Exhibit
10.6


August 15, 2006


 


The following agreements have been agreed in form and substance by the
parties thereto as attached and the parties thereto hereby agree to enter into
these agreements after the Trading Company (as defined therein) has been established:


 


以下各方当事人兹确认,已就下述合同以后附的形式及内容达成一致,并将待贸易公司设立后签署正式协议。


 


1.             MPM Sale, Marketing
& Supply Agreement (in English)


 


华菱连轧管销售、营销和供应协议(英文)


 


2.             MPM Sale, Marketing
& Supply Agreement (in Chinese)


    


   华菱连轧管销售、营销和供应协议(中文)


 


3.             VST Sale, Marketing
& Supply Agreement (in English)


    


    华菱钢管销售、营销和供应协议(英文)


 


4.             VST Sale, Marketing
& Supply Agreement (in Chinese)


 


华菱钢管销售、营销和供应协议(中文)


 


 









 



 


	
  

  	
   

  	
  LONE STAR TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Rhys J. Best

  
	
   

  	
   

  	
  Name: 

  	
   

  	
  Rhys J. Best

  
	
   

  	
   

  	
  Title: 

  	
   

  	
  Chairman/CEO

  



 


[Sales & Marketing Agreements
– Cover Page]









 



 


	
  

  	
  HENGYANG VALIN MPM STEEL TUBE CO., LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Zhao JianHui

  
	
   

  	
  Name: 

  	
  Zhao JianHui

  
	
   

  	
  Title: 

  	
  Chairman/General Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  HENGYANG VALIN STEEL TUBE CO., LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Zhao JianHui

  
	
   

  	
  Name: 

  	
  Zhao JianHui

  
	
   

  	
  Title: 

  	
  Chairman/General Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  HUNAN VALIN STEEL TUBE & WIRE CO., LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Cao HuiQuan

  
	
   

  	
  Name: 

  	
  Cao HuiQuan

  
	
   

  	
  Title: 

  	
  Director/General Manager

  



 


[Sales
& Marketing Agreements – Cover Page]


 


 
















 


MPM SALE,
MARKETING & SUPPLY AGREEMENT


This MPM SALE, MARKETING &
SUPPLY AGREEMENT (the “Agreement”), dated as of                , 2006, by and among [Trading
Company], a company limited by shares organized and existing under the laws of
the Cayman Islands (“Buyer”), Lone Star Technologies, Inc., a
corporation organized under the laws of the State of Delaware, United States of
America (“LST”), Hengyang Valin MPM Steel Tube Co., Ltd., a Sino-foreign
joint venture company organized under the laws of the PRC (“Supplier”),
and Hunan Valin Steel Tube & Wire Co., Ltd., a joint stock company
organized and existing under the laws of the PRC (“VTW”).


RECITALS:


WHEREAS,
Buyer is a trading company established by Star China Ltd. (“Star China”),
a wholly-owned subsidiary of LST organized and existing under the laws of the
Cayman Islands, or by any of its Affiliates, including without limitation, LST,
and VTW.


WHEREAS,
the parties wish to enter into this Agreement to set forth the terms and
conditions pursuant to which Supplier will manufacture and sell certain
products (as set forth below) to Buyer and Buyer will purchase and resell
certain products from Supplier; and


WHEREAS, the Buyer intends to provide
distribution services, marketing support, technical expertise and other
services in order to increase the sales of Supplier’s products in the
Territory.


NOW,
THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties hereto agree as follows:


1.             Defined
Terms.  The following
terms have the meanings specified in this Section 1 and shall be equally
applicable to both the singular and plural forms.


(a)           “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.


(b)           “Applicable
Margin Split” means the applicable “Cost Plus” (indicated in column (F))
based on the Net Sales Profit, as set forth in Exhibit B.  For the sole purpose of determining the initial
Applicable Margin Split, the Parties agree to use 32% of Net Sales Profit Margin
as the reference.










 



 


(c)           “Business
Day” means a day, other than a Saturday, Sunday or public holiday, on which
banks in the People’s Republic of China and Dallas, Texas, the United States of
America are open for general business.


(d)           “Capital
Increase Agreement” means the capital increase agreement for Supplier dated
August 15, 2006 between VTW, Hengyang Valin Steel Tube Co., Ltd., Star
China and Supplier in respect of Star China’s contribution to the registered
capital of Supplier.


(e)          
“Competing Products” means any Tubular Products which Supplier or its
subsidiary(ies) has the ability and capacity to manufacture at the time Buyer
makes a purchase inquiry.


(f)           
“Coupling” means a tubular section used for the exclusive purpose of
joining two threaded pin ends of pipe or equipment having the same external and
internal diameters and same thread.


(g)          
“Coupling Materials” means seamless pipes from which tubular sections
are prepared for the manufacture of Couplings or Cross-Overs.


(h)          
“Cross-Over” means a tubular section used for the exclusive purpose of
joining two threaded pin ends of pipe having different dimensions or threads.


(i)           
“Effective Date” means the date on which the JV Contract comes into
effect.


(j)            “Funding
Date” means the date on which Star China makes its contribution to the
registered capital of Supplier in accordance with the terms of the Capital
Increase Agreement and the JV Contract.


(k)           “JV
Contract” means the joint venture contract dated August 15, 2006 between
VTW, Hengyang Valin Steel Tube Co., Ltd. and Star China in relation to the
establishment of the Supplier.


(l)           
“Line Pipe” means finished or unfinished line pipe manufactured by
Supplier or its Subsidiaries (if any) based upon, at a minimum, the latest
version of the standards promulgated by the API and/or the ASTM.


(m)         
“Net Sales Profit” means Total Sales less Total Deductions.


(n)           “Net Sales Profit Margin” means Net Sales Profit
divided by Total Sales.


(o)          
“Lone Star” means LST or its Subsidiaries (however, for the purpose of
this Agreement, the Buyer is regarded as a Subsidiary of LST).


(p)          
“Oil Country Tubular Goods” means casing, tubing, drill pipe,
semi-finished and unfinished green tubes, Coupling stock and finished Couplings
manufactured directly or indirectly by Supplier or its Subsidiaries based upon,
at a minimum, the latest version of the standards promulgated by the API and/or
the ASTM.



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(q)          
“Persistent Default” as it relates to a Competing Product, means the
failure by Supplier or its subsidiary(ies) to supply Competing Product that
meets Buyer’s requirements as to technical specifications, quantity, quality
and/or delivery time as set forth in Buyer’s inquiry (as accepted by Supplier
or its subsidiary(ies)) and such failure shall have resulted in least three (3)
serious complaints or claims for penalty or damage for payments for any one
type of Competing Product from customers within any 6-month period (for the
avoidance of doubt, a single down-hole failure shall be deemed to be a
Persistent Default); provided, however, that minor deviations from the terms of
the order which are beyond the control of Supplier or its subsidiary(ies) shall
not be deemed to be a default.


(r)            “PRC”
means The People’s Republic of China, for the purposes of this Agreement only,
excluding Hong Kong Special Administrative Region, Macao Special Administrative
Region and Taiwan.


(s)           “Preferred
Return Period” shall have the meaning set forth in the Shareholders
Agreement.


(t)            “Preferential
Supplier Period” is defined in Section 3(a).


(u)           “Price Adjustment” means an adjustment to the price
or imputed price of the Tubular Products sold by Supplier to Buyer that is
required by the Tax Authorities.


(v)           “Prime
Products” mean only the Tubular Products sold to the Buyer meeting the
Buyer’s specific requirements, including API specifications and metallic
chemistries.


(w)          “Shareholders
Agreement” means the shareholders agreement dated                      
by and between the Buyer, LST, VTW and Star China.


(x)            “Specialty
Tubing” means mechanical and pressure tubes, cold drawn and hot finished
tubes, shells for redraw and other boiler tubes manufactured directly or
indirectly by Supplier or its Subsidiaries based upon, at a minimum, the latest
version of the standards promulgated by the API and/or the ASTM.


(y)           “Subsidiaries”
of Supplier or Buyer means a
subsidiary in which Supplier or Buyer owns more than 50% equity interest.


(z)            “Tax Authorities” means the PRC tax authorities
having the power to tax Supplier in accordance with the then applicable PRC tax
laws, rules or practices.


(aa)        
“Term” has the meaning ascribed to it in Section 16.


(bb)        
“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 the parties mutually agree to
add to the Territory.


