Document:

Equity
      Pledge Agreement

    

    

    By
      and among

     

     

    The
      Shareholders of Tianjin Shengkai Industrial Technology Development Co.,
      Ltd.

    

    Shengkai
      (Tianjin) Ceramic Valve Co., Ltd.

    

    

    Tianjin
      Shengkai Industrial Technology Development Co., Ltd.

    

     

    May
      30th,
      2008

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      Equity
        Pledge Agreement

      
        
          

        

      

       

      EQUITY
        PLEDGE AGREEMENT 

    

    

    THIS
      EQUITY PLEDGE AGREEMENT (hereinafter referred to as “this Agreement”) is
      executed by the following parties on May 30th,
      2008 in
      Tianjin, People’s Republic of China (“PRC”): 

    

    (1)
      All shareholders of Tianjin Shengkai Industrial Technology Development Co.,
      Ltd.

    (hereinafter
      collectively called “Party A” or “Pledgors”)

    

    
      	
              Name
                of Each

              Shareholder

            	 	
              Shareholding

              Ratio
                (%) 

            	 	
              ID
                Card No.

            	 	
              Contact
                Address

            
	
              Wang
                Chen

            	 	
              71.39%

            	 	
              120103196412022118

            	 	
              204-209,Gate
                8,Zhonghuan Deppartment,No.2 Road, Wujiayao, Heping District,
                Tianjin

            
	
              Guo
                Wei

            	 	
              13.33%

            	 	
              120103196607222128

            	 	
              204-209,Gate
                8,Zhonghuan Department,No.2 Road, Wujiayao, Heping District,
                Tianjin

            
	
              Zhao
                Yanqiu

            	 	
              6.55%

            	 	
              2310851197903050762

            	 	
              Tuanjie
                Wei, Muleng Town, Muleng City, Helongjiang Province

            
	
              Ji
                Haihong

            	 	
              6.55%

            	 	
              140102197002012349

            	 	
              No.7,Unit1,4th/F,No.11,Xinmin
                Zhongjie,Xinghualing District, Taiyuan City,Shanxi
                Province

            
	
              Zhang
                Ying

            	 	
              0.48%

            	 	
              51010319740824628X

            	 	
              No.3,4th/F,
                Dong 315, Huangtian Bawei 4th Road, Qingyang District, Chengdu
                City

            
	
              Miao
                Yang

            	 	
              0.48%

            	 	
              110108197106111811

            	 	
              No.1905,No.1Building,
                Yangguang 100 International Department, No.2, Guanghua Road,Chaoyang
                District, Beijing

            
	
              Chen
                Fang

            	 	
              0.48%

            	 	
              440402197211205769

            	 	
              Room
                401, Unit 1, Dong 3,No.2013,Xiangzhou Fenghuang North Road, Xiangzhou
                District,Zhuhai City,Guangzhou Province

            
	
              Wu
                Yanping

            	 	
              0.37%

            	 	
              120106196505060526

            	 	
              No.101,Gate
                3,No.25 Building,Xinghuali,Shengli Street,Da Gang
                District,Tianjin

            
	
              Liu
                Naifan

            	 	
              0.37%

            	 	
              372832196010257414

            	 	
              Dormitory
                District,Yinan Gold Mine,Yinan County,Shandong
                Province

            

    

     

    
      
        
        

      

      
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      Equity
        Pledge Agreement

      
        
          

        

      

       

    

    (2)
      Shengkai(Tianjin) Ceramic Valve Co., Ltd. (hereinafter collectively called
      “Party B” or “Pledgee”)

    

    Registered
      Address: Room A2-191,No.166 Xisandao,Konggang Logistic Processing Zones,Tianjin.
      

    

    Legal
      Representative:Wang Chen

    

    (3)
      Tianjin Shengkai Industrial Technology Development Co., Ltd. (hereinafter
      collectively called “Party C” or the “Company”)

    

    Registered
      Address: Room324, 3/F, 1stStreet, Tianjin Economic-Technological Development
      Area

    

    Legal
      Representative: Wang Chen

     

    (Pledgors,
      Pledgee and the Company may be collectively called the “Parties” and
      individually as “Each Party”.)

     

    WHEREAS,
      

    

    
      	
              1.

            	
              The
                Company is a domestic company incorporated and validly existing under
                PRC
                Laws, and its business license No. is 120191000015144;

            

    

    

    
      	
              2.

            	
              The
                Pledgors, the PRC citizen, legally
                holds 100% Equity Interests in the
                Company;

            

    

    

    
      	
              3.

            	
              The
                Pledgee, as a wholly foreign-owned enterprise, was duly incorporated
                and
                validly existing under the PRC Laws;

            

    

    

    
      	
              4.

            	
              Party
                A signed a loan agreement (the “Loan Agreement”) on May 30th,
                2008with Party B. According to this agreement, Party B will provide
                the
                loan to Party A and Party A agrees to pledge all their equities in
                Party C
                as a guaranty of the performance of the obligations thereunder.
                

            

    

     

    
      	
              5.

            	
              Party
                B signed a consigned management agreement (the “Consigned Management
                Agreement”) on May 30th,
                2008 with Party C and Party A, and Party A agrees to pledge all their
                equities in Party C to Party B as a guaranty for the performance
                of the
                obligations thereunder. 

            

    

     

    
      
        
        

      

      
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      Equity
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              6.

            	
              Party
                B signed a technology service agreement (the “Technology Service
                Agreement”) on May 30th,
                2008 with Party C and Party A, and Party A agrees to pledge all their
                equities in Party C to Party B as a guaranty for the performance
                of the
                obligations thereunder. 

            

    

     

    
      	
              7.

            	
              The
                Parties signed an exclusive purchase option agreement (the “Exclusive
                Purchase Option Agreement”) on May 30th,
                2008, and the parties thereto agree that Party A shall pledge all
                their
                equities in Party C to Party B as a guaranty of the performance of
                the
                obligations assumed by Party A and Party C thereunder.
                

            

    

     

    NOW
      THEREFORE,
      the
      Parties, through friendly negotiations, hereby enter into this Agreement with
      respect to the equity pledge. 

    

    
      	
              1.

            	
              Definitions
                and Interpretation 

            

    

     

    Unless
      otherwise provided in this Agreement, the following terms shall have the
      following meanings: 

    

    
      	 	
              1.1

            	
              “PRC”
                refers to the People’s Republic of China, excluding the HongKong Special
                Administrative Region, Macao Special Administrative Region and Taiwan
                Province;

            

    

    

    
      	 	
              1.2

            	
              “PRC
                Laws” refers to all PRC laws, administrative regulations and government
                rules in effect;

            

    

    

    
      	 	
              1.3

            	
              “Pledged
                Equity” refers to all the equity in the Company as provided in Article2.1;
                

            

    

    

    
      	 	
              1.4

            	
              “Main
                Agreements” refers to the Loan Agreement, Consigned Management Agreement,
                Technology Service Agreement and Exclusive Purchase Option Agreement
                and
                the Appendixes thereof (if applicable);

            

    

    

    
      	 	
              1.5

            	
              “Right
                of Pledge” refers to the right owned by the Pledgee to be first
                compensated from the money converted from or the proceeds from the
                auction
                or sale of the Pledged Equity by the Pledgors to the Pledgee in the
                event
                of default of Pledgors and/or Party C, and such right shall cause
                the
                Pledgee to be entitled to the bonus arising from Pledged Equity;
                

            

    

    

    
      	 	
              1.6

            	
              “ABIC”
                refers to the competent Administration Bureau of Industry and Commerce
                which is authorized in accordance with PRC Laws to register the Pledged
                Equity hereunder;

            

    

     

    
      
        
        

      

      
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      Equity
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              1.7

            	
              “Event
                of Default” refers to the event as defined in Article 8
                hereunder.

