8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)
November 20, 2008

FLOW INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State of Incorporation) 0-12448
(Commission File Number) 91-1104842
(IRS Employer
Identification Number)

23500 — 64th Avenue South, Kent, Washington 98032
(Address of principal executive offices) (Zip Code)

(253) 850-3500
(Registrant’s telephone number, including area code)

N/A
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

          On November 25, 2008, Flow International Corporation (“Flow”) announced that it had agreed to purchase a $2 million minority ownership position in Dardi International Corporation, China’s leading waterjet manufacturer (“Dardi”). A copy of the press release announcing this investment is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

          In connection with the investment in Dardi, on November 20, 2008 Flow entered into the following agreements to be effective November 18, 2008 (i) a Share Purchase Agreement by and among Flow, Dardi, Chen Bo and other named shareholders of Dardi (the “Share Purchase Agreement”) and (ii) a Shareholders (Joint Venture) Agreement by and among Flow, Dardi, Chen Bo and other named shareholders of Dardi (the “Shareholders Agreement”). The Share Purchase Agreement provides for the purchase by Flow from certain named shareholders of Dardi of 1,500,000 ordinary shares of Dardi, which at the closing will represent approximately 5% of the total issued and outstanding capital of Dardi. The Shareholders Agreement, among other things, contemplates the conversion of Dardi from a PRC domestic joint stock company into a PRC foreign invested joint stock company and documents the parties’ understandings regarding certain aspects of the operation and management of Dardi. The Shareholders Agreement also addresses share transfer restrictions, rights of first refusal and preemptive right provisions with respect to the ordinary shares of Dardi.

          The foregoing summary is qualified in its entirety by reference to the text of the Share Purchase Agreement, a copy of which is attached as Exhibit 99.2 to this Current Report and to the text of the Shareholders Agreement, a copy of which is attached as Exhibit 99.3 to this Current Report, and which are incorporated by reference herein.

ITEM 9.01. Exhibits

          (d) Exhibits

99.1	News Release dated November 25, 2008.
99.2	Share Purchase Agreement by and among Flow International Corporation, Dardi International Corporation, Chen Bo and Other Shareholders of Dardi International Corporation
99.3	Shareholders (Joint Venture) Agreement by and among Flow International Corporation, Dardi International Corporation, Chen Bo and Other Shareholders of Dardi International Corporation

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 26, 2008	FLOW INTERNATIONAL CORPORATION
	By:	/s/ John S. Leness
	Name: John S. Leness
	Title: General Counsel and Secretary

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact:
Flow Investor Relations	Flow Media Relations
Geoffrey Buscher	Lisa Brandli
253-813-3286	425-653-1237
investors@flowcorp.com	lbrandli@flowcorp.com

Kent, WA — November 25, 2008 — Flow International Corporation, the world’s leading developer and manufacturer of industrial waterjet machines for cutting and cleaning applications, announced today that it has agreed to purchase a $2 million minority ownership position in Dardi International Corporation, China’s leading waterjet manufacturer.

Privately held Dardi is the world leading waterjet supplier for the “economy” segment of the market, and the largest volume producer of waterjets in Asia with three factories located near Nanjing, China. In September, Flow introduced Dardi as the new supplier of its economy segment product line. By establishing a minority equity position with Dardi, Flow gains further access to Dardi’s low cost factories as well as its extensive distribution network in China.

Charley Brown, Flow’s President and CEO commented: “For many months, we have been discussing an equity position in Dardi that included a potential majority interest. In light of current economic conditions, we feel it prudent to keep our investment in check, while not diminishing the long term advantage that we gain by utilizing Dardi’s manufacturing and distribution base in China. We have struck a good balance of minimizing our investment while continuing to pursue our strategic interests in the high growth China market and throughout Asia.”

The transaction will close following receipt of approval from the Chinese government and satisfaction of typical closing conditions.

About Flow International
Flow International Corporation is the world’s leading developer and manufacturer of ultrahigh-pressure waterjet technology for cutting and cleaning. Flow provides state-of-the-art ultrahigh-pressure (UHP) technology to numerous industries including automotive, aerospace, job shop, surface preparation, food and dozens more. For more information, visit www.flowcorp.com.