(cc)        
“Total Deductions” means the costs allocated to the Prime Products
pursuant to Exhibit C, plus all the additional costs incurred by the Buyer in
preparing and delivering the Prime Products to its end customers, including but
not limited to costs relating to administration, financing, further processing
and shipping.


(dd)        
“Total Sales” means the revenue from the sales to its end customers
received by the Buyer.



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(ee)        
“Tubular Products” means Line Pipe, Oil Country Tubular Goods, Specialty
Tubing and/or all other tubular products manufactured by Supplier or its
Subsidiaries (if any).


(ff)          
“$” means the lawful currency of the United States of America.


2.             Exclusive
Marketing.


(a)           Unless
otherwise provided herein, as of the Funding Date and so long as Supplier is
the preferred supplier of Lone Star under this Agreement, Supplier hereby
grants LST the exclusive right, without limitation or exclusion, (i) to market
and sell Tubular Products through Buyer to any party located in the Territory
and (ii) for any Tubular Product purchases initiated in the Territory without
regard to the end-use location.  LST
shall conduct marketing and sales of Tubular Products in the Territory through
Buyer.  It is understood that Supplier,
prior to the signing of this Agreement, has distributed Tubular Products in the
Territory to a limited extent.  From the
Funding Date, Buyer shall be responsible for the distribution and sales of all
Tubular Products in the Territory.  Tubular
Products shipped to the Territory but sold to international end-users outside
the Territory through Buyer will constitute sales in the Territory, but such
sales should not conflict with Supplier’s sales in international markets other
than the Territory.


(b)           Supplier
will promptly, and in any event no later than six (6) months from the Funding
Date, cease to directly or indirectly sell Tubular Products to customers in the
Territory (other than to Buyer).


(c)           Supplier
will disclose to Buyer all existing supply contracts it or its Subsidiaries (if
any) have with customers in the Territory with unfulfilled orders, and as from
the Funding Date and subject to such customers’ consent, give Buyer the option
to assume such contracts. In the event that customers of existing contracts
decline to be transferred to the Buyer, Supplier shall continue to perform such
contracts, provided that such contracts shall be terminated or fully performed
before the end of the six (6) month period from the Funding Date.


(d)           Upon
notification supported by reasonable evidence to Supplier by Buyer that a
customer of Supplier located outside the Territory is purchasing Tubular
Products from Supplier for the purpose of selling such Tubular Products into the
Territory, Supplier will immediately cease selling any Tubular Products to such
customer.


(e)           Buyer
has customary operating and credit standards and terms and conditions for its
distribution of Tubular Products.  To the
extent consistent with such standards, terms and conditions, Buyer shall seek
to retain the group of Supplier’s distribution channels set forth on Exhibit A
hereto; provided, however, that Buyer will not be bound by any agreement
previously entered into between Supplier or its Affiliates and such
distributors.



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3.             Preferred Supplier


(a)           From
the Funding Date and for so long as Lone Star continues to hold, directly or
indirectly, at least 35% of the equity in the Supplier (the “Preferential
Supplier Period”), Supplier will be the preferred supplier for all
Competing Products that Lone Star purchases in the PRC.


(b)           During
the Preferential Supplier Period, Lone Star
intents to optimize the purchase of the Supplier’s Competing Products and
support Supplier’s desire to become the majority supplier for Lone Star’s
global procurement of Competing Products, to the extent that it is consistent
with the economic interests of Lone Star.


(c)           If
at any time during such Preferential Supplier Period, Lone Star wishes to place
an inquiry for Competing Products to be sourced from the PRC, Buyer will place
such inquiry with Supplier or its Subsidiary(ies), setting forth the
specifications of the product, price, quantity, quality, delivery time and
other applicable terms.  For repeat
inquiries (i.e. inquiries for identical Competing Products), Supplier or its
Subsidiary(ies) with which the inquiry is placed will have the right to accept
or decline the inquiry on such terms within two (2) Business Days of the
inquiry being placed, and for new inquiries, Supplier or its Subsidiary(ies)
with which the inquiry is placed will have the right to accept or decline the
inquiry on such terms within five (5) Business Days of the inquiry being
placed.  If Supplier or its Subsidiary(ies)
with which the inquiry is placed declines to accept the inquiry in whole or in
part or fails to reply within the relevant time period of the inquiry being
placed, Lone Star may order such Competing Product from any other supplier at
substantially the same terms and conditions that have been offered to Supplier.


(d)           If
for whatever reason there is a Persistent Default, Lone Star has the right to
suspend the preferred supplier arrangement with respect to the Competing
Product for which the Persistent Default relates until the cause for the Persistent
Default is resolved to Buyer’s reasonable satisfaction.  During such suspension, Supplier shall use
its best efforts to identify and rectify the causes for the Persistent Default,
and the preferred supplier arrangement shall be resumed as soon as practicable
when the Persistent Default has been fully rectified to Buyer’s reasonable
satisfaction.


4.             Costing, Price and Payment.


(a)           During
the Preferred Return Period, the
price of the Tubular Products shall be the costs allocated to the Prime
Products (as defined in Exhibit C) as determined by the method set forth in
Exhibit C to this Agreement, plus the Applicable Margin Split.  After the Preferred Return Period and during
the Term of this Agreement, as long as Supplier is the preferred supplier for
all Competing Products that Lone Star purchases in the PRC, the price of the
Tubular Products shall be at least the most favorable market price that the
Supplier provides to its customers outside the PRC.  If the Supplier provides to any person (other
than customers in the PRC) more favorable terms for any Tubular Products than
those terms which Buyer is receiving for the same Tubular Products, taking into
account the quantities, product costs, quality requirements, inventory
requirements and delivery time, then: 
(i) Supplier will promptly notify Buyer of such terms and (ii) so long
as Buyer is in material compliance with its payment obligations under this
Agreement (without taking into account disputed invoices), Supplier shall



 5
 






 



 


grant
equally favorable terms to Buyer as those granted to such other customer.  The more favorable terms shall apply
retroactively to all shipments of the affected Tubular Products as of the
effective date of Supplier’s arrangement with its other customer(s) and shall
continue until the earlier of termination of this Agreement and the termination
of such arrangement.


(b)           With
respect to Tubular Products that Buyer purchases from Supplier, Buyer shall
make payment against documents (D/P) (as defined in Incoterms 2000) to Supplier
at sight for each shipment. Within 7 days after the close of accounting book on
a quarterly basis, Buyer shall calculate the amount, if any, representing
customer returns, warranty claims and unresolved disputed invoices relating to
Tubular Products occurring during such quarter, which shall be payable by
Supplier or offset by Buyer’s next payment to Supplier in accordance with
Section 20 below.  If such payment period
ends on a day which is not a Business Day, such period shall be deemed to end
on the next Business Day.  Buyer will be
the importer of record for all products received by it under this
Agreement.  All prices and payments under
this Agreement shall be in U.S. Dollars.  
Buyer shall use its best commercially reasonable efforts to maximize the
price it charges its customers of Tubular Products, while Supplier shall use
its best commercially reasonable efforts to minimize the product costs.


(c)           Supplier
may, upon reasonable notice and during business hours, but not more frequently
than once per quarter, have an independent third party audit the invoices
between Buyer and its customers of Tubular Products solely for the purpose of
reviewing Buyer’s invoices to such customers. 
Information obtained by Supplier, orally or in writing, during such
audit shall be considered confidential information subject to Section 18
hereof, and reports related to such audit shall only be provided to Supplier’s
Chief Financial Officer and Deputy Manager in charge of Finance.


(d)           Buyer
may, upon reasonable notice and during business hours, but not more frequently
than once per quarter, have an independent third party audit the books and
records of Supplier for the purpose of verifying, among other things, whether
the product costs have been allocated to the Prime Products in compliance with
Exhibit C. Information obtained by Buyer,
orally or in writing, during such audit shall be considered confidential
information subject to Section 18 hereof.


(e)           The
Parties agree that the Net Sales Profit shall be distributed to Star China
or its Affiliate (including without limitation, LST, whichever is applicable, and
VTW in accordance with the Applicable Margin Split and the Shareholders
Agreement entered into between Star China (or its Affiliate) and VTW as
shareholders of the Buyer.


(f)            During the Preferential Return Period and following a
Price Adjustment required by the Tax Authorities, the Cost Plus charged by the
Supplier 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) Buyer'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 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.