            
	 	 	 
	 	
              1.8

            	
              “Business
                Day” refers to any
                day except Saturday, Sunday and other public holidays as permitted
                by PRC
                Laws;

            

    

    

    
      	
              2.

            	
              Equity
                Pledge 

            

    

     

    
      	 	
              2.1

            	
              The
                Parties agree that Pledgors shall pledge all their Equities in the
                Company
                to the Pledgee as a guaranty for the performance of the obligations
                assumed by the Pledogors and/or the Company under each of the Main
                Agreements. 

            

    

    

    
      	 	
              2.2

            	
              In
                case the Pledgors increase the registered capital in the Company
                during
                the term of this Agreement, such increased capital shall be equally
                deemed
                as the Pledged Equity.

            

    

    

    
      	 	
              2.3

            	
              In
                case any act conducted by the Pledgors or the Company may cause the
                Right
                of Pledge damaged so as to harm the interests of the Pledgee, the
                Pledgee
                is entitled to require the Pledged Equity to be auctioned or sold
                in
                advance and the proceeds from such auction or sale shall be used
                to
                discharge the debt secured by the Pledged Equity in
                advance.

            

    

    

    
      	
              3.

            	
              Registration
                of Pledge 

            

    

    

    
      	 	
              3.1

            	
              Upon
                the execution of this Agreement, the Pledgors shall cause the Company
                to
                record the Right of Pledge in the register of shareholders and deliver
                it
                with the common seal of the Company as well as the original of equity
                contribution certificate of the Pledgors to the Pledgee for keeping.
                Within the term of this Agreement, Party B shall return the register
                of
                shareholders and equity contribution certificate to the Company for
                modification registration with ABIC, and the Company shall complete
                the
                modification registration within 10 days upon receipt of the register
                of
                shareholders and equity contribution certificate, and Party A together
                with the Company shall continue to deliver such modified register
                of
                shareholders and equity contribution certificate to Party B within
                2 days
                following the completion of the aforesaid
                registration.

            

    

    

    
      	 	
              3.2

            	
              The
                Parties agree that if ABIC accept the registration with respect to
                the
                equity pledge, they will promptly cause the Pledged Equity under
                this
                Agreement to be recorded at ABIC, and the Parties confirm that whether
                the
                Pledged Equity is recorded as above or not shall not affect the validity
                of this Agreement unless compulsorily required by PRC Laws.
                

            

    

    

    
      	 	
              3.3

            	
              After
                the signing of this Agreement, the Pledgors shall in accordance with
                the
                Pledgee’s written request which may be made by the Pledgee from time to
                time, together with the Pledgee, notarized this agreement as well
                as the
                register of shareholders with the recorded Pledged Equity in a notary
                public office as designated by the Pledgee, and Party A and the Company
                shall give assistant with respect to the notarization following the
                delivery of the notice with the request of notarization by Party
                B.
                

            

    

     

    
      
        
        

      

      
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      Equity
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              4.

            	
              Representations
                and Warranties

            

    

    

    
      	 	
              4.1

            	
              Each
                Party under this Agreement represents and warrants to other Parties
                that:
                (1) it has relevant power, rights and authorizations for the execution
                hereof, and performance of the obligations hereunder; 

              (2)
                the execution and performance of this Agreement shall not violate
                or
                conflict with any of the terms and conditions of other agreements
                signed
                between the Parties. 

            

    

    

    
      	 	
              4.2

               

            	
              The
                Pledgors represent and warrant to the Pledgee that:

              (1)
                they are the legal owner of the Pledged Equity, and have fulfilled
                the
                obligations of capital contribution in the registered capital of
                the
                Company;

              (2)
                except for the Right of Pledge as setup hereunder, the
                Pledged Equity is not subject to
                any pledge, guaranty or other form of encumbrances;

              (3)
                they do not or will not transfer the Pledged Equity to any third
                party or
                make any agreements, whether oral or written, with respect to the
                transfer
                of Pledged Equity.

            

    

     

    
      	
            	
              4.3

            	
              The
                Company
                agrees to undertake the joint liability with respect to the
                representations and warrants made by the
                Pledgors.

            

    

     

    
      	
              5.

            	
              Obligations
                of Pledgors 

            

    

    

    
      	 	
              5.1

            	
              The
                dividend and bonus arising from the Pledged Equity shall be deposited
                in
                an escrow account for the supervision of the
                Pledgee.

            

    

    

    
      	 	
              5.2

            	
              Apart
                from the encumbrance set forth hereunder and under the Exclusive
                Purchase
                Option Agreement, without the Pledgee’s prior written consent, the
                Pledgors shall not sell, transfer, mortgage or otherwise dispose
                of the
                Pledged Equity, nor shall place encumbrances on such Pledged
                Equity;

            

    

    

    
      	 	
              5.3

            	
              Without
                the Pledgee’s prior written consent, the Pledgors shall not supplement or
                amend the articles of association of the Company in any manner, nor
                shall
                it increase or decrease the registered capital or change the shareholding
                structure of the Company in any
                manner;

            

    

    

    
      	 	
              5.4

            	
              The
                Pledgors shall cause the Shareholders’ General Meeting not to approve for
                the resolutions on the dissolution, liquidation and change of legal
                form
                of the Company, its subsidiaries wholly owned or controlled by the
                Company; 

            

    

     

    
      
        
        

      

      
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      Equity
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              5.5

            	
              The
                Pledgors shall cause the Shareholders’ General Meeting not to approve for
                any Profit Distribution Proposal, nor shall accept such distributed
                dividend without
                the Pledgee’s prior written consent; At the Pledgee’s request, it shall
                promptly approve for the Profit Distribution Proposal, and accept
                such
                distributed dividend;

            

    

    

    
      	 	
              5.6

            	
              At
                the
                Pledgee’s request, the Pledgors shall provide the Pledgee with all
                information regarding the business operation and financial condition
                of
                the Company;

            

    

    

    
      	 	
              5.7

            	
              The
                Pledgors shall not incur or succeed to any debts or liabilities which
                may
                adversely affect their
                equity interests in the Company without the Pledgee’s prior written
                consent;

            

    

    

    
      	 	
              5.8

            	
              The
                Pledgors shall appoint, and appoint only, the candidates nominated
                by
                the
                Pledgee to the board of directors of the Company, and shall not replace
                such candidates without the Pledgee’s prior written consent;
                

            

    

    

    
      	 	
              5.9

            	
              The
                Pledgors shall cause the Board of Directors of the Company not to
                approve
                any acquisition of, any consolidation with, or any investment in
                any third
                party without the
                Pledgee’s prior written consent; 

            

    

    

    
      	 	
              5.10

            	
              The
                Pledgors shall promptly notify
                the Pledgee of any pending or threatened lawsuit, arbitration or
                administrative dispute which involve the assets, business or incomes
                of
                the Company, and take positive measures against aforesaid lawsuits,
                arbitrations or administrative dispute;

            

    

    

    
      	 	
              5.11

            	
              The
                Pledgors shall
                not commit any conducts or omissions that may adversely affect the
                assets,
                business operation, the debts and liabilities of the Company without
                the
                Pledgee’s prior written consent;

            

    

    

    
      	 	
              5.12

            	
              To
                the extent permitted by the PRC laws and regulations, and at any
                time upon
                Pledgee’s request, the Pledgors shall promptly and unconditionally
                transfer their equity interests of the Company to Pledgee or its
                designated third party in accordance with the Exclusive Purchase
                Option
                Agreement, and cause other shareholders waive their rights of first
                refusal with respect to such transfer;

            

    

    

    
      	 	
              5.13

            	
              The
                Pledgors shall cause the directors of the Company approve for the
                resolution in respect of the Equity Transfer or Assets Transfer
                hereunder;

            

    

     

    
      
        
        

      

      
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      Equity
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              5.14

            	
              The
                Pledgors shall make every efforts to cause the
                Company perform the obligations of Article 6 hereunder;

            
	 	 	 
	 	
              5.15

            	
              The
                Shareholders shall, to the extent permitted by applicable laws, cause
                the
                business term of Party C (including the circumstance of change of
                business
                terms) not shorter than that of Party B(including the circumstance
                of
                change of business terms);

            

    

     

    
      	 	
              5.16

            	
              The
                Pledgors shall strictly comply with the provisions of this Agreement,
                and
                effectively perform its obligations hereunder, and shall be prohibited
                from committing any act or omission which may affect the validity
                or
                enforceability of this Agreement.

