Exhibit 10.4


GUARANTY


THIS GUARANTY
(this “Guaranty”), dated as of August 15,
2006, is executed by 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 (the “Guarantor”), in
favor of the Chinese Parties (as defined in the JV Contract defined below) (the
Guarantor and the Chinese Parties are collectively referred to as the “Parties” hereinafter).


WHEREAS, in order
to induce the Chinese Parties to enter into the Joint Venture Contract (the “JV
Contract”), dated as of August 15, 2006, by and among Star China
Ltd. (“Star China”) a company duly
incorporated and existing under the laws of Cayman Islands, Hunan Valin Steel
Tube and Wire Co., Ltd. (“VTW”), a
company duly incorporated and existing under the laws of People’s Republic of
China (“PRC”, for the purposes of this Guaranty
only, not including Hong Kong Special Administrative Region, Macau Special
Administrative Region or Taiwan) and Hengyang Valin Steel Tube Company Limited
(“VST”), a company duly incorporated
and existing under the laws of PRC, 
Guarantor has agreed, subject to the terms and conditions contained in
this Guaranty, to guarantee the payment and performance of all obligations,
liabilities and indemnities of Star China now existing or hereafter arising
under the JV Contract, the Capital Increase Agreement between Star China, VTW,
VST and Hengyang Valin MPM Steel Tube Company Limited (“Valin MPM”),
dated as of August 15, 2006 (“CIA”) and
the Articles of Association in respect of Valin MPM between Star China, VTW and
VST, dated as of August 15, 2006 (“AoA”) (JV
Contract, CIA and AoA are collectively referred to as “Transaction
Documents”) (collectively, the “Obligations”)
and to execute and deliver this Guaranty;


WHEREAS, Guarantor
will benefit, directly or indirectly, from the consummation of the transactions
contemplated by the Transaction Documents;


WHEREAS, each
capitalized term defined in the Transaction Documents and not otherwise defined
herein shall have the meaning ascribed thereto in the Transaction Documents
when used herein;


NOW, THEREFORE, in
consideration of the foregoing, and intending to be legally bound hereby,
Guarantor agrees as follows:


Section 1.               Unconditional
Guarantee.


(a)           Guarantor fully and irrevocably
guarantees the payment and performance of the Obligations when due.  Guarantor is hereby made fully responsible
for the acts and omissions of Star China that constitute a breach of the
Transaction Documents.  This Guaranty
shall be a full, unconditional, irrevocable, absolute and continuing guarantee
of payment and performance and not a guarantee of collection, and Guarantor
shall remain liable on the Obligations hereunder until the payment in full of
the Obligations.


(b)           The Obligations of Guarantor
hereunder shall not be released, discharged, diminished or impaired by
(i) the renewal, extension, modification or alteration by Star China and
the Chinese Parties, with or without the knowledge or consent of Guarantor, of
the Transaction Documents or of any liability or obligation of Star China
thereunder or of any document or instrument under which the Obligations arise,
(ii) any 



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forbearance or
compromise granted to Star China by the Chinese Parties when dealing with Star
China except to the extent of such forbearance or compromise, (iii) any
change in corporate structure or ownership of Star China or the bankruptcy,
insolvency, liquidation, receivership, dissolution, winding-up or termination
of Star China or the fact that at any time Star China does not exist,
(iv) the inaccuracy of any of the representations and warranties of Star
China under any of the Transaction Documents, (v) any neglect, delay,
omission, failure or refusal of Star China to take or prosecute any action in
connection with the Transaction Documents, or (vi) the full or partial
release of Star China on any liability or obligation, except that Guarantor
shall be released pro tanto to the extent the Chinese Parties expressly release
Star China from liability with respect to the Obligations.


(d)           Guarantor waives notice of
(i) acceptance of this Guaranty, (ii) the creation, renewal,
extension, modification, alteration or existence of any liability or obligation
of Star China constituting part of the Obligations, and (iii) any breach
of or default in the performance of the Obligations.