(g)           In the event that Supplier is assessed retroactive taxes
as a result of a Price Adjustment (“Additional Price Adjustment Taxes”),
Supplier shall provide timely notice to Buyer of such assessment and Buyer
shall indemnify Supplier against all such Additional Price Adjustment Taxes.


(h)           Supplier shall promptly engage one of the Four Accounting
Firms (as such term is defined in the JV Contract) to advise Supplier with
respect to its communications with the Tax Authority and in conducting any
analyses (including pricing studies) necessary to prepare for such
communications.


5.             Method of Sales.  Buyer will purchase the Tubular Products in
accordance with method consistent with Incoterms 2000.


6.             Product Acceptance from Major Tubular Customers.  Buyer shall use reasonable efforts to work
with Supplier to obtain product acceptance and approvals from major Tubular
Product customers in the Territory and elsewhere.  The trademarks to be used on all purchased
Tubular Products for sale in the Territory shall be as specified in Exhibit D
to this Agreement.



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7.             Market and Production Information.


(a)           Buyer
shall, from time to time, invite Supplier to participate in visits to customers
in order to maximize market exposure and awareness on the part of
Supplier.  Supplier shall, from time to
time, as requested by Buyer, allow Buyer and customers to visit Supplier’s
production facilities in Hengyang, Hunan, People Republic of China.  Buyer shall also provide Supplier, on a
monthly basis, with market information and sales reports in respect of the
Tubular Products acquired by Buyer from Supplier.


(b)           The
parties acknowledge that prior to the signing of this Agreement, Supplier has
been responsible for its marketing activities and distribution channels in the
Territory.  Subject to Article 2, any
changes to the choice of or management of Supplier’s existing distribution
channels shall be at Buyer’s discretion pursuant to the exclusive marketing
arrangement in the Territory.


8.             Volume Obligations.  Supplier shall supply not less than
100,000 metric tons of Tubular Products annually for purchase by Buyer unless
Buyer requests a smaller amount, and shall, together with the Tubular Products
purchased by Buyer from Valin Steel Tube Co., Ltd., supply not less than
200,000 metric tons of Tubular Products annually for purchase by Buyer unless
Buyer requests a smaller amount.  Buyer
shall use its best efforts to achieve target sales of not less than 200,000
metric tons of Tubular Products annually from Supplier and Valin Steel Tube
Co., Ltd. and shall have consideration for Supplier’s and Valin Steel Tube Co.,
Ltd.’s mill operating capacity in placing orders for Tubular Products.


9.             Exclusive
Sales.  During the
Preferential Supplier Period, if Lone Star wishes to sell Tubular Products
directly into the PRC, such sale shall only be made through Supplier.  


10.           Product Quality and Claims.  


(a)           Supplier
represents and warrants to Buyer as follows: 
Supplier will deliver to Buyer title to all Tubular Products free and
clear of all security interests, liens, charges, restrictions or encumbrances
of any kind, nature or description; all Tubular Products shall be free from
defects in material and/or workmanship, unless otherwise specified in the
purchase order; all Tubular Products shall be new and not used or
reconditioned; all Tubular Products will conform to Buyer’s specifications and
technical standards set forth in each purchase order. All Tubular Products
shall in all respects be suitable for the particular purpose for which they are
purchased and all Tubular Products shall be merchantable in accordance with the
purchase orders.  All Tubular Products
shall be packaged, labeled and shipped in accordance with applicable laws and
regulations, including without limitation state and federal environmental and
hazardous substance laws and regulations, and in accordance with the purchase
orders.  


(b)           In
the event that there is any product quality issue (whether through a
customer-initiated complaint or otherwise), Buyer shall be responsible for
investigating it, interfacing with the customer as well as Supplier, but
Supplier shall be solely responsible for any defect contained in the Tubular
Products upon delivery to Buyer and any damages caused 



 7
 






 



 


thereby.  In connection with the handling of such
product quality issues, (i) Buyer will discuss with Supplier the proposed
settlement offer with a customer prior to extending such offer to the customer;
(ii) Supplier will use its best efforts to conform to Buyer’s 30-day customary
time framework for handling of product quality issues; and (iii) Supplier shall
be responsible for all settlement costs, including any direct or indirect
legal, special or consequential damages; provided, however, that Supplier shall
not be responsible for any settlement effected by Buyer without Supplier’s
prior consent, which shall not be unreasonably withheld, conditioned or
delayed.  If Supplier shall not have
responded within 30 days, Supplier shall be deemed to have agreed to the
settlement suggested by Buyer.


11.           Product Mix and Volume.  Buyer and Supplier shall work closely
together in developing an annual supply plan, which shall be completed 90 days
before the beginning of each calendar year. Buyer shall use its best
commercially reasonable efforts to prepare a reasonably accurate forecast for
the demand of the Tubular Products in such annual supply plan so as to enable
Supplier to efficiently allocate its production resources, while Supplier shall
use its best  commercially reasonable
efforts to prepare a reasonably accurate forecast for the product costs in such
annual supply plan so as to enable Buyer to better market and sell of Tubular
Products.  Buyer shall advise Supplier of
the anticipated volume and product mix of Tubular Products that Supplier will
manufacture for purchase by Buyer on a quarterly basis, such forecast to be
delivered 60 days prior to the beginning of each quarter.  Buyer may make specific line item changes at
any time on or before 45 days prior to commencement of production.  Supplier shall confirm with Buyer that it
will produce the Tubular Products requested in such forecast within five days
of receipt of Buyer’s advice of its needs. 
Buyers shall place purchase orders in reasonable advance time prior to
delivery consistent with market practice.


12.           Remedies.  In the event of Supplier’s breach of this
contract and subject to Section 3 herein, Buyer may take any or all of the
following actions, without prejudice to any other rights or remedies available
to Buyer under this Agreement or by law: (i) require Supplier to repair or
replace such Tubular Products, and upon Supplier’s failure or refusal to do so,
repair or replace the same at Supplier’s expense, (ii) reject any shipment or
delivery containing defective or non-conforming Tubular Products and return or
replacement of such Tubular Products at Buyer’s option, said return to be made
at Supplier’s cost and risk, or (iii) cancel any outstanding deliveries
hereunder, and treat such breach by Supplier as Supplier’s repudiation of the
purchase order(s) relating to such deliveries. 
In the event of Buyer’s breach of this contract, unless otherwise proved
by Supplier the existence of actual damages, Supplier’s remedy shall be
Supplier’s recovery of the Tubular Products or the purchase price payable for
Tubular Products shipped prior to such breach.


13.           Product Liability Insurance.  Throughout the Term of this Agreement and for
a period of two years thereafter, Supplier will maintain in effect sufficient
and proper product liability insurance through an internationally recognized
insurance company with insurance coverage required by LST consistent with
insurance coverage requirements applicable to similar products sold in the
Territory.



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14.           Prompt Delivery.  Time of delivery is of the essence of each
purchase order of Tubular Products. Buyer and Supplier shall work closely to
ensure timely delivery required by the purchase orders.


15.           Inspection and Audit Rights; Priority.  Upon Buyer providing Supplier no less than 30
days’ prior notice, Buyer shall have the right to inspect, or have a third
party inspect, any or all of the Tubular Products prior to loading at the port
of origin or upon Buyer’s receipt, at Buyer’s election, which right shall be
exercisable notwithstanding Buyer’s having paid for the goods prior to
inspection.  Any product that according
to any such inspection does not meet the agreed upon specifications as set forth
in Section 10 may be rejected by Buyer. 
Supplier agrees that production and shipments of Tubular Products to
Buyer will have priority over all other conflicting orders received by Supplier
from any person, and Supplier shall implement and maintain effective
controlling measures to ensure the priority on production and shipments of
Tubular Products to Buyer will at all times be effectively carried out. Buyer’s
inspection of Tubular Products shall have no effect on Supplier’s product
warranty or liability for any direct or indirect damages, costs or losses
caused by Tubular Products under Section 10.  Buyer, by reason of its failure to inspect
the goods, shall not be deemed to have accepted any defective Tubular Products
or Tubular Products which do not conform to the specifications thereof, or to
have waived any of Buyer’s rights or remedies arising by virtue of such defects
or nonconformance.  If any of the
delivered Tubular Products are in a defective or nonconforming condition,
efforts of Buyer to correct such defect or nonconformance shall not constitute
an acceptance, and Buyer may reject such Tubular Products where the attempt to
repair has proved unsuccessful.  Buyer
shall have no obligation to attempt to repair or correct such defect or
nonconformance.