            

    

    

    
      	
              6.

            	
              Obligations
                of the Company

            

    

    

    
      	 	
              6.1

            	
              Without
                the
                Pledgee’s prior written consent, it shall not supplement or amend the
                articles of association or rules of the Company, its subsidiaries
                wholly-owned or controlled by the Company in any manner, nor shall
                it
                increase or decrease the registered capital or change the shareholding
                structure of aforesaid entities in any manner; 

            
	 	
              6.2

            	
              It
                shall prudently and effectively maintain its business operations
                according
                to good financial and business standards so as to maintain or increase
                the
                value of its assets; 

            

    

    

    
      	 	
              6.3

            	
              Unless
                as required necessary for the business operation of the
                Company or upon the prior written consent by Party B , it shall not
                transfer, mortgage or otherwise dispose of the lawful rights and
                interests
                to and in its assets or incomes, nor shall it encumber its assets
                and
                income in any way that would affect the Pledgee’s security interests;
                

            

    

    

    
      	 	
              6.4

            	
              It
                shall not incur or succeed to any debts or liabilities unless as
                required
                necessary for the business operation of the
                Company or upon the prior written consent by Party B;
                

            

    

    

    
      	 	
              6.5

            	
              Without
                the
                Pledgee’s prior written consent, it shall not enter into any material
                contract (exceeding RMB3,000,000 in value);

            

    

    

    
      	 	
              6.6

            	
              Without
                the
                Pledgee’s prior written consent, it shall not provide any loans or
                guaranty to any third party; 

            

    

    

    
      	 	
              6.7

            	
              At
                the
                Pledgee’s request, it shall provide the Pledgee with all information
                regarding its business operation and financial condition;
                

            

    

    

    
      	 	
              6.8

            	
              The
                Company shall purchase insurance from insurance companies acceptable
                to
                the Pledgee in such amounts and of such kinds as are customary in
                the
                region among companies doing similar business and having similar
                assets;
                

            

    

     

    
      
        
        

      

      
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              6.9

            	
              Without
                the Pledgee’s prior written consent, it shall not acquire or consolidate
                with any third party, nor shall they invest in any third party;
                

            

    

    

    
      	 	
              6.10

            	
              It
                shall promptly notify
                the Pledgee of any pending or threatened lawsuit, arbitration or
                administrative dispute which involve its assets, business or incomes,
                and
                take positive measures against aforesaid lawsuits, arbitrations or
                administrative dispute; 

            

    

    

    
      	 	
              6.11

            	
              Without
                the
                Pledgee’s prior written consent, it shall not distribute any dividends to
                the Pledgors in any manner, and at the Pledgee’s request, it shall
                promptly distribute all distributable dividends to the
                Pledgors.

            
	 	 	 
	 	
              6.12

            	
              Without
                the Pledgee’s prior written consent, it shall not commit any act or
                omission that would materially affect its assets, business or
                liabilities;

            

    

    

    
      	
              7.

            	
              Exercise
                of Right of Pledge 

            

    

    

    
      	 	
              7.1

            	
              The
                Pledgee may exercise the Right of Pledge at any time following the
                delivery of Notice of Default as provided in Article 8.2 to the
                Pledgors.

            

    

    

    
      	 	
              7.2

            	
              The
                Pledgee is entitled to be first compensated with the money converted
                from
                or the proceeds from auction or sale of all or part of Pledged Equity
                in
                accordance with legal proceedings unless the Pledgors has duly and
                completely performed the obligations under Main Agreements.
                

            

    

    

    
      	 	
              7.3

            	
              Within
                the term of this Agreement, If the Pledged Equity hereunder is subjected
                to any compulsory measures implemented by a court or other departments
                due
                to the Pledgors’ failing to repay the debts which fall due or violation of
                PRC Laws or state policies etc., the Pledgors shall, 

              (1)
                notify the Pledgee in written form of such compulsory measures within
                three (3) days following its occurrence;

              (2)
                use all efforts (including but not limited to provide other security
                to
                the court or other government authorities), in order to dismiss the
                compulsory measures taken by the court or other government authorities
                over the Pledged Equity.

            

    

    

    
      	 	
              7.4

            	
              The
                Pledgors shall not hinder the Pledgee from exercising the Right of
                Pledge
                and shall give necessary assistance so that the Pledgee could realize
                its
                Right of Pledge. 

            

    

     

    
      
        
        

      

      
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              8.

            	
              Event
                of Default 

            

    

    

    
      	 	
              8.1

            	
              The
                following events shall be regarded as the Events of Default:
                

            

    

    

    
      	 	
              8.1.1

            	
              Any
                Party breaches any of the representations or warranties
                hereunder;

            

    

    

    
      	 	
              8.1.2

            	
              The
                Pledgors and/or the Company breaches any of the representations or
                warranties under the Main
                Agreements;

            

    

    

    
      	 	
              8.1.3

            	
              The
                Pledgors and/or the Company fail(s) to duly and completely perform
                the
                obligations hereunder; 

            

    

    

    
      	 	
              8.1.4

            	
              The
                Pledgors and/or the Company fail(s) to duly and completely perform
                the
                obligations under the Main
                Agreements;

            

    

    

    
      	 	
              8.1.5

            	
              Any
                other external borrowing, guaranty, compensation or other liabilities
                of
                the Pledgors: (1) is required for an early repayment or performance
                prior
                to the scheduled date due to any breach by the Pledgors; or (2) is
                due

              but
                can not be repaid or perform as scheduled, which , at the discretion
                of
                the Pledgee, has an adverse effect on the Pledgors’ ability of performing
                the obligations under this
                Agreement;

            

    

    

    
      	 	
              8.1.6

            	
              The
                Company fails to repay the debts which fall
                due;

            

    

    

    
      	 	
              8.1.7

            	
              The
                properties owned by Pledgor have significant adverse changes, which,
                at
                the discretion of Pledgee, has an adverse effect on Pledgor’s ability of
                performing the obligations under this
                Agreement;

            

    

    

    
      	 	
              8.2
                

            	
               

              Unless
                the Pledgors take the action to Pledgee’s satisfaction to remedy the
                defaults as listed in Article 8.1 hereof, the Pledgee may give a
                written
                notice about default (“Notice of Default”) to the Pledgors when such
                default occurs or at any time thereafter. 

               

            

    

    

    
      	
              9.

            	
              Taxes
                and Expenses 

            

    

    

    
      	 	
              9.1

            	
              The
                Parties shall pay, in accordance with relevant PRC laws and regulations,
                their respective taxes and expenses arising from the execution and
                performance of this Agreement.

            

    

    

    
      	
              10.

            	
              Assignment 

            

    

    

    
      	 	
              10.1

            	
              The
                Pledgors shall not transfer part or all of the rights and obligations
                under this Agreement without prior written consent from the Pledgee.
                

            

    

    

    
      	 	
              10.2

            	
              To
                the extent being permitted by law, the Pledgee shall
                have the right to transfer any or all of its rights and obligations
                under
                this Agreement to any third party upon a six (6) -day written notice
                to
                the Pledgors or the Company without its
                approval.

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

      Equity
        Pledge Agreement

      
        
          

        

      

       

    

    
      	
              11.