(e)           If Star China fails to perform
Obligations requiring payment, in whole or in part, when such Obligations are
due, Guarantor shall promptly pay such Obligations in cash.  Guarantor shall pay such amount within ten
(10) Business Days (as defined in the JV Contract) of receipt of demand for
payment from the Chinese Parties.  The
Chinese Parties may enforce Guarantor’s obligations under this Guaranty after
suing Star China or joining Star China in any suit against Guarantor, or
enforcing any rights and remedies against Star China or otherwise pursuing or
asserting any claims or rights against Star China or any other person or entity
or any of its or their property which may also be liable with respect to the
matters for which Guarantor is liable under this Section 1.


(f)            Guarantor reserves the right to
assert defenses which Star China may have to payment or performance of any
Obligation.


Section 2.               Representation
as to Benefit.  Guarantor warrants
and represents for and as to itself that it has received, or will receive,
direct or indirect benefit from the making of this Guaranty.


Section 3.               Governing
Law and Consent to Jurisdiction. 
This Guaranty shall be governed by and construed in accordance with the
laws of China.


Section 4.               Dispute
Resolution.  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 Guaranty (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, shall be
referred to the International Court of Arbitration of the International Chamber
of Commerce 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 Article within
this Guaranty.  The Tribunal shall
consist of one (1) arbitrator who shall be appointed by the Chairman of the
International Chamber of Commerce.  The
costs of the arbitration, including administrative and arbitrator’s fees, shall
be borne by the Parties according to the arbitration award.  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 



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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 Guaranty to comply with the decision of the arbitrator
requires the other party to apply to any court for enforcement of such award,
the non-complying Party shall be liable to the other for all cost of such
litigation including attorney’s fees. 
The Parties may apply to any court of competent jurisdiction in
accordance with this Article 4 for temporary or
permanent injunctive relief, without breach of this Article 4 or abridgement of the
powers of the arbitrator.  Neither 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 Article 4, and then only for the enforcement of any arbitral award.


Section 5.               Benefit.  This Guaranty shall inure to the benefit of
the Chinese Parties and their respective successors and assigns, and shall be
binding upon Guarantor and its successors and assigns; provided, however, that
(i) neither the Chinese Parties nor Guarantor shall assign its rights or
obligations under this Guaranty without the prior written consent of the other
except by operation of law, (ii) no assignment or other transfer by,
through or under the Chinese Parties shall operate to increase Guarantor’s
obligations hereunder, and (iii) Guarantor shall be fully protected in
making and shall receive full credit for any payments or other performance made
by it to the Chinese Parties or their successors and assigns with respect to
the Obligations prior to the time Guarantor receives written notice of such
assignment or succession.


Section 6.               Continuing
Guarantee.  Subject to the terms,
conditions and limitations hereof, this Guaranty is a continuing guarantee and
shall remain in full force and effect and be binding upon Guarantor until the
Obligations have been satisfied in full.


Section 7.               Notices.  Any notice, demand or other communication
required or permitted under this Guaranty shall be in writing and given
by hand delivery, facsimile, overnight courier, or post.  All notices shall be properly addressed to
the recipient, with all postage and other charges being paid by the party
giving notice.  Notices shall be
effective when actually received by the party being notified.  The addresses of the parties for purposes of
notice are as follows:


If to Guarantor, to:


Lone Star Technologies, Inc.:


15660 N. Dallas Pkwy., Ste. 500,

Dallas, TX 75248

United States of America

Attention: General Counsel

Facsimile No:  (+1) 972-770-6474


with a copy to:


Weil, Gotshal
& Manges LLP

200 Crescent Court, Suite 300





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Dallas, Texas
75201

United States of America

Attention:  Mary R. Korby

Fax: (+1) 214-746-7777

E-mail: mary.korby@weil.com


If to the Chinese Parties, to:


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


Hengyang Valin Steel Tube Co. Ltd.:


No. 10 Dali New Village, Zhengxiang District

Hengyang, Hunan Province

People’s Republic of China

Attention: Head of Office

Facsimile No:  (86)734-8870188


Any party may change its address by giving two days’ advance written
notice to the other party.



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IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of
the date first above written.


	
  

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  Lone Star
  Technologies, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rhys J. Best

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Rhys J. Best

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Chairman/CEO

  



 


 


[Signature
Page of Guaranty]


 



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