This press release contains forward-looking statements relating to future events or future financial performance that involve risks and uncertainties. The words “believe,” “expect,” “intend,” “anticipate,” variations of such words, and similar expressions identify forward-looking statements but their absence does not mean that the statement is not forward-looking. These statements are only predictions and actual results could differ materially from those anticipated in these statements based on a number of risk factors, including those set forth in the April 30, 2008 Flow International Corporation Form 10-K Report, filed with the Securities and Exchange Commission. Forward- looking statements in this press release include, without limitation, statements regarding Flow’s access to Dardi’s factories and distribution network. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this announcement.

EX-99.2

Exhibit 99.2

SHARE PURCHASE AGREEMENT

          This SHARE PURCHASE AGREEMENT (this “Agreement”) is entered into as of November 18, 2008, by and among [Flow International Corporation], a corporation organized and existing under the laws of the State of Washington, USA (“Purchaser”), Dardi International Corporation, a joint stock company organized and existing under the laws of the PRC (the “Company”), Chen Bo (“Sellers’ Representative”), and the shareholders of the Company listed on Schedule A of this Agreement (collectively, “Sellers,” and individually, “Seller”).

RECITALS

          A. As of the date hereof, the Company is a joint stock company established and existing under the laws of the PRC with a paid-in capital of Thirty Million Renminbi (RMB30,000,000) and the total issued and outstanding shares of Thirty Million (30,000,000) ordinary shares with a par value of One Renminbi (RMB1.00) per share. As of the date hereof, Sellers own all of the issued and outstanding ordinary shares of the Company, with the number of ordinary shares owned by each of them set forth opposite their respective names on Schedule A.

          B. Sellers wish to sell to Purchaser, and Purchaser wishes to purchase from Sellers, One Million Five Hundred Thousand(1,500,000) ordinary shares of the Company (the “Purchased Shares”) at the consideration of Two Million US Dollars (US$2,000,000) upon the terms and subject to the conditions set forth herein. The following chart contains information concerning ordinary shares amount held by each seller pior to share transfer and the share amount going to be transferred by each seller.

		Shares					Shares					Par
	Names of	Amount		SAPT/			Amount		SAT/			Share		Total
	Share-	Prior to		Total			to be		Total			Transfer		Transfer
	holders	Transfer		Shares			Transferred		Shares			Price		Price
No.	(Sellers)	(SAPT)		Amount			(SAT)		Amount			(US$)		(US$)
1	Chen Bo		5,759,200		19.20	%		287,960		0.9599	%		1.33		383,946.67
2	Jin Wenling		5,790,400		19.30	%		289,520		0.9651	%		1.33		386,026.66
3	Huang Zhaofu		4,921,000		16.40	%		246,050		0.8202	%		1.33		328,066.66
4	Zhao Hongjun		1,538,000		5.13	%		76,900		0.2563	%		1.33		102,533.33

		Shares					Shares					Par
	Names of	Amount		SAPT/			Amount		SAT/			Share		Total
	Share-	Prior to		Total			to be		Total			Transfer		Transfer
	holders	Transfer		Shares			Transferred		Shares			Price		Price
No.	(Sellers)	(SAPT)		Amount			(SAT)		Amount			(US$)		(US$)
5	Yang Min		1,538,000		5.13	%		76,900		0.2563	%		1.33		102,533.33
6	Zhang Weixin		1,038,000		3.46	%		51,900		0.1730	%		1.33		69,200.00
7	Zhang Rong- cheng		1,038,000		3.46	%		51,900		0.1730	%		1.33		69,200.00
8	Wei Ming-xing		600,000		2.00	%		30,000		0.1000	%		1.33		40,000.00
9	Liu Qian		600,000		2.00	%		30,000		0.1000	%		1.33		40,000.00
10	Wu Tingting		600,000		2.00	%		30,000		0.1000	%		1.33		40,000.00
11	Gao Zhigang		481,000		1.60	%		24,050		0.0802	%		1.33		32,066.67
12	Tian Jing		481,000		1.60	%		24,050		0.0802	%		1.33		32,066.66
13	Yang Zuhua		446,250		1.49	%		22,313		0.0744	%		1.33		29,750.00
14	Jin wenli		446,250		1.49	%		22,312		0.0744	%		1.33		29,750.00
15	Sun Guohua		413,000		1.38	%		20,650		0.0688	%		1.33		27,533.33
16	Liu Hong		413,000		1.38	%		20,650		0.0688	%		1.33		27,533.33
17	Zhang Zuping		362,250		1.21	%		18,113		0.0604	%		1.33		24,150.00
18	Tan Qiuqin		362,250		1.21	%		18,112		0.0604	%		1.33		24,150.00

