containing the notice or documents was properly addressed and duly
posted or delivered to the courier service.


124.                           Any notice or document delivered or sent by post to or
left at the registered address of any Member 
in accordance with the terms of these Articles shall notwithstanding
that such Member be then dead or bankrupt, and whether or not the Company has
notice of his death or bankruptcy, be deemed to have been duly served in
respect of any share registered in the name of such Member as sole or joint
holder, unless his name shall at the time of the service of the notice or
document, have been removed from the Register of Members as the holder of the
share, and such service shall for all purposes be deemed a sufficient service
of such notice or document on all persons interested (whether jointly with or
as claiming through or under him) in the share.


125.                           Notice of every general meeting of the Company shall
be given to:


(a)                                  all Members holding shares with the right to receive
notice and who have supplied to the Company an address for the giving of
notices to them; and


(b)                                 every person entitled to a share in consequence of the
death or bankruptcy of a Member, who but for his death or bankruptcy would be
entitled to receive notice of the meeting.


No other person shall be entitled to receive
notices of general meetings.


INDEMNITY


126.                           Every Director (including for the purposes of this
Article any alternate Director appointed pursuant to the provisions of these
Articles), Secretary, Assistant Secretary, or other officer for the time being
and from time to time of the Company (but not including the Company’s auditors)
and the personal representatives of the same shall be indemnified and secured
harmless out of the assets and funds of the Company against all actions,
proceedings, costs, charges, expenses, losses, damages or liabilities incurred
or sustained by him in or about the conduct of the Company’s business or
affairs or in the execution or discharge of his duties, powers, authorities or
discretions, including without prejudice to the generality of the foregoing,
any costs, expenses, losses or liabilities incurred by him









 



 


in defending (whether successfully or otherwise) any
civil proceedings concerning the Company or its affairs in any court whether in
the Cayman Islands or elsewhere.


127.                           No such Director, alternate Director, Secretary,
Assistant Secretary or other officer of the Company (but not including the
Company’s auditors) shall be liable (a) for the acts, receipts, neglects, defaults
or omissions of any other such Director or officer or agent of the Company or
(b) for any loss on account of defect of title to any property of the Company
or (c) on account of the insufficiency of any security in or upon which any
money of the Company shall be invested or (d) for any loss incurred through any
bank, broker or other similar person or (e) for any loss occasioned by any
negligence, default, breach of duty, breach of trust, error of judgement or
oversight on his part or (f) for any loss, damage or misfortune whatsoever
which may happen in or arise from the execution or discharge of the duties,
powers authorities, or discretions of his office or in relation thereto, unless
the same shall happen through his own dishonesty.


NON-RECOGNITION OF TRUSTS


128.                           No person shall be recognised by the Company as
holding any share upon any trust and the Company shall not, unless required by
law, be bound by or be compelled in any way to recognise (even when having
notice thereof) any equitable, contingent or future interest in any of its
shares or any other rights in respect thereof except an absolute right to the
entirety thereof in each Member registered in the Register of Members.


WINDING UP


129.                           If the Company shall be wound up the liquidator may,
with the sanction of a Special Resolution of the Company divide amongst the
Members in specie or kind the whole or any part of the assets of the Company
(whether they shall consist of property of the same kind or not) and may, for
such purpose set such value as he deems fair upon any property to be divided as
aforesaid and may determine how such division shall be carried out as between
the Members or different classes of shares. 
The liquidator may, with the like sanction, vest the whole or any part
of such assets in trustees upon such trusts for the benefit of the
contributories as the liquidator, with the like sanction shall think fit, but
so that no Member shall be compelled to accept any shares or other securities
whereon there is any liability.


AMENDMENT OF ARTICLES OF ASSOCIATION


130.                           Subject to the Companies Law and the rights attaching
to the various classes of shares, the Company may at any time and from time to
time by Special Resolution alter or amend these Articles in whole or in part.









 



 


REGISTRATION BY WAY OF CONTINUATION


131.                           The
Company may by Special Resolution resolve to be registered by way of
continuation in a jurisdiction outside the Cayman Islands or such other
jurisdiction in which it is for the time being incorporated, registered or
existing. In furtherance of a resolution adopted pursuant to this Article, the
Directors may cause an application to be made to the Registrar of Companies to
deregister the Company in the Cayman Islands or such other jurisdiction in
which it is for the time being incorporated, registered or existing and may
cause all such further steps as they consider appropriate to be taken to effect
the transfer by way of continuation of the Company.