            	
              Effectiveness
                Modification
                and Cancellation

            

    

    

    
      	 	
              11.1

            	
              This
                Agreement shall be executed on the date set forth in the first page
                and
                shall become effective on the day on which the Pledged Equity is
                recorded
                on the register of the
                shareholders.

            

    

    

    
      	 	
              11.2

            	
              The
                modification of this Agreement shall not be effective without written
                agreement through negotiation. If the Parties could not reach an
                agreement, this Agreement remains
                effective.

            

    

    

    
      	 	
              11.3

            	
              This
                Agreement shall not be discharged or canceled without written agreement
                through negotiation.

            

    

    

    
      	 	
              11.4

            	
              If
                the Pledgee fails to provide the loan to the Pledgors in accordance
                with
                the Loan Agreement, this Agreement shall be automatically
                terminated.

            

    

    

    
      	
              12.

            	
              Confidentiality

            

    

    

    
      	 	
              12.1

            	
              Any
                information, documents, data and all other materials (herein “Confidential
                Information”) arising out of the negotiation, signing, and implement of
                this Agreement, shall be kept in strict confidence by the Parties.
                Without
                the written approval by the other Parties, any Party shall not disclose
                to
                any third party any Confidential Information, but the following
                circumstances shall be excluded:

            

    

    

    
      	 	
              a.

            	
              The
                materials that is known or may be known by the Public (but not include
                the
                materials disclosed by each Party
                receiving the Confidential
                Information);

            

    

    

    
      	 	
              b.

            	
              The
                materials required to be disclosed subject to the applicable laws
                or the
                rules or provisions of stock exchange;
                or

            

    

    

    
      	 	
              c.

            	
              The
                materials disclosed by each Party to its legal or financial consultant
                relating the transaction of this Agreement, and this legal or financial
                consultant shall comply with the confidentiality set forth in this
                Section. The disclosure of the Confidential
                Information by staff or employed institution of any Party shall be
                deemed
                as the disclosure of such Confidential Information by such Party,
                and such
                Party shall bear the liabilities for breaching the contract.
                

            

    

    

    
      	 	
              12.2

            	
              This
                Clause shall survive whatever this Agreement is invalid, amended,
                revoked,
                terminated or unable to implement by any
                reason.

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    Equity
      Pledge Agreement

    
      
        

      

    

     

    
      	
              13.

            	
              Force
                Majeure

            

    

    

    
      	 	
              13.1

            	
              An
                event of force majeure means an event that could not be foreseen,
                and
                could not be avoided and overcome, which includes among other things,
                but
                without limitation, acts of nature (such as earthquake, flood or
                fire),
                government acts, strikes or riots;

            

    

    

    
      	 	
              13.2

            	
              If
                an event of force majeure occurs, any of the Parties who is prevented
                from
                performing its obligations under this Agreement by an event of force
                majeure shall notify the other Parties without delay and within fifteen
                (15) days of the event provide detailed information about and notarized
                documents evidencing the event and take appropriate means to minimize
                or
                remove the negative effects of force majeure on the other Parties,
                and
                shall not assume the liabilities for breaching this Agreement. The
                Parties
                shall keep on performing this Agreement after the event of force
                majeure
                disappears.

            

    

    

    
      	
              14.

            	
              Applicable
                Law and Dispute Resolution

            

    

    

    
      	 	
              14.1

            	
              The
                execution, validity, construing and performance of this Agreement
                and the
                disputes resolution under this Agreement shall be governed by the
                laws and
                regulations of the PRC.

            

    

    

    
      	 	
              14.2

            	
              The
                Parties shall strive to settle any dispute arising from or in connection
                with this Agreement through friendly consultation. In case no settlement
                can be reached through consultation within thirty (30) days after
                such
                dispute is raised, each party can submit such matter to Beijing
                Arbitration Commission for arbitration in accordance with its rules.
                The
                arbitration award shall be final conclusive and binding upon the
                Parties.

            

    

    

    
      	 	
              14.3

            	
              During
                the process of dispute-resolution, the Parties shall continue to
                perform
                other terms under this Agreement, except for provision of dispute
                resolution.

            

    

    

    
      	
              15.

            	
              Miscellaneous
                

            

    

    

    
      	 	
              15.1

            	
              Entire
                Agreement 

            

    

    

    
      	 	 	
              The
                Parties acknowledge that this Agreement constitutes the entire agreement
                of the Parties with respect to the subject matters therein and supersedes
                and replaces all prior or contemporaneous oral or written agreements
                and
                understandings.

            

    

    

    
      	 	
              15.2

            	
              Successor
                

            

    

    

    
      	 	 	
              This
                Agreement shall bind and benefit the successor of each Party and
                the
                transferee permitted hereunder with the same rights and obligations
                as if
                the original parties hereof. 

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

      Equity
        Pledge Agreement

      
        
          

        

      

       

    

    
      	 	
              15.3

            	
              Notice

            

    

    

    
      	 	 	
              Any
                notice required to be given or delivered to the Parties hereunder
                shall be
                in writing and delivered to the address as indicated below or such
                other
                address or as such party may designate, in writing, from time to
                time. All
                notices shall be deemed to have been given or delivered upon by personal
                delivery, fax and registered mail. It shall be deemed to be delivered
                upon: (1) registered air mail: 5 business days after deposit in the
                mail;
                (2) personal delivery or delivery by fax: 2 business days after
                transmission. If the notice is delivered by fax, it should be confirmed
                by
                original through registered air mail or personal delivery. 

               

              The
                Representative designated by Party A 

              Contact
                person: Wang Chen

              Address:
                Room324, 3/F, 1stStreet, Tianjin Economic-Technological Development
                Area

              Tel:
                86-22-28590002  Fax:
                86-22-28590003

               

              Party
                B

              Contact
                person: Wang Chen

              Address:
                Room A2-191, No.166 Xisandao, Konggang Logistics Processing Zones,
                Tianjin

              Tel:
                86-22-28590002 
                Fax: 86-22-28590003

               

              Party
                C

              Contact
                person: Wang Chen

              Address:
                Room324, 3/F, 1stStreet, Tianjin Economic-Technological Development
                Area

              Tel:
                86-22-28590002  Fax:
                86-22-28590003

            

    

     

    
      	 	
              15.4

            	
              This
                Agreement is executed in eleven originals with each Party holding
                one
                original, and each of the originals shall be equally valid and
                authentic.

            

    

    

    [Signature
      page follows]

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    Equity
      Pledge Agreement

    
      
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      party has caused this Agreement to be executed and delivered as of the date
      first above written. 

    

    Party
      A All
      shareholders of Tianjin Shengkai Industrial Technology Development Co.,
      Ltd.

    

    

      
        	
                Name of the

                Shareholders

              	 	
                Signature

              	 	
                Name of the

                Shareholders

              	 	
                Signature

              
	 	 	 	 	 	 	 
	
                Wang
                  Chen

              	 	
                /s/
                  Wang Chen

              	 	
                Guo
                  Wei

              	 	
                /s/
                  Guo Wei

              
	 	 	 	 	 	 	 
	
                Zhao
                  Yanqiu

              	 	
                /s/
                  Zhao Yanqiu

              	 	
                Ji
                  Haihong

              	 	
                /s/
                  Ji Haihong

              
	 	 	 	 	 	 	 
	
                Zhang
                  Ying

              	 	
                /s/
                  Zhang Ying

              	 	
                Miao
                  Yang

              	 	
                /s/
                  Miao Yang

              
	 	 	 	 	 	 	 
	
                Chen
                  Fang

              	 	
                /s/
                  Chen Fang

              	 	
                Wu
                  Yanping

              	 	
                /s/
                  Wu Yanping

              
	 	 	 	 	 	 	 
	
                Liu
                  Naifan

              	 	
                /s/
                  Liu Naifan

              	 	 	 	 

      

    

    

    Party
      B  Shengkai
      (Tianjin) Ceramic Valve Co., Ltd (“Pledgee”)

    

    Legal
      Representative: Wang Chen

    Signature
      and Company Seal: /s/ Wang Chen

    

    Party
      C  Tianjin
      Shengkai Industrial Technology Development Co. Ltd. (“Company”) 

     

    Legal
      Representative: Wang Chen

    Signature
      and Company seal: /s/ Wang Chen

    

    
      
        
        

      

      
        14EXCLUSIVE
      PURCHAE OPTION AGREEMENT

    

    by
      and among

    

    SHENGKAI
      (TIANJIN)
      CERAMIC
      VALVE CO., LTD.