		Shares					Shares					Par
	Names of	Amount		SAPT/			Amount		SAT/			Share		Total
	Share-	Prior to		Total			to be		Total			Transfer		Transfer
	holders	Transfer		Shares			Transferred		Shares			Price		Price
No.	(Sellers)	(SAPT)		Amount			(SAT)		Amount			(US$)		(US$)
19	Zhou Xing		340,000		1.13	%		17,000		0.0567	%		1.33		22,666.67
20	Zhang Huixin		246,400		0.82	%		12,320		0.0411	%		1.33		16,426.67
21	Qi Ping		246,400		0.82	%		12,320		0.0411	%		1.33		16,426.66
22	Wei Guidi		200,000		0.67	%		10,000		0.0333	%		1.33		13,333.33
23	Gong Hongmei		200,000		0.67	%		10,000		0.0333	%		1.33		13,333.33
24	Hu Wencai		144,000		0.48	%		7,200		0.0240	%		1.33		9,600.00
25	Wu Ailing		136,000		0.45	%		6,800		0.0227	%		1.33		9,066.67
26	Huang Jian-qiang		134,000		0.45	%		6,700		0.0223	%		1.33		8,933.33
27	Jiang Yezhou		120,000		0.40	%		6,000		0.0200	%		1.33		8,000.00
28	Jiang Zhenhan		118,600		0.40	%		5,930		0.0198	%		1.33		7,906.67
29	Tai Qiuhui		118,600		0.40	%		5,930		0.0198	%		1.33		7,906.66
30	Zhao Yinghua		100,000		0.33	%		5,000		0.0166	%		1.33		6,666.67
31	Shi Yulan		100,000		0.33	%		5,000		0.0166	%		1.33		6,666.67
32	Cheng Yilun		100,000		0.33	%		5,000		0.0166	%		1.33		6,666.67

		Shares					Shares					Par
	Names of	Amount		SAPT/			Amount		SAT/			Share		Total
	Share-	Prior to		Total			to be		Total			Transfer		Transfer
	holders	Transfer		Shares			Transferred		Shares			Price		Price
No.	(Sellers)	(SAPT)		Amount			(SAT)		Amount			(US$)		(US$)
33	Zhu Ning		100,000		0.33	%		5,000		0.0166	%		1.33		6,666.67
34	Chen Yang		100,000		0.33	%		5,000		0.0166	%		1.33		6,666.67
35	Liu Xinhai		70,000		0.23	%		3,500		0.0116	%		1.33		4,666.67
36	Chen Fanggui		60,000		0.20	%		3,000		0.0100	%		1.33		4,000.00
37	Li Gang		60,000		0.20	%		3,000		0.0100	%		1.33		4,000.00
38	Shen Dong-feng		50,000		0.17	%		2,500		0.0083	%		1.33		3,333.33
39	Li Jian		50,000		0.17	%		2,500		0.0083	%		1.33		3,333.33
40	Wu Wei		50,000		0.17	%		2,500		0.0083	%		1.33		3,333.33
41	Zhao Shuang-feng		42,400		0.14	%		2,120		0.0071	%		1.33		2,826.67
42	Li Yuhua		40,000		0.13	%		2,000		0.0067	%		1.33		2,666.67
43	Tian Qifu		40,000		0.13	%		2,000		0.0067	%		1.33		2,666.67
44	Sun Wei		40,000		0.13	%		2,000		0.0067	%		1.33		2,666.67
45	Ma Jun		40,000		0.13	%		2,000		0.0067	%		1.33		2,666.67
46	Sun Qinghai		40,000		0.13	%		2,000		0.0067	%		1.33		2,666.67