16.           Term.  The term of this Agreement (“Term”)
shall commence from the Effective Date until terminated in accordance with the
provisions of Sections 16 or 17. 
This Agreement will terminate automatically on the termination of the
Joint Venture Contract unless it is otherwise agreed in writing by the Parties.


17.           Termination of Agreement.


(a)           Termination by Agreement.  This Agreement may be terminated upon the
mutual written agreement of the parties.


(b)           Termination for Bankruptcy.  Any party upon written notice to the other
Party may terminate this Agreement at any time in the event any other party
shall make an assignment for the benefit of its creditors, or shall file a
voluntary petition under the bankruptcy, reorganization, insolvency or similar laws
of any jurisdiction to which it is subject, or shall suffer an involuntary
petition under such laws to be filed against it, or shall be adjudicated
bankrupt or insolvent, or have an order for relief in bankruptcy entered
concerning it, under the laws of any jurisdiction to which it is subject.


(c)           Effect of Termination.  If this Agreement shall be terminated
pursuant to this Section, all further obligations of the parties under this
Agreement (other than Sections 10, 12, 13, 18, 20, 21, 23, 26, 27, 29) shall
be terminated without further liability of any party to the



 9
 






 



 


other; provided, however,
that nothing herein shall relieve any party from liability for its breach of
this Agreement prior to its termination.


18.           Confidentiality
Obligations.  Each party shall use its best efforts to
prevent any of the other party’s proprietary and confidential information that
it receives under the scope of this Agreement from being (a) used for any
purpose other than the fulfillment of the receiving party’s obligations under
this Agreement or (b) disclosed to any third party (other than the receiving
party’s counsel, auditors or other advisors), in each case without the prior
written consent of the other party.  The
provisions of this Section shall not apply and the receiving party shall have
no obligation with respect to any information that the receiving party can
show:  (i) is or becomes public
knowledge through no wrongful act of the receiving party; (ii) is already known
to the receiving party, which knowledge can be documented from written records;
(iii) is rightfully obtained by the receiving party from any third party
without similar restriction and without breach of any obligation owed to the
disclosing party; or (iv) is independently developed by the receiving party’s
employees who have not had access to the applicable confidential
information.  In addition, a receiving
party may disclose confidential information of the other party if it becomes
compelled to do so by applicable law, regulation or legal process; provided,
however, that before doing so it gives the other party reasonable notice of its
intended disclosure sufficient for the other party to seek a protective order.


19.           Force
Majeure.  If any party is
prevented from or delayed in complying, either totally or in part, with any of
the terms or provisions of this Agreement by reason of (a) fire, flood or storm
that inflicts damage to Supplier’s facilities, or (b) other causes beyond the
reasonable control of Buyer or Supplier that, in the case of either (a) or (b),
cause Supplier’s facilities to become inoperable, then upon notice to the other
party, the affected provisions shall be suspended during the period of such
disability and such party shall have no liability in connection therewith.  Supplier will use its best efforts to remedy
any disability caused by a Force Majeure event.


20.           Invoices;
Right of Set-Off.  Supplier
shall render one copy of each purchase order invoice submitted under this
Agreement and shall send all purchase documents to the Buyer in accordance with
method consistent with Incoterms 2000 (to the extent applicable).  To
the extent permitted under applicable PRC Customs, foreign exchange and
taxation laws and regulations, Buyer shall have the rights of set-off, netting,
offset, recoupment, and similar rights relating to any payments to be made by
Buyer to Supplier or any Subsidiary of Supplier pursuant to any order for
Tubular Products or otherwise.


21.           Environmental.
Supplier warrants that it will, and shall
cause all of its Affiliates, officers, directors, managers, independent
contractors, and employees, to perform all services and furnish all Tubular
Products with due care and in compliance with all applicable federal, state,
regional, and local safety and environmental laws, rules, regulations,
including, without limitation, laws, rules, and regulations pertaining to
notification, permitting, waste management and unauthorized releases.  Supplier further agrees to indemnify, defend
and hold Buyer harmless from any and all claims, demands, judgments, causes of
action, damages, penalties, fines, costs, liabilities or losses, including, but
not limited to, personal injury or death and property damage which arise as a
result of activities related to performance of this



 10
 






 



 


Agreement or
any breach of any provision of this Agreement. 
This indemnity shall survive completion or termination of this
Agreement.


22.           Clerical Errors.  Stenographic and clerical
errors, whether in mathematical computation or otherwise, made by Buyer on a
purchase order or any other forms delivered to Supplier shall be subject to
correction by Buyer.  If Supplier finds
any clerical errors on such documents, it shall inform Buyer accordingly.


23.           Joint
Liability. 
Both Supplier and Buyer hereby agree to cause its respective Affiliates and any of its or its
Affiliates’ officers, directors, managers, independent contractors, or
employees to honor the covenants contained in this Agreement.  Both Supplier
and Buyer shall be liable for
any breaches of such covenants by its respective Affiliates and its or its
Affiliates’ officers, directors, managers, independent contractors, or
employees.


24.           Entire
Agreement; Amendment.  This Agreement
constitutes the entire agreement
between Buyer and Supplier with
respect to the subject matter hereof.  This Agreement may not be amended except
by an instrument in writing executed by both Buyer and Supplier.


25.           Applicable Law.  This Agreement
will be governed by, and construed in accordance with, the laws of Hong Kong,
SAR.


26.           Successors and Permitted Assigns. 
This Agreement will be binding upon, and will inure to the benefit of,
each party and their respective successors and assigns; provided, however, none
of the parties may assign this Agreement without the prior written consent to
the assignment by the other parties hereto except that Buyer may serve as
Supplier’s exclusive sales agent either directly or through a wholly owned
subsidiary, provided that Buyer remains fully liable to Supplier under this
Agreement.


27.           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, 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



 11
 






 



 


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 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 attorneys’ fees. 
The parties may apply to any court of competent jurisdiction in
accordance with this clause (ii), for temporary or permanent injunctive relief,
without breach of this clause (ii) or abridgement of the powers of the
arbitrator.  None of the parties 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
clause (ii), 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 by such other method authorized by
applicable law or court rule.  During the
settlement process of disputes, each party shall continue to perform its
obligations unrelated to the relevant disputes under this Agreement.


28.           Notice
Provision.  All required or permitted notices and other
communications shall be in
writing and, unless otherwise provided in this Agreement, shall be deemed effective when transmitted to the addresses set forth below (i) on the second
Business Day following delivery to the
courier service if sent by international air courier, fastest method, where the
recipient is required to sign for such package, (ii) upon receipt by the sender
of a confirmation of receipt by the recipient’s fax machine designated below if
sent by fax or (iii) upon delivery to a responsible person at the office
specified if by manual delivery:


If to Supplier:


Hengyang Valin MPM Steel Tube Co., Ltd.


Attention: 
General Manager


[Address]


If
to VTW:


Hunan Valin Steel Tube & Wire Co., Ltd.


Attention:


Address: Valin Plaza, No. 111 Section of Fu Rong
Zhong Lu, Changsha, 


Hunan
Province, PRC


If
to Buyer:


[Trading Company]


Attention: 
Chief Executive Officer


15660 N. Dallas Pkwy., Ste. 500, 


Dallas, TX 75248, U.S.A.


Fax:         +1-972-770-6474



 12
 






 



 


with
a copy 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 LST:


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
a copy 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


or to such other address or
addresses as any such party may from time to time designate for itself in
writing.


29.           No Third Party Beneficiaries.  Nothing in this Agreement shall be construed
to create any rights in any third party against any party.


30.           Compliance with Laws.  Each party agrees to comply with all applicable
laws and regulations relating to its performance hereunder.  Each Party shall ensure that it obtains and
maintains at its own cost all necessary permits and/or licenses necessary for
it to perform its obligations hereunder.


31.           No Waiver.  The performance of or compliance with a party’s
obligation hereunder may be waived, but only in writing signed by an authorized
representative of the other party.  A
waiver of compliance with any provision of this Agreement shall not constitute
a waiver of any subsequent lack of compliance with such provision or of any
other provision of this Agreement. 
Failure of any party to enforce at any time any provision of this
Agreement shall not be construed as a waiver thereof.


32.           Relationship of Parties.     Nothing in this Agreement shall create, or
be deemed to create, a partnership, joint venture or legal relationship of any
kind between the parties that would impose liability upon one party for the
acts or failure to act of the other party, or authorize any party to act as
agent for the other.  Save where
expressly stated in this Agreement, none of the parties shall have the
authority to make representations, act in the name or on behalf of or otherwise
bind the other.