    

    TIANJIN
      SHENGKAI INDUSRIAL TECHNOLOGY

    DEVELOPMENT
      CO., LTD. 

    

    and

    

    THE
      SHAREHOLDERS SIGNATORIES THERETO

    

    May
      30th,
      2008

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      Exclusive
        Purchase Option Agreement 
        
          

        

      

    EXCLUSIVE
      PURCHASE OPTION AGREEMENT 

     

    
      This
        Exclusive Option Purchase Agreement (the “Agreement”) is executed by the
        following parties on May 30th,
        2008 in
        Tianjin, the People’s Republic of China.

    

    

    (1) Shengkai
      (Tianjin) Ceramic Valve Co., Ltd. (“Party A”)

    

    Registered
      Address: Room A2-191, No.166 Xisandao, Konggang Logistics Processing Zones,
      Tianjin 

    

    Legal
      representative: Wang Chen

    

    (2) Tianjin
      Shengkai Industrial Technology Development Co., Ltd. (“Party
      B”)

     

    Registered
      Address: Room324, 3/F, 1stStreet, Tianjin Economic-Technological Development
      Area

    

    Legal
      representative: Wang Chen

    

    (3)
      The Shareholders of Tianjin Shengkai Industrial Technology Development Co.,
      Ltd.
      (“Shareholders”)

    

    
      	
              Name of Each

              Shareholder

            	 	
              Shareholding

              Ratio (%) 

            	 	
              ID Card No.

            	 	
              Contact Address

            
	
              Wang Chen

            	 	
              71.39%

            	 	
              120103196412022118

            	 	
              204-209,Gate
                8,Zhonghuan Deppartment,No.2 Road, Wujiayao, Heping District,
                Tianjin

            
	 	 	 	 	 	 	 
	
              Guo
                Wei

            	 	
              13.33%

            	 	
              120103196607222128

            	 	
              204-209,Gate
                8,Zhonghuan Department,No.2 Road, Wujiayao, Heping District,
                Tianjin

            
	 	 	 	 	 	 	 
	
              Zhao
                Yanqiu

            	 	
              6.55%

            	 	
              2310851197903050762

            	 	
              Tuanjie
                Wei, Muleng Town, Muleng City, Helongjiang Province

            
	 	 	 	 	 	 	 
	
              Ji
                Haihong

            	 	
              6.55%

            	 	
              140102197002012349

            	 	
              No.7,Unit1,4th/F,No.11,Xinmin
                Zhongjie,Xinghualing District, Taiyuan City,Shanxi
                Province

            
	 	 	 	 	 	 	 
	
              Zhang
                Ying

            	 	
              0.48%

            	 	
              51010319740824628X

            	 	
              No.3,4th/F,
                Dong 315, Huangtian Bawei 4th Road, Qingyang District, Chengdu
                City

            
	 	 	 	 	 	 	 
	
              Miao
                Yang

            	 	
              0.48%

            	 	
              110108197106111811

            	 	
              No.1905,No.1Building,
                Yangguang 100 International Department, No.2, Guanghua Road,Chaoyang
                District, Beijing

            
	 	 	 	 	 	 	 
	
              Chen
                Fang

            	 	
              0.48%

            	 	
              440402197211205769

            	 	
              Room
                401, Unit 1, Dong 3,No.2013,Xiangzhou Fenghuang North Road, Xiangzhou
                District,Zhuhai City,Guangzhou Province

            
	 	 	 	 	 	 	 
	
              Wu
                Yanping

            	 	
              0.37%

            	 	
              120106196505060526

            	 	
              No.101,Gate
                3,No.25 Building,Xinghuali,Shengli Street,Da Gang
                District,Tianjin

            
	 	 	 	 	 	 	 
	
              Liu
                Naifan

            	 	
              0.37%

            	 	
              372832196010257414

            	 	
              Dormitory
                District,Yinan Gold Mine,Yinan County,Shandong
                Province

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

      Exclusive
        Purchase Option Agreement 
        
          

        

      

    

     

    Party
      A,
      Party B, and shareholders of Party B are hereinafter from time to time,
      collectively, referred to as the “Parties”,
      and
      each of them is hereinafter from time to time referred to as a “Party”;
      the
      individual shareholders are hereinafter from time to time, collectively,
      referred to as the “Shareholders”
and
      each of them is hereinafter from time to time referred to as a “Shareholder”.
      The
      equity interests in Party B held by each Shareholder or any shareholder now
      existing or hereafter acquired is hereinafter from time to time referred to
      as
      the “Equity
      Interests”
or
      “Equity”.

    

    WHEREAS:
      

    

    
      	
              1.

            	
              Party
                A, a wholly foreign-owned enterprise incorporated under the laws
                of the
                People’s Republic of China (the “PRC”),
                which engages in the general business items, including researching,
                developing, technology consulting service of ceramic valves and ceramic
                materials.

            

    

    

    
      	
              2.

            	
              Party
                B, as a domestic limited liability company, incorporated under PRC
                laws in
                Tianjin, and licensed by Tianjin Administration for Industry and
                Commerce,
                it engages in The design, manufacturing and marketing of Environmental
                pollution control equipments (including flue gas desulphurization
                governance, de-dusting equipment); the production and manufacturing
                of
                industrial control systems of its transportation systems and equipments;
                the design, manufacturing and marketing of ceramic valves; the
                manufacturing environmental dedicated instrumentation electronic
                equipments; the manufacturing of ceramic coatings; the manufacturing
                and
                sale of high-tech ceramics; electromechanical products (except cars),
                chemical products (flammable, explosive, dangerous goods except prone
                to
                cause toxicity); technical consultation; technical services; operating
                the
                enterprise home-grown products as well as related technology import
                and
                export business. 

            

    

    

    
      	
              3.

            	
              As
                of the date of this Agreement, the percentage ownership of the Equity
                Interests in Party B held by each of the Shareholders shall be set
                forth
                as described above. 

            

    

    

    
      	
              4.

            	
              To
                secure the performance of the obligations assumed by Party B and
                the
                Shareholders under this Agreement, the Shareholders agree to pledge
                all
                their equity in Party B to Party A, and have executed Equity Pledge
                Agreement on May 30th,
                2008 with respect thereto (collectively called as the “Equity
                Pledge Agreements”
                or respectively as “Individual
                Equity Pledge Agreement”
                or “Equity
                Pledge Agreement”).

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

      Exclusive
        Purchase Option Agreement 
        
          

        

      

    

     

    NOW,
      THEREFORE,
      the
      Parties through mutual negotiations hereby enter into this Agreement with
      respect of the exclusive purchase option right:

    

    
      	
              1.

            	
              THE
                GRANT AND EXERCISE OF PURCHASE
                OPTION

            

    

    
      

      
        	 	
                1.1

              	
                Each
                  Shareholder hereby irrevocably grants to Party A an exclusive purchase
                  right at any time, or designate any third party to purchase all
                  or part of
                  such Shareholders’ Equity Interests in Party B, provided permitted under
                  the PRC laws and regulations and Party B agrees to such grant by
                  such
                  Shareholders to Party A. Apart from Party A or any third party
                  designated
                  by Party A, no other person shall have the right to purchase such
                  Equity
                  Interests. Each of the Shareholders shall transfer its Equity Interests
                  in
                  Party B to Party A in accordance with its percentage ownership
                  of such
                  Equity Interests provided Party A selects to purchase such Shareholders’
                  Equity Interests.