		Shares					Shares					Par
	Names of	Amount		SAPT/			Amount		SAT/			Share		Total
	Share-	Prior to		Total			to be		Total			Transfer		Transfer
	holders	Transfer		Shares			Transferred		Shares			Price		Price
No.	(Sellers)	(SAPT)		Amount			(SAT)		Amount			(US$)		(US$)
47	Wang Shunmei		40,000		0.13	%		2,000		0.0067	%		1.33		2,666.67
48	Yao Xiang-wen		31,200		0.10	%		1,560		0.0052	%		1.33		2,080.00
49	Sun Xu		14,800		0.05	%		740		0.0025	%		1.33		986.67
	Total		30,000,000		100	%		1,500,000		5.0000	%				2,000,000.00

          C. Upon Closing of this sale and purchase of the Purchased Shares, the Purchased Shares will represent 5% of the total issued and outstanding share capital of the Company, and the new shareholding structure of the Company will be set forth inthe following table.

				HSA/
	Names of	Holding Shares		Total Shares
No.	Shareholders	Amount(HSA)		Capital
1	Flow (Purchaser)		1,500,000		5.00	%
2	Chen Bo		5,471,240		18.24	%
3	Jin Wenling		5,500,880		18.33	%
4	Huang Zhaofu		4,674,950		15.58	%
5	Zhao Hongjun		1,461,100		4.87	%
6	Yang Min		1,461,100		4.87	%
7	Zhang Weixin		986,100		3.29	%
8	Zhang Rongcheng		986,100		3.29	%

				HSA/
	Names of	Holding Shares		Total Shares
No.	Shareholders	Amount(HSA)		Capital
9	Wei Mingxing		570,000		1.90	%
10	Liu Qian		570,000		1.90	%
11	Wu Tingting		570,000		1.90	%
12	Gao Zhigang		456,950		1.52	%
13	Tian Jing		456,950		1.52	%
14	Yang Zuhua		423,937		1.41	%
15	Jin Wenli		423,938		1.41	%
16	Sun Guohua		392,350		1.31	%
17	Liu Hong		392,350		1.31	%
18	Zhang Zuping		344,137		1.15	%
19	Tan Qiuqin		344,138		1.15	%
20	Zhou Xing		323,000		1.07	%
21	Zhang Huixin		234,080		0.78	%
22	Qi Ping		234,080		0.78	%
23	Wei Guidi		190,000		0.63	%
24	Gong Hongmei		190,000		0.63	%
25	Hu Wencai		136,800		0.45	%
26	Wu Ailing		129,200		0.43	%
27	Huang Jianqiang		127,300		0.42	%
28	Jiang Yezhou		114,000		0.38	%
29	Jiang Zhenhan		112,670		0.37	%
30	Tai Qiuhui		112,670		0.37	%
31	Zhao Yinghua		95,000		0.32	%
32	Shi Yulan		95,000		0.32	%
33	Cheng Yilun		95,000		0.32	%
34	Zhu Ning		95,000		0.32	%
35	Chen Yang		95,000		0.32	%
36	Liu Xinhai		66,500		0.22	%
37	Chen Fanggui		57,000		0.19	%
38	Li Gang		57,000		0.19	%

				HSA/
	Names of	Holding Shares		Total Shares
No.	Shareholders	Amount(HSA)		Capital
39	Shen Dongfeng		47,500		0.16	%
40	Li Jian		47,500		0.16	%
41	Wu Wei		47,500		0.16	%
42	Zhao Shuangfeng		40,280		0.13	%
43	Li Yuhua		38,000		0.13	%
44	Tian Qifu		38,000		0.13	%
45	Sun Wei		38,000		0.13	%
46	Ma Jun		38,000		0.13	%
47	Sun Qinghai		38,000		0.13	%
48	Wang Shunmei		38,000		0.13	%
49	Yao Xiangwen		29,640		0.10	%
50	Sun Xu		14,060		0.05	%
	Total		30,000,000		100.00	%

AGREEMENT

          INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and the mutual representations, warranties, covenants and agreements in this Agreement, the parties hereby agree as follows:

1. Definitions

          For purposes of this Agreement, the following terms shall have the following meanings, unless the context clearly requires otherwise:

          1.1 “Action” shall mean any civil, criminal, regulatory or administrative claim, action, suit, arbitration, proceeding or investigation by or before any court or other Governmental Authority or any arbitration proceeding.