 



 13














 


 


33.           Execution.             This Agreement may be executed in
any number of counterparts and by the parties on separate counterparts, each of
which, when executed, shall be an original, but all counterparts shall together
constitute on and the same instrument.


34.           Further Assurance.            LST shall execute or procure the
execution of all necessary service contracts between Buyer on the one hand and
LST or other third-party service providers on the other hand as may from time
to time be necessary to give support to Buyer in performing its distribution
and sale responsibility hereunder.


35.           Language.             This Agreement is written in
English and Chinese.  Both languages
shall be of equal effect.


 


IT WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first written above.


	
  

  	
   

  	
  [TRADING
  COMPANY]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LONE
  STAR TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HENGYANG VALIN MPM STEEL

  TUBE
  CO., LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						



 



 14
 






 



 


	
  

  	
   

  	
  HUNAN
  VALIN STEEL TUBE & WIRE

  CO., LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						



 



 15
 






 



 


I hereby certify that,
this Agreement has been approved by the board of directors of Hengyang Valin
MPM Steel Tube Co., Ltd. on                           .


	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:Legal Representative

  	
   

  
	
   

  	
  Date:

  	
   

  
	
   

  	
  Company Seal:

  	
   

  
				



 



 16
 






 



 


Exhibit A


Supplier’s
Distributors in the Territory and Summary of Major Distribution Terms



 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

  (Net

  Sales

  Profit

  Margin

  Split to

  Supplier)

  (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


Product
Cost


“Prime Tonnage”
means the tonnage of Prime Products.


The costs of Prime
Products shall be the aggregate of the following costs calculated per
production line, per product type and on a per month basis:


(1)          Raw Material Cost:
means the actual cost of billet (sourced from third-party billet suppliers),
scrap steel, virgin iron units and metallic additives used in the manufacture
of the Prime Products.


(2)          Conversion Costs


(a)      (Self-Produced)
Billet Conversion Cost: in the event billets used for the production of
Prime Products are produced by the Supplier, billet conversion cost means the
actual cost of converting scrap steel, pig iron units and metallic additives
into steel billets allocated on a prorate basis of tonnage of billets used in
Prime Products to total billet production tonnage.


(b)         Green
Tube Conversion Cost: means the actual cost of converting steel billets
into green tubes allocated on a prorata basis of tonnage of green tubes used in
Prime Products to total green tube production tonnage.


(c)          Finishing
Cost of Oil Country Tubular Goods (OCTG): means (1) the total actual costs
of operating of the heat treating facilities allocated on a prorata basis of
Prime Tonnage to total actual production tonnage of heat treating facilities
plus (2) the total actual costs of operating of the threading facilities
allocated on a prorata basis of Prime Tonnage to total actual production
tonnage of threading facilities.


(3)                  General,
Administrative and Finance Expenses: means the total general,
administrative and finance expenses incurred by the Supplier in a calendar
month, allocated on a prorata basis of Prime Tonnage to total actual production
tonnage of the Supplier.


(4)                  Selling
Expenses: means (1) the sales and marketing (including export) expenses
that directly relate to the sale of the Prime Products plus (2) undividable
export expenses allocated on a prorata basis of Prime Tonnage to total export
tonnage of the Supplier.


(5)                  VAT
and Add-on Fees: means the actual VAT and add-on fees directly relate to
the Prime Products.



 19
 






 



 


Exhibit D


Form of Co-Branding


Tubular Products manufactured for sale in the
Territory will have the names “Lone Star/HYST” or “Lone Star/HYST Seamless” as
appropriate.   Such products will also
have the appropriate Lone Star mark and Valin Mark and the product tab attached
hereto.


 



 20















 


VST SALE,
MARKETING & SUPPLY AGREEMENT


This VST SALE, MARKETING & SUPPLY AGREEMENT (the “Agreement”),
dated as of              ,
2006, by and among [Trading Company], a company limited by shares organized and
existing under the laws of the Cayman Islands (“Buyer”), Lone Star
Technologies, Inc., a corporation organized under the laws of the State of
Delaware, United States of America (“LST”), Hengyang Valin Steel Tube
Co., Ltd., a limited liability company organized under the laws of the PRC (“Supplier”),
and Hunan Valin Steel Tube & Wire Co., Ltd., a joint stock company
organized and existing under the laws of the PRC (“VTW”).


RECITALS:


WHEREAS,
Buyer is a trading company established by Star China Ltd. (“Star China”),
a wholly-owned subsidiary of LST organized and existing under the laws of the
Cayman Islands, or by any of its Affiliates, including without limitation, LST,
and VTW.


WHEREAS,
the parties wish to enter into this Agreement to set forth the terms and
conditions pursuant to which Supplier will manufacture and sell certain
products (as set forth below) to Buyer and Buyer will purchase and resell
certain products from Supplier; and


WHEREAS, the Buyer intends to provide
distribution services, marketing support, technical expertise and other
services in order to increase the sales of Supplier’s products in the
Territory.


NOW,
THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties hereto agree as follows:


1.             Defined
Terms.  The following
terms have the meanings specified in this Section 1 and shall be equally
applicable to both the singular and plural forms.


(a)           “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.


(b)           “Billet
Supply Agreement” means the Steel Billet Supply Agreement dated August 15,
2006 by and between the Supplier and Hengyang Valin MPM Steel Tube Co., Ltd.


(c)           “Business
Day” means a day, other than a Saturday, Sunday or public holiday, on which
banks in the People’s Republic of China and Dallas, Texas, the United States of
America are open for general business.


(d)           “Capital
Increase Agreement” means the capital increase agreement for Supplier dated
on or about August 15, 2006 between VTW, Hengyang Valin Steel Tube Co.,









 



 


Ltd., Star China and
Supplier in respect of Star China’s contribution to the registered capital of
Supplier.


(e)           “Competing
Products” means any Tubular Products which Supplier or its subsidiary(ies)
has the ability and capacity to manufacture at the time Buyer makes a purchase
inquiry.


(f)            “Coupling”
means a tubular section used for the exclusive purpose of joining two threaded
pin ends of pipe or equipment having the same external and internal diameters
and same thread.


(g)           “Coupling
Materials” means seamless pipes from which tubular sections are prepared
for the manufacture of Couplings or Cross-Overs.


(h)           “Cross-Over”
means a tubular section used for the exclusive purpose of joining two threaded
pin ends of pipe having different dimensions or threads.


(i)            “JV
Company” means Hunan Valin Hengyang Steel Tube Co., Ltd., a Sino-foreign
equity joint venture enterprise.


(j)            “Lone
Star” means LST or subsidiaries in which LST owns at least 50% equity
interest.


(k)           “Line
Pipe” means finished or unfinished line pipe manufactured directly or
indirectly by Supplier or its Subsidiaries (if any) based upon, at a minimum,
the latest version of the standards promulgated by the API and/or the ASTM.


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


(m)          “Persistent
Default” as it relates to a Competing Product, means the failure by
Supplier or its subsidiary(ies) to supply Competing Product that meets Buyer’s
requirements as to technical specifications, quantity, quality and/or delivery
time as set forth in Buyer’s inquiry (as accepted by Supplier or its
subsidiary(ies)) and such failure shall have resulted in least three (3)
serious complaints or claims for penalty or damage for payments for any one
type of Competing Product from customers within any 6-month period (for the
avoidance of doubt, a single down-hole failure shall be deemed to be a
Persistent Default); provided, however, that minor deviations from the terms of
the order which are beyond the control of Supplier or its subsidiary(ies) shall
not be deemed to be a default.


(n)           “PRC”
means The People’s Republic of China, for the purposes of this Agreement only,
excluding Hong Kong Special Administrative Region, Macao Special Administrative
Region and Taiwan.



 2
 






 



 


(o)           “Specialty
Tubing” means mechanical and pressure tubes, cold drawn and hot finished
tubes, shells for redraw and other boiler tubes manufactured directly or
indirectly by Supplier or its Subsidiaries based upon, at a minimum, the latest
version of the standards promulgated by the API and/or the ASTM.


(p)           “Subsidiaries”
of Supplier or Buyer means a
subsidiary in which Supplier or Buyer owns more than 50% equity interest.


(q)           “Term”
has the meaning ascribed to it in Section 14.


(r)            “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 the parties mutually agree to add to the
Territory.