                 

              
	 	
                1.2

              	
                Party
                  B hereby irrevocably grants to Party A an exclusive purchase option,
                  at
                  any time to acquire all or a portion of such Shareholders’ Equity
                  Interests, or all or substantial part of Party B’s assets, provided
                  permitted under the PRC laws and regulations and the shareholders
                  agree to
                  such grant by Party B to Party A. 

                 

              
	 	
                1.3

              	
                For
                  the purpose of this Agreement, a “third party” or a “person” may be a
                  natural person, company, partnership, enterprise, trust agency
                  or other
                  non-corporate entity.

              

      

       

    

    
      	 	
              1.4

            	
              To
                the extent permitted under the PRC laws and regulations, Party A
                shall
                determine at any time and at its own option to exercise such exclusive
                right to (i) purchase the Equity Interests as provided in Section
                1.1
                by
                written notice to the applicable Shareholder(s) specifying the amount
                of
                equity to be purchased (hereinafter referred to as “Equity
                Transfer”)
                or (ii) purchase all or substantially all of Party B’s assets as provided
                in Section
                1.2
                (hereinafter referred to as “Assets
                Transfer”)
                by written notice to Party B (each an "Exercise
                Notice").

            

    

    

    
      	 	
              1.5

            	
              Within
                thirty (30) days of the receipt of the Exercise Notice, the applicable
                Shareholder(s) and Party B shall execute a share/asset transfer agreement
                and other documents (collectively, the "Transfer
                Documents")
                necessary to effect the respective transfer of equity or assets to
                Party A
                (or any eligible party designated by Party A), and shall unconditionally
                assist Party A to obtain all approvals, permits, registrations, filings
                and other procedures necessary to effect the Equity or Assets
                Transfer.

            

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

      Exclusive
        Purchase Option Agreement 
        
          

        

      

    

     

    
      	 	
              1.6

            	
              Unless
                otherwise required under the PRC laws and regulations, the transaction
                price for the Equity Transfer or the Assets Transfer hereunder, as
                applicable, shall be the lowest price permitted under the PRC laws
                and
                regulations.

            
	 	 	 
	 	
              1.7

            	
              The
                consideration after tax payment (the “Consideration of Equity Transfer”)
                obtained by the Shareholders from Equity Transfer in Party B hereunder
                shall be used to satisfy their repayment obligations under the Loan
                Agreement dated as of May 30th,
                2008, signed by and among, Party A and the Shareholders (the “Loan
                Agreement”);

               

              The
                consideration after tax payment (the “Consideration of Assets Transfer”)
                by the Party B, if as applicable, from Assets Transfer hereunder
                shall be
                allocated to the Shareholders, to the largest extent as permitted
                by PRC
                laws and regulations, through profit allocation proposal and fulfill
                their
                payment obligations under the Loan Agreement, and Party B shall give
                full
                cooperation;

               

              And
                if the Consideration of Equity Transfer or Assets Transfer is higher
                than
                the total principal under the Loan Agreement due to the requirement
                by the
                applicable law or any other reasons, the excess shall be deemed as
                loan
                interests and/or utilizing fees of the Loan to the largest extent
                being
                permitted by PRC Laws, and be paid to Party A by the Shareholders
                together
                with loan principal.

            

    

    

    
      	
              2.

            	
              REPRESENTATIONS
                AND WARRANTIES

            

    

    

    
      	 	
              2.1

            	
              Each
                Party hereto represents to the other Parties that: (1) it has all
                the
                necessary rights, powers and authorizations to enter into this Agreement
                and perform its duties and obligations hereunder; and (2) the execution
                or
                performance of this Agreement shall not violate or conflict with
                the terms
                of any other contracts or agreements to which it is a
                party.

            

    

    

    
      	 	
              2.2

            	
              Each
                Shareholder hereby represents to Party A that: (1) such Shareholder
                is the
                legally registered shareholder of party B and has paid full amount
                of
                registered capital in Party B as required to be contributed by such
                Shareholder under the PRC laws and regulations; (2)Except for the
                Equity
                Pledge Agreement executed among the Parties, such Shareholder has
                not
                created any other mortgage, pledge, secured interests or other form
                of
                debt liabilities over the Equity Interests held by such Shareholder;
                and
                (3) such Shareholder has not transfer to any third party (and entered
                into
                any agreement in respect of) such Equity
                Interests.

            

    

    

    
      	 	
              2.3

            	
              Party
                B hereto represents to Party A that: (1) it is a limited liability
                company
                duly registered and validly existing under the PRC laws and regulations;
                and (2) its business operations are in compliance with applicable
                laws and
                regulations of the PRC in all material
                respects.

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

      Exclusive
        Purchase Option Agreement 
        
          

        

      

    

     

    
      	
              3.

            	
              OBLIGATIONS
                OF PARTY B AND ALL
                SHAREHOLDERS

            

    

    

    The
      Parties further agree as follows:

    

    
      	 	
              3.1

            	
              Before
                Party A has acquired all the equity/assets of Party B by exercising
                the
                purchase option provided hereunder, Party
                B:

            

    

     

    
      	 	
              a.

            	
              without
                Party A’s prior written consent, shall not supplement or amend the
                articles of association or rules of Party B, its wholly-owned and
                holding
                subsidiaries in any manner, nor shall it increase or decrease the
                registered capital or change the shareholding structure of aforesaid
                entities in any manner; 

            
	 	
              b.

            	
              shall
                prudently and effectively maintain its business operations according
                to
                good financial and business standards so as to maintain or increase
                the
                value of its assets; 

            

    

    

    
      	 	
              c.

            	
              shall
                not transfer, mortgage or otherwise dispose of the lawful rights
                and
                interests to and in its assets or incomes, nor shall it encumber
                its
                assets and income in any way that would affect Party A’s security
                interests unless as required necessary for the business operation
                of Party
                B or upon prior written consent by Party A ;

            

    

    

    
      	 	
              d.

            	
              shall
                not incur or succeed to any debts or liabilities without Party A’s prior
                written consent; 

            

    

    

    
      	 	
              e.

            	
              without
                Party A’s prior written consent, shall not enter into any material
                contract (exceeding RMB 3,000,000 in
                value);

            

    

    

    
      	 	
              f.

            	
              without
                Party A’s prior written consent, shall not provide any loans or guaranty
                to any third party; 

            

    

    

    
      	 	
              g.

            	
              at
                Party A’s request, it shall provide Party A with all information regarding
                Party B’s business operation and financial condition;
                

            

    

    

    
      	 	
              h.

            	
              shall
                purchase insurance from insurance companies acceptable to Party B
                in such
                amounts and of such kinds as are customary in the region among companies
                doing similar business and having similar assets;
                

            

    

    

    
      	 	
              i.

            	
              without
                Party A’s prior written consent, shall not acquire or consolidate with any
                third party, nor shall they invest in any third party;
                

            

    

    

    
      	 	
              j.

            	
              shall
                promptly notify Party A of any pending or threatened lawsuit, arbitration
                or administrative dispute which involve Party B’s assets, business or
                incomes, and take positive measures against aforesaid lawsuits,
                arbitrations or administrative dispute;

            

    

    
       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      

        Exclusive
          Purchase Option Agreement 
          
            

          

        

      

       

      
        	 	
                k.

              	
                without
                  Party A’s prior written consent, shall not distribute any dividends to
                  the
                  shareholders in any manner, and, at Party A’s request, shall promptly
                  distribute all distributable dividends to the shareholders of Party
                  B;

              
	 	 	 
	 	
                l.

              	
                without
                  Party A’s prior written consent, shall not commit any act or omission that
                  would materially affect Party B’s assets, business or
                  liabilities;

              
	 	
                 

                m

                 

              	
                 

                at
                  Party A’s request, shall it promptly and unconditionally transfer its
                  assets to Party A or its designated third party as permitted by
                  PRC laws
                  and regulations;

                 

              
	 	
                n

              	
                shall
                  strictly comply with the provisions of this Agreement, and effectively
                  perform its obligations hereunder, and shall be prohibited from
                  committing
                  any act or omission which may affect the validity or enforceability
                  of
                  this Agreement.

              

      

       

    

    
      	 	
              3.2

            	
              Before
                Party A has acquired all the equity/assets of Party B by exercising
                the
                purchase option provided hereunder, each
                Shareholder:

            

    

    

      
        	 	
                a.

              	
                apart
                  from relevant provisions in each of the Equity Pledge Agreements,
                  without
                  Party A’s prior written consent, it shall not individually or collectively
                  transfer, sell, mortgage or otherwise dispose of such Shareholder’s Equity
                  Interests in Party B; nor shall such Shareholder places encumbrances
                  on
                  such Shareholder’s Equity Interests that would affect Party A’s interest
                  hereunder and thereunder;

              

      

    

     

    
      	 	
              b.

            	
              without
                Party A’s prior written consent, shall not supplement or amend the
                articles of association or rules of Party B in any manner, nor shall
                it
                increase or decrease its registered capital or change the shareholding
                structure in any manner;

            

    

    

    
      	 	
              c.

            	
              without
                Party A’s prior written consent, shall cause the Shareholders’ General
                Meeting not to approve for the resolutions on the dissolution, liquidation
                and change of legal form of Party B, its wholly owned and holding
                subsidiaries; 

            

    

    

    
      	 	
              d.

            	
              shall
                cause the Shareholders’ General Meeting not to approve for any Profit
                Distribution Proposal, nor shall accept such distributed dividend
                without
                Party A’s written consent; At Party A’s request, it shall promptly approve
                for the Profit Distribution Proposal, and accept such distributed
                dividend.

            

    

    

    
      	 	
              e.

            	
              at
                Party A’s request, it shall provide Party A with all information regarding
                Party B’s business operation and financial
                condition;

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

      Exclusive
        Purchase Option Agreement 
        
          

        

      

    

     

    
      	 	
              f.

            	
              shall
                not incur or succeed to any debts or liabilities which may adversely
                affect its Equity Interests in Party B without Party A’s prior written
                consent;

            

    

    

    
      	 	
              g.

            	
              shall
                appoint, and appoint only, the candidates nominated by Party A to
                the
                board of directors of Party B, and shall not replace such candidates
                without Party A’s prior written consent;

            

    

    

    
      	 	
              h.

            	
              shall
                cause Party B’s board of directors not to approve any acquisition of, any
                consolidation with, or any investment in any third party without
                Party A’s
                prior written consent; 

            

    

    

    
      	 	
              i.

            	
              shall
                promptly notify Party A of any pending or threatened lawsuit, arbitration
                or administrative dispute which involve Party B’s assets, business or
                incomes, and take positive measures against aforesaid lawsuits,
                arbitrations or administrative dispute;

            

    

    

    
      	 	
              j.

            	
              without
                Party A’s prior written consent, shall not commit any act or omission that
                would materially affect Party B’s assets, business or
                liabilities;

            

    

    

    
      	 	
              k.

            	
              to
                the extent permitted by the PRC laws and regulations, and at any
                time upon
                Party A’s request, shall promptly and unconditionally transfer their
                Equity Interests in Party B to Party A or a third party designated
                by
                Party A, and waive their rights of first refusal with respect to
                such
                transfer; 

            

    

    

    
      	 	
              l.

            	
              shall
                cause the directors of Party B approve for the resolution in respect
                of
                the Equity Transfer or Assets Transfer
                hereunder;

            

    

    

    
      	 	
              m.

            	
              shall
                make every efforts to cause Party B perform the obligations of Section
                3.1
                hereunder; and 

            

    

    

    
      	 	
              n.

            	
              shall
                strictly comply with the provisions of this Agreement, and effectively
                perform its obligations hereunder, and shall be prohibited from committing
                any act or omission which may affect the validity or enforceability
                of
                this Agreement.

            

    

    

    
      	 	
              3.3

            	
              The
                Shareholders shall, to the extent permitted by applicable laws, cause
                Party 

              B's
                operational term (including the circumstance of change of business
                terms)
                to be extended to equal the operational term of Party A (including
                the
                circumstance of change of business
                terms).

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

      Exclusive
        Purchase Option Agreement 
        
          

        

      

    

     

    
      	
              4.

            	
              GUARANTY
                OF THIS AGREEMENT 

            

    

    

    
      	 	
              4.1

            	
              To
                secure the performance of the obligations assumed by the Shareholders
                and
                Party B hereunder, the Parties agree to execute the Equity Pledge
                Agreement with respect thereto.

            

    

    

    
      	
              5.

            	
              TAXES
                AND FEES 

            

    

    

    
      	 	
              5.1

            	
              The
                Parties shall pay, in accordance with relevant PRC laws and regulations,
                their respective taxes arising from Equity or Assets transfer and
                related
                registration formalities and other charges during the transactions
                contemplated herein and therein. Party A shall pay the taxes and
                charges
                which shall be paid by Party B arising from Equity Transfer and related
                registration formalities, if the consideration of equity transfer
                is lower
                than, or equal to the total principal under the Loan Agreement.
                

            

    

    

    
      	
              6.

            	
              ASSIGNMENT
                OF AGREEMENT

            

    

    

    
      	 	
              6.1

            	
              Party
                B and the Shareholders shall not transfer such Shareholder’s rights and
                obligations under this Agreement to any third party without the prior
                written consent of Party A. 

            

    

    

    
      	 	
              6.2

            	
              Each
                Shareholder and Party B agree that Party A shall have the right to
                transfer any or all of its rights and obligations under this Agreement
                to
                any third party upon a six(6)-day written notice to such Shareholder
                and
                Party B without approval by such Shareholder and Party B.
                

            

    

    

    
      	
              7.

            	
              EVENTS
                OF DEFAULT

            

    

    

    
      	 	
              7.1

            	
              Any
                violation of any provision hereof, incomplete performance of any
                obligation provided hereunder, any misrepresentation made hereunder,
                material concealment or omission of any material fact or failure
                to
                perform any covenants provided hereunder by any Party shall constitute
                an
                event of default. The defaulting Party shall assume all the legal
                liabilities pursuant to the applicable PRC laws and
                regulations.

            

    

    

    
      	 	
              7.2

            	
              In
                the event of default by Party B or Shareholders, Party A shall be
                entitled
                to exercise the Pledgee’s right under the Equity Pledge Agreement in the
                event that Party B and Shareholders commit an event of default and
                fail to
                redress such default within 60 working days upon receipt of written
                notification from Party A.

            

    

    

    
      	
              8.

            	
              EFFECTIVEMESS,
                MODIFICATION AND
                CANCELLATION

            

    

    

    
      	 	
              8.1

            	
              This
                Agreement shall be effective upon the execution hereof by all Parties
                hereto.

            

    

    

    
      	 	
              8.2

            	
              The
                modification of this Agreement shall not be effective without written
                agreement through negotiation. If the Parties could not reach an
                agreement, this Agreement remains
                effective.

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

      Exclusive
        Purchase Option Agreement 
        
          

        

         

      

    

    
      	 	
              8.3

            	
              This
                Agreement shall not be discharged or canceled without written agreement
                through negotiation, provided Party A may, by giving a thirty (30)
                days
                prior notice to the other Parties hereto, terminate this
                Agreement.

            

    

    

    
      	 	
              8.4

            	
              If
                Party A fails to provide the loan to the Shareholders in accordance
                with
                the Loan Agreement, this Agreement shall be automatically
                terminated.