(s)           “Tubular
Products” means Line Pipe, Oil Country Tubular Goods, Specialty Tubing
and/or all other tubular products manufactured by Supplier or its Subsidiaries
(if any).


(t)            “$”
means the lawful currency of the United States of America.


2.             Exclusive
Marketing.


(a)           Unless
otherwise provided herein, during the Term, Supplier hereby grants LST the
exclusive right, without limitation or exclusion, (i) to market and sell
Tubular Products through Buyer to any party located in the Territory and, (ii)
for any Tubular Product purchases initiated in the Territory without regard to
the end-use location. LST shall conduct marketing and sales of Tubular Products
in the Territory through Buyer.  It is
understood that Supplier, prior to the signing of this Agreement, has
distributed Tubular Products in the Territory to a limited extent.  From the date hereof, Buyer shall be
responsible for the distribution and sales of all Tubular Products in the
Territory.  Tubular Products shipped to the
Territory but sold to international end-users outside the Territory through
Buyer will constitute sales in the Territory, but such sales should not
conflict with Supplier’s sales in international markets other than the
Territory.


(b)           Supplier
will promptly, and in any event no later than six (6) months from the date
hereof, cease to directly or indirectly sell Tubular Products to customers in
the Territory (other than to Buyer).


(c)           Supplier
will disclose to Buyer all existing supply contracts it or its Subsidiaries (if
any) have with customers in the Territory with unfulfilled orders, and as from
the date hereof and subject to such customers’ consent, give Buyer the option
to assume such contracts. In the event that customers of existing contracts
decline to be transferred to the Buyer, Supplier shall continue to perform such
contracts, provided that such contracts shall be terminated or fully performed
before the end of the six (6) month period from the date hereof.



 3
 






 



 


(d)           Upon
notification supported by reasonable evidence to Supplier by Buyer that a
customer of Supplier located outside the Territory is purchasing Tubular
Products from Supplier for the purpose of selling such Tubular Products into
the Territory, Supplier will immediately cease selling any Tubular Products to
such customer.


(e)           Buyer
has customary operating and credit standards and terms and conditions for its
distribution of Tubular Products.  To the
extent consistent with such standards, terms and conditions, Buyer shall seek
to retain the group of Supplier’s distribution channels set forth on Exhibit A
hereto; provided, however, that Buyer will not be bound by any agreement
previously entered into between Supplier or its Affiliates and such
distributors.


3.             Preferred Supplier


(a)           During
the Term, Supplier will be the preferred supplier for all Competing Products
that Lone Star purchases in the PRC.


(b)           During
the Term, Lone Star intents to
optimize the purchase of the JV Company’s Competing Products and support JV
Company’s desire to become the majority supplier for Lone Star’s
global procurement of Competing Products, to the extent that it is consistent
with the economic interests of Lone Star.


(c)           If
at any time during the Term, Lone Star wishes to place an inquiry for Competing
Products to be sourced from the PRC, Buyer will place such inquiry with
Supplier or its Subsidiary(ies), setting forth the specifications of the
product, price, quantity, quality, delivery time and other applicable
terms.  For repeat inquiries (i.e.
inquiries for identical Competing Products), Supplier or its Subsidiary(ies)
with which the inquiry is placed will have the right to accept or decline the
inquiry on such terms within two (2) Business Days of the inquiry being placed,
and for new inquiries, Supplier or its Subsidiary(ies) with which the inquiry
is placed will have the right to accept or decline the inquiry on such terms
within five (5) Business Days of the inquiry being placed.  If Supplier or its Subsidiary(ies) with which
the inquiry is placed declines to accept the inquiry in whole or in part or
fails to reply within the relevant time period of the inquiry being placed,
Lone Star may order such Competing Product from any other supplier at
substantially the same terms and conditions that have been offered to Supplier.


(d)           If
for whatever reason there is a Persistent Default, Lone Star has the right to
suspend the preferred supplier arrangement with respect to the Competing
Product for which the Persistent Default relates until the cause for the
Persistent Default is resolved to Buyer’s reasonable satisfaction.  During such suspension, Supplier shall use
its best efforts to identify and rectify the causes for the Persistent Default,
and the preferred supplier arrangement shall be resumed as soon as practicable
when the Persistent Default has been fully rectified to Buyer’s reasonable
satisfaction.



 4
 






 



 


4.             Costing, Price and Payment.


(a)           During
the Term, the price of the Tubular Products shall be at least the most
favorable market price that the Supplier provides to its customers outside the
PRC.  If the Supplier provides to any
person (other than customers in the PRC) more favorable terms for any Tubular
Products than those terms which Buyer is receiving for the same Tubular
Products, taking into account the quantities, product costs, quality
requirements, inventory requirements and delivery time, then:  (i) Supplier will promptly notify Buyer of
such terms and (ii) so long as Buyer is in material compliance with its payment
obligations under this Agreement (without taking into account disputed
invoices), Supplier shall grant equally favorable terms to Buyer as those
granted to such other customer.  The more
favorable terms shall apply retroactively to all shipments of the affected
Tubular Products as of the effective date of Supplier’s arrangement with its
other customer(s) and shall continue until the termination of this Agreement.


(b)           With
respect to Tubular Products that Buyer purchases from Supplier, Buyer shall
make payment against documents (D/P) (as defined in Incoterms 2000) to Supplier
at sight for each shipment. Within 7 days after the close of accounting book on
a quarterly basis, Buyer shall calculate the amount, if any, representing
customer returns, warranty claims and unresolved disputed invoices relating to
Tubular Products occurring during such quarter, which shall be payable by
Supplier or offset by Buyer’s next payment to Supplier in accordance with
Section 19 below.  If such payment period
ends on a day which is not a Business Day, such period shall be deemed to end
on the next Business Day.  Buyer will be
the importer of record for all products received by it under this
Agreement.  All prices and payments under
this Agreement shall be in U.S. Dollars.  
Buyer shall use its best commercially reasonable efforts to maximize the
price it charges its customers of Tubular Products, while Supplier shall use
its best commercially reasonable efforts to minimize the product costs.


(c)           Supplier
may, upon reasonable notice and during business hours, but not more frequently
than once per quarter, have an independent third party audit the invoices
between Buyer and its customers of Tubular Products solely for the purpose of
reviewing Buyer’s invoices to such customers. 
Information obtained by Supplier, orally or in writing, during such
audit shall be considered confidential information subject to Section 17
hereof.


(d)           Buyer
may, upon reasonable notice and during business hours, but not more frequently
than once per quarter, have an independent third party audit the books and
records of Supplier for the purpose of verifying the product costs. Information
obtained by Buyer, orally or in writing, during such audit
shall be considered confidential information subject to Section 17 hereof.


5.             Method of Sales.  Buyer will purchase the Tubular Products in
accordance with method consistent with Incoterms 2000.


6.             Product Acceptance from Major Tubular Customers.  Buyer shall use reasonable efforts to work
with Supplier to obtain product acceptance and approvals from major Tubular
Product customers in the Territory and elsewhere.



 5
 






 



 


7.             Market and Production Information.


(a)           Buyer
shall, from time to time, invite Supplier to participate in visits to customers
in order to maximize market exposure and awareness on the part of
Supplier.  Supplier shall, from time to
time, as requested by Buyer, allow Buyer and customers to visit Supplier’s
production facilities in Hengyang, Hunan, People Republic of China.  Buyer shall also provide Supplier, on a
monthly basis, with market information and sales reports in respect of the
Tubular Products acquired by Buyer from Supplier.


(b)           The
parties acknowledge that prior to the signing of this Agreement, Supplier has
been responsible for its marketing activities and distribution channels in the
Territory.  Subject to Article 2, any
changes to the choice of or management of Supplier’s existing distribution
channels shall be at Buyer’s discretion pursuant to the exclusive marketing
arrangement in the Territory.


8.             Volume Obligations.  During the Term, Supplier shall supply not
less than 100,000 metric tons of Tubular Products annually for purchase by
Buyer unless Buyer requests a smaller amount, and shall, together with the
Tubular Products purchased by Buyer from Valin MPM Steel Tube Co., Ltd., supply
not less than 200,000 metric tons of Tubular Products annually for purchase by
Buyer unless Buyer requests a smaller amount. 
Buyer shall use its best efforts to achieve target sales of not less
than 200,000 metric tons of Tubular Products annually from Supplier and Valin
MPM Steel Tube Co., Ltd. and shall have consideration for Supplier’s and Valin
MPM Steel Tube Co., Ltd.’s mill operating capacity in placing orders for
Tubular Products.


9.             Product Quality and Claims.  


(a)           Supplier
represents and warrants to Buyer as follows: 
Supplier will deliver to Buyer title to all Tubular Products free and
clear of all security interests, liens, charges, restrictions or encumbrances
of any kind, nature or description; all Tubular Products shall be free from
defects in material and/or workmanship, unless otherwise specified in the
purchase order; all Tubular Products shall be new and not used or
reconditioned; all Tubular Products will conform to Buyer’s specifications and
technical standards set forth in each purchase order. All Tubular Products
shall in all respects be suitable for the particular purpose for which they are
purchased and all Tubular Products shall be merchantable in accordance with the
purchase orders.  All Tubular Products
shall be packaged, labeled and shipped in accordance with applicable laws and
regulations, including without limitation state and federal environmental and
hazardous substance laws and regulations, and in accordance with the purchase
orders.  


(b)           In
the event that there is any product quality issue contained in the Tubular
Products upon delivery to Buyer (whether through a customer-initiated complaint
or otherwise), Buyer shall be responsible for investigating it, interfacing
with the customer as well as Supplier, but Supplier shall be solely responsible
for any defective Tubular Products and any damages caused thereby.  In connection with the handling of such
product quality issues, (i) Buyer will discuss with Supplier the proposed
settlement offer with a customer prior to extending such offer to the customer;
(ii) Supplier will use its best efforts to conform to Buyer’s 30-day customary
time framework for handling of product quality issues; and (iii) Supplier shall
be responsible for all settlement costs, including any direct or indirect
legal, special or consequential damages;



 6
 






 



 


provided,
however, that Supplier shall not be responsible for any settlement effected by
Buyer without Supplier’s prior consent, which shall not be unreasonably
withheld, conditioned or delayed.  If
Supplier shall not have responded within 30 days, Supplier shall be deemed to
have agreed to the settlement suggested by Buyer.


10.           Product Mix and Volume.  Buyer and Supplier shall work closely
together in developing an annual supply plan, which shall be completed 90 days
before the beginning of each calendar year. Buyer shall use its best
commercially reasonable efforts to prepare a reasonably accurate forecast for
the demand of the Tubular Products in such annual supply plan so as to enable
Supplier to efficiently allocate its production resources, while Supplier shall
use its best commercially reasonable efforts to prepare a reasonably accurate
forecast for the product costs in such annual supply plan so as to enable Buyer
to better market and sell of Tubular Products. 
Buyer shall advise Supplier of the anticipated volume and product mix of
Tubular Products that Supplier will manufacture for purchase by Buyer on a
quarterly basis, such forecast to be delivered 60 days prior to the beginning
of each quarter.  Buyer may make specific
line item changes at any time on or before 45 days prior to commencement of
production.  Supplier shall confirm with
Buyer that it will produce the Tubular Products requested in such forecast
within five days of receipt of Buyer’s advice of its needs.  Buyers shall place purchase orders in reasonable
advance time prior to delivery consistent with market practice.


11.           Remedies.  In the event of Supplier’s breach of this
contract and subject to Section 3 herein, Buyer may take any or all of the
following actions, without prejudice to any other rights or remedies available
to Buyer under this Agreement or by law: (i) require Supplier to repair or
replace such Tubular Products, and upon Supplier’s failure or refusal to do so,
repair or replace the same at Supplier’s expense, (ii) reject any shipment or
delivery containing defective or non-conforming Tubular Products and return or
replacement of such Tubular Products at Buyer’s option, said return to be made
at Supplier’s cost and risk, or (iii) cancel any outstanding deliveries
hereunder, and treat such breach by Supplier as Supplier’s repudiation of the
purchase order(s) relating to such deliveries. 
In the event of Buyer’s breach of this contract, unless otherwise proved
by Supplier the existence of actual damages, Supplier’s remedy shall be Supplier’s
recovery of the Tubular Products or the purchase price payable for Tubular
Products shipped prior to such breach.


12.           Product Liability Insurance.  Throughout the Term of this Agreement and for
a period of two years thereafter, Supplier will maintain in effect sufficient
and proper product liability insurance through an internationally recognized
insurance company with insurance coverage required by LST consistent with
insurance coverage requirements applicable to similar products sold in the
Territory.


13.           Prompt Delivery.  Time of delivery is of the essence of each
purchase order of Tubular Products. Buyer and Supplier shall work closely to
ensure timely delivery required by the purchase orders.


14.           Inspection and Audit Rights; Priority.  Upon Buyer providing Supplier no less than 30
days’ prior notice, Buyer shall have the right to inspect, or have a third
party



 7
 






 



 


inspect, any or
all of the Tubular Products prior to loading at the port of origin or upon
Buyer’s receipt, at Buyer’s election, which right shall be exercisable
notwithstanding Buyer’s having paid for the goods prior to inspection.  Any product that according to any such
inspection does not meet the agreed upon specifications as set forth in Section
8 may be rejected by Buyer.  Supplier
agrees that production and shipments of Tubular Products to Buyer will have
priority over all other conflicting orders received by Supplier from any
person, and Supplier shall implement and maintain effective controlling
measures to ensure the priority on production and shipments of Tubular Products
to Buyer will at all times be effectively carried out. Buyer’s inspection of
Tubular Products shall have no effect on Supplier’s product warranty or
liability for any direct or indirect damages, costs or losses caused by Tubular
Products under Section 9.  Buyer,
by reason of its failure to inspect the goods, shall not be deemed to have
accepted any defective Tubular Products or Tubular Products which do not
conform to the specifications thereof, or to have waived any of Buyer’s rights
or remedies arising by virtue of such defects or nonconformance.  If any of the delivered Tubular Products are
in a defective or nonconforming condition, efforts of Buyer to correct such
defect or nonconformance shall not constitute an acceptance, and Buyer may
reject such Tubular Products where the attempt to repair has proved
unsuccessful.  Buyer shall have no
obligation to attempt to repair or correct such defect or nonconformance.


15.           Term.  The term of this Agreement (“Term”)
shall commence from the date hereof until terminated in accordance with the
provisions of Sections 15 or 16. 
This Agreement will terminate automatically upon (1) the completion of
the merger of Supplier into JV Company, or (2) the termination of the Billet
Supply Agreement, unless it is otherwise agreed in writing by the Parties.


16.           Termination of Agreement.


(a)           Terms.  This
Agreement shall have a term of five (5) years unless early terminated in
accordance with Section 15 or this Section 16.


(b)           Termination by Agreement.  This Agreement may be terminated upon the
mutual written agreement of the parties.


(c)           Termination for Bankruptcy.  Any party upon written notice to the other
Party may terminate this Agreement at any time in the event any other party
shall make an assignment for the benefit of its creditors, or shall file a
voluntary petition under the bankruptcy, reorganization, insolvency or similar
laws of any jurisdiction to which it is subject, or shall suffer an involuntary
petition under such laws to be filed against it, or shall be adjudicated
bankrupt or insolvent, or have an order for relief in bankruptcy entered
concerning it, under the laws of any jurisdiction to which it is subject.


(d)           Effect of Termination.  If this Agreement shall be terminated
pursuant to this Section, all further obligations of the parties under this
Agreement (other than Sections 9, 11, 12, 17, 19, 20, 22, 25, 26, 28)
shall be terminated without further liability of any party to the other;
provided, however, that nothing herein shall relieve any party from liability
for its breach of this Agreement prior to its termination.



 8
 






 



 


17.           Confidentiality
Obligations.  Each party shall use its best efforts to
prevent any of the other party’s proprietary and confidential information that
it receives under the scope of this Agreement from being (a) used for any
purpose other than the fulfillment of the receiving party’s obligations under
this Agreement or (b) disclosed to any third party (other than the receiving
party’s counsel, auditors or other advisors), in each case without the prior
written consent of the other party.  The
provisions of this Section shall not apply and the receiving party shall have
no obligation with respect to any information that the receiving party can
show:  (i) is or becomes public
knowledge through no wrongful act of the receiving party; (ii) is already known
to the receiving party, which knowledge can be documented from written records;
(iii) is rightfully obtained by the receiving party from any third party
without similar restriction and without breach of any obligation owed to the
disclosing party; or (iv) is independently developed by the receiving party’s
employees who have not had access to the applicable confidential
information.  In addition, a receiving
party may disclose confidential information of the other party if it becomes
compelled to do so by applicable law, regulation or legal process; provided,
however, that before doing so it gives the other party reasonable notice of its
intended disclosure sufficient for the other party to seek a protective order.