            

    

    

    
      	
              9.

            	
              CONFIDENTIALITY

            

    

    

    
      	 	
              9.1

            	
              Any
                information, documents, data and all other materials (herein “confidential
                information”) arising out of the negotiation, signing, and implement of
                this Agreement, shall be kept in strict confidence by the Parties.
                Without
                the written approval by the other Parties, any Party shall not disclose
                to
                any third party any relevant materials, but the following circumstances
                shall be excluded:

            

    

    

    
      	 	
              a.

            	
              The
                materials that is known or may be known by the Public (but not include
                the
                materials disclosed by each party receiving the
                materials);

            

    

    

    
      	 	
              b.

            	
              The
                materials required to be disclosed subject to the applicable laws
                or the
                rules or provisions of stock exchange;
                or

            

    

    

    
      	 	
              c.

            	
              The
                materials disclosed by each Party to its legal or financial consultant
                relating the transaction of this Agreement, and this legal or financial
                consultant shall comply with the confidentiality set forth in this
                Section. The disclosure of the confidential materials by staff or
                employed
                institution of any Party shall be deemed as the disclosure of such
                materials by such Party, and such Party shall bear the liabilities
                for
                breaching the contract. 

            

    

    

    
      	 	
              9.2

            	
              If
                this Agreement is terminated or becomes invalid or unenforceable,
                the
                validity and enforceability of Article 9 shall not be affected or
                impaired.

            

    

    

    
      	
              10.

            	
              FORCE
                MAJEURE

            

    

    

    
      	 	
              10.1

            	
              An
                event of force majeure means an event that could not be foreseen,
                and
                could not be avoided and overcome, which includes among other things,
                but
                without limitation, acts of nature (such as earthquake, flood or
                fire),
                government acts, strikes or riots;

            

    

    

    
      	 	
              10.2

            	
              If
                an event of force majeure occurs, any of the Parties who is prevented
                from
                performing its obligations under this Agreement by an event of force
                majeure shall notify the other Parties without delay and within fifteen
                (15) days of the event provide detailed information about and notarized
                documents evidencing the event and take appropriate means to minimize
                or
                remove the negative effects of force majeure on the other Parties,
                and
                shall not assume the liabilities for breaching this Agreement. The
                Parties
                shall keep on performing this Agreement after the event of force
                majeure
                disappears.

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

      Exclusive
        Purchase Option Agreement 
        
          

        

      

    

     

    
      	
              11.

            	
              APPLICABLE
                LAW AND DISPUTE RESOLUTION

            

    

    

    
      	 	
              11.1

            	
              Applicable
                Law 

            

    

    

    
      	 	 	
              The
                execution, validity, construing and performance of this Agreement
                and the
                disputes resolution under this Agreement shall be governed by the
                laws and
                regulations of the PRC. 

            

    

    

    
      	 	
              11.2

            	
              Dispute
                Resolution 

            

    

    

    
      	 	 	
              The
                Parties shall strive to settle any dispute arising from or in connection
                with this Agreement through friendly consultation. In case no settlement
                can be reached through consultation within thirty (30) days after
                such
                dispute is raised, each party can submit such matter to Beijing
                Arbitration Commission for arbitration in accordance with its rules.
                The
                arbitration shall take place in Beijing and the proceedings shall
                be
                conducted in Chinese. The arbitration award shall be final conclusive
                and
                binding upon the Parties. 

            

    

    

    
      	
              12.

            	
              MISCELLANEOUS

            

    

    

    
      	 	
              12.1

            	
              Entire
                Agreement 

            

    

    

    
      	 	 	
              The
                Parties acknowledge that this Agreement constitutes the entire agreement
                of the Parties with respect to the subject matters therein and supersedes
                and replaces all prior or contemporaneous oral or written agreements
                and
                understandings.

            

    

    

    
      	 	
              12.2

            	
              Successor
                

            

    

    

    
      	 	 	
              This
                Agreement shall bind and benefit the successor of each Party and
                the
                transferee permitted hereunder with the same rights and obligations
                as if
                the original parties hereof. 

            

    

    

    
      	 	
              12.3

            	
              Notice

            

    

    

    
      	 	 	
              Any
                notice required to be given or delivered to the Parties hereunder
                shall be
                in writing and delivered to the address as indicated below or such
                other
                address or as such party may designate, in writing, from time to
                time. All
                notices shall be deemed to have been given or delivered upon by personal
                delivery, fax and registered mail. It shall be deemed to be delivered
                upon: (1) registered air mail: 5 business days after deposit in the
                mail;
                (2) personal delivery: 2 business days after transmission. If the
                notice
                is delivered by fax, it should be confirmed by original through registered
                air mail or personal delivery. 

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

      Exclusive
        Purchase Option Agreement 
        
          

        

      

    

    
      

      
        	 	 	
                Party
                  A

                Contact
                  person: Wang Chen

                Address:
                  Room A2-191, No.166 Xisandao, Konggang Logistics Processing Zones,
                  Tianjin

                Tel:
                  86-22-28590002      Fax:
                  86-22-28590003

                 

                Party
                  B

                Contact
                  person: Wang Chen

                Address:
                  Room324, 3/F, 1stStreet, Tianjin Economic-Technological Development
                  Area

                Tel:
                  86-22-28590002      Fax:
                  86-22-28590003

                  

                The
                  Representative designated by the Shareholders

                Contact
                  person: Wang Chen

                Address:
                  Shengkai
                  Ind. Park Wanggang R.d Jinnan (Shuanggang) Dev. Area Tianjin

                Tel:
                  86-22-28590002   
Fax:
                  86-22-28590003

              

    

    
      	 	
              12.4

            	
              Copies

            

    

    

    
      	 	 	
              This
                Agreement is executed in eleven originals with each of the person
                for
                signing this Agreement holding one original, and each of the originals
                shall be equally valid and
                authentic.

            

    

     

    [Signature
      page follows]

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

      Exclusive
        Purchase Option Agreement 
        
          

        

      

    

    
       

    

    IN
      WITNESS THEREFORE,
      the
      parties hereof have caused this Agreement to be executed and delivered as of
      the
      date first written above.

    

    Party
      A Shengkai
      (Tianjin) Ceramic Valve Co., Ltd (Seal)

    

    Legal
      Representative (or Authorized Representative): Wang Chen

     

    

    Party
      B Tianjin Shengkai Industrial Technology Development Co., Ltd.
      (Seal)

    

    Legal
      Representative (or Authorized Representative): Wang Chen

     

    Shareholders
      of Tianjin Shengkai Industrial Technology Development Co.,
      Ltd.

    

    
      	
              Name
                of the Shareholders

            	 	
              Signature

            	 	
              Name
                of the Shareholders

            	 	
              Signature

            
	 	 	 	 	 	 	 
	
              Wang
                Chen

            	 	
              /s/
                Wang Chen

            	 	
              Guo
                Wei

            	 	
              /s/
                Guo Wei

            
	 	 	 	 	 	 	 
	
              Zhao
                Yanqiu

            	 	
              /s/
                Zhao Yanqiu

            	 	
              Ji
                Haihong

            	 	
              /s/
                Ji Haihong

            
	 	 	 	 	 	 	 
	
              Zhang
                Ying

            	 	
              /s/
                Zhang Ying

            	 	
              Miao
                Yang

            	 	
              /s/
                Miao Yang

            
	 	 	 	 	 	 	 
	
              Chen
                Fang

            	 	
              /s/
                Chen Fang

            	 	
              Wu
                Yanping

            	 	
              /s/
                Wu Yanping

            
	 	 	 	 	 	 	 
	
              Liu
                Naifan

            	 	
              /s/
                Liu Naifan

            	 	 	 	 

    

    

    
      
        
        

      

      
        13

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