18.           Force
Majeure.  If any party is
prevented from or delayed in complying, either totally or in part, with any of
the terms or provisions of this Agreement by reason of (a) fire, flood or storm
that inflicts damage to Supplier’s facilities, or (b) other causes beyond the
reasonable control of Buyer or Supplier that, in the case of either (a) or (b),
cause Supplier’s facilities to become inoperable, then upon notice to the other
party, the affected provisions shall be suspended during the period of such
disability and such party shall have no liability in connection therewith.  Supplier will use its best efforts to remedy
any disability caused by a Force Majeure event.


19.           Invoices;
Right of Set-Off.  Supplier
shall render one copy of each purchase order invoice submitted under this
Agreement and shall send all purchase documents to the Buyer in accordance with
method consistent with Incoterms 2000 (to the extent applicable).  To
the extent permitted under applicable PRC Customs, foreign exchange and
taxation laws and regulations, Buyer shall have the rights of set-off, netting,
offset, recoupment, and similar rights relating to any payments to be made by
Buyer to Supplier or any Subsidiary of Supplier pursuant to any order for
Tubular Products or otherwise.


20.           Environmental.
Supplier warrants that it will, and shall cause all of its Affiliates,
officers, directors, managers, independent contractors, and employees, to
perform all services and furnish all Tubular Products with due care and in
compliance with all applicable federal, state, regional, and local safety and
environmental laws, rules, regulations, including, without limitation, laws,
rules, and regulations pertaining to notification, permitting, waste management
and unauthorized releases.  Supplier
further agrees to indemnify, defend and hold Buyer harmless from any and all
claims, demands, judgments, causes of action, damages, penalties, fines, costs,
liabilities or losses, including, but not limited to, personal injury or death
and property damage which arise as a result of activities related to
performance of this Agreement or any breach of any provision of this
Agreement.  This indemnity shall survive
completion or termination of this Agreement.



 9














 


 


21.           Clerical Errors.  Stenographic and clerical
errors, whether in mathematical computation or otherwise, made by Buyer on a
purchase order or any other forms delivered to Supplier shall be subject to
correction by Buyer.  If Supplier finds
any clerical errors on such documents, it shall inform Buyer accordingly.


22.           Joint
Liability. 
Both Supplier and Buyer hereby agree to cause its respective Affiliates and any of its or its
Affiliates’ officers, directors, managers, independent contractors, or
employees to honor the covenants contained in this Agreement.  Both Supplier
and Buyer shall be liable for
any breaches of such covenants by its respective Affiliates and its or its
Affiliates’ officers, directors, managers, independent contractors, or
employees.


23.           Entire
Agreement; Amendment.  This Agreement
constitutes the entire agreement
between Buyer and Supplier with
respect to the subject matter hereof.  This Agreement may not be amended except
by an instrument in writing executed by both Buyer and Supplier.


24.           Applicable Law.  This Agreement
will be governed by, and construed in accordance with, the laws of Hong Kong,
SAR.


25.           Successors and Permitted Assigns. 
This Agreement will be binding upon, and will inure to the benefit of,
each party and their respective successors and assigns; provided, however, none
of the parties may assign this Agreement without the prior written consent to
the assignment by the other parties hereto except that Buyer may serve as
Supplier’s exclusive sales agent either directly or through a wholly owned
subsidiary, provided that Buyer remains fully liable to Supplier under this
Agreement.


26.           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, 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 to apply to any court for
enforcement of such award, the non-complying party shall be liable to the other
for all cost of



 10
 






 



 


such litigation
including attorneys’ fees.  The parties
may apply to any court of competent jurisdiction in accordance with this clause
(ii), for temporary or permanent injunctive relief, without breach of this
clause (ii) or abridgement of the powers of the arbitrator.  None of the parties 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 clause (ii), 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 by such other method authorized by applicable law or court rule.  During the settlement process of disputes,
each party shall continue to perform its obligations unrelated to the relevant
disputes under this Agreement.


27.           Notice
Provision.  All required or permitted notices and other
communications shall be in
writing and, unless otherwise provided in this Agreement, shall be deemed effective when transmitted to the addresses set forth below (i) on the second
Business Day following delivery to the
courier service if sent by international air courier, fastest method, where the
recipient is required to sign for such package, (ii) upon receipt by the sender
of a confirmation of receipt by the recipient’s fax machine designated below if
sent by fax or (iii) upon delivery to a responsible person at the office
specified if by manual delivery:


	
  If to Supplier:

  	
   

  
	
   

  	
   

  
	
  Hengyang Valin
  Steel Tube Co., Ltd.

  	
   

  
	
  Attention:
  General Manager

  	
   

  
	
  [Address]

  	
   

  
	
   

  	
   

  
	
  If to VTW:

  	
   

  
	
   

  	
   

  
	
  Hunan Valin
  Steel Tube & Wire Co., Ltd.

  	
   

  
	
  Attention:

  	
   

  
	
  Address: Valin Plaza, No. 111 Section of Fu Rong
  Zhong Lu, Changsha,

  Hunan Province, PRC

  	
   

  
	
   

  	
   

  
	
  If to Buyer:

  	
   

  
	
   

  	
   

  
	
  [Trading
  Company]

  	
   

  
	
  Attention:    Chief
  Executive Officer

  	
   

  
	
  15660 N. Dallas
  Pkwy., Ste. 500,

  	
   

  
	
  Dallas, TX
  75248, U.S.A.

  	
   

  
	
  Fax:    +1-972-770-6474

  	
   

  
	
   

  	
   

  
	
  with a copy 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

  	
   

  



 



 11
 






 



 


	
  If to LST:

  	
   

  
	
   

  	
   

  
	
  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 a copy 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

  	
   

  



 


or to such other address or
addresses as any such party may from time to time designate for itself in
writing.


28.           No Third Party Beneficiaries.  Nothing in this Agreement shall be construed
to create any rights in any third party against any party.


29.           Compliance with Laws.  Each party agrees to comply with all
applicable laws and regulations relating to its performance hereunder.  Each Party shall ensure that it obtains and
maintains at its own cost all necessary permits and/or licenses necessary for
it to perform its obligations hereunder.


30.           No Waiver.  The performance of or compliance with a party’s
obligation hereunder may be waived, but only in writing signed by an authorized
representative of the other party.  A
waiver of compliance with any provision of this Agreement shall not constitute
a waiver of any subsequent lack of compliance with such provision or of any
other provision of this Agreement. 
Failure of any party to enforce at any time any provision of this
Agreement shall not be construed as a waiver thereof.


31.           Relationship of Parties.  Nothing
in this Agreement shall create, or be deemed to create, a partnership, joint
venture or legal relationship of any kind between the parties that would impose
liability upon one party for the acts or failure to act of the other party, or
authorize any party to act as agent for the other.  Save where expressly stated in this
Agreement, none of the parties shall have the authority to make representations,
act in the name or on behalf of or otherwise bind the other.


32.           Execution.  This
Agreement may be executed in any number of counterparts and by the parties on
separate counterparts, each of which, when executed, shall be an original, but
all counterparts shall together constitute on and the same instrument.



 12
 






 



 


33.           Further Assurance.  LST
shall execute or procure the execution of all necessary service contracts
between Buyer on the one hand and LST or other third-party service providers on
the other hand as may from time to time be necessary to give support to Buyer
in performing its distribution and sale responsibility hereunder.


34.           Language.  This Agreement
is written in English and Chinese.  Both
languages shall be of equal effect.


IT
WITNESS WHEREOF, the
parties hereto have entered into this Agreement as of the date first written
above.


	
   

  	
   

  	
  [TRADING COMPANY]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LONE
  STAR TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HENGYANG
  VALIN STEEL TUBE CO.,

  LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HUNAN
  VALIN STEEL TUBE &

  WIRE CO., LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						




 13
 






 



 


I hereby certify that,
this Agreement has been approved by the board of directors of Hengyang Valin
Steel Tube Co., Ltd. on            .


	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name :

  	
   

  
	
   

  	
  Title : Legal Representative

  	
   

  
	
   

  	
  Date :

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Company Seal :

  



 



 14
 






 



 


Exhibit A


Supplier’s
Distributors in the Territory and Distribution Terms



 15