          1.2 “Affiliate” shall mean, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, “control” shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); provided, that, beneficial ownership of 30% or more of the voting securities (or the equivalents) of a Person shall be deemed to be control. With respect to any Person who is an individual, “Affiliates” shall mean such individual’s spouse and descendants (whether natural or adopted) and any trust solely for the

benefit of such individual and/or such individual’s spouse, their respective ancestors and/or descendants (whether natural or adopted).

          1.3 “Amended Articles of Association” shall mean the amended articles of association of the Company, dated the date hereof, duly executed and approved by the shareholders of the Company, including Purchaser, and the Governmental Authority.

          1.4 “Audited Financial Statements” shall mean the consolidated financial statements of the Company for its fiscal year ended as of December 31, 2007, consisting of audited balance sheets and statements of income and cash flow of the Company, audited by independent public accountants, in accordance with PRC GAAP.

          1.5 “Business” shall mean the design, development, manufacture or sale of waterjet or abrasive waterjet cutting or cleaning systems and other tools, equipment and pumps that utilize high pressure technology as has been conducted by the Company on or prior to the date hereof or may be conducted by the Company in the future.

          1.6 “Business License” shall mean the updated business license of the Company issued by SAIC after the transactions contemplated herein and the conversion of the Company into a foreign invested joint stock company have been approved by MOFCOM and the authority department.

          1.7 “Closing” shall mean the consummation of the matters as contemplated by Section 3.2.

          1.8 “Closing Date” shall mean the date Closing takes place pursuant to Section 3.1 below.

          1.9 “Disclosure Schedule” shall have the meaning set forth in the introduction to Section 4.

          1.10 “Employee Plan” shall mean all bonus, stock option, incentive, deferred compensation, medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, all employment rules or regulations, employee handbook, and all employment, termination, severance or other contracts, agreements or commitments (whether written or otherwise) to which the Company is a party or otherwise obligated, with respect to which the Company has any obligation or which are established, adopted, maintained, contributed to or sponsored by the Company for the benefit of any current or former employee, officer or director of the Company; provided, however, that the Employee Plan does not include any arrangement that has been terminated and completely wound up prior to the date of this Agreement and for which the Company has no present or potential liability.

          1.11 “Encumbrance” shall mean any security interest, pledge, mortgage, lien, option, charge, claim, preferential arrangement, property attachment, evidence attachment, other enforcement measures or restriction of any kind, including without limitation any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

          1.12 “Environmental Law” shall mean any applicable Law relating to pollution, industrial hygiene, occupational safety conditions, environmental conditions, land use, water and air quality, Hazardous Materials and protection of the environment, health or safety (occupational, product related or otherwise).

          1.13 “Financial Statements” shall mean the Audited Financial Statements and the Interim Financial Statements.

          1.14 “Government Approvals” shall have the meaning set forth in Section 6.4.

          1.15 “Governmental Authority” shall mean any PRC national, provincial or local governmental, regulatory or administrative authority, agency or commission which exercises executive, regulatory or administrative authority over the transactions contemplated herein.

          1.16 “Governmental Order” shall mean any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

          1.17 “Hazardous Materials” shall mean any substance, material or waste whether solid, liquid, gaseous or any combination of the foregoing which listed, defined, designated or otherwise classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated, under any applicable Environmental Law, whether by type or by quantity, including any substance containing any such substance as a component, including, but not limited to, petroleum products, asbestos-containing materials, polychlorinated biphenyls, radon, urea formaldehyde insulation, and toxic mold.

          1.18 “Intellectual Property” shall mean (a) inventions, whether or not patentable, whether or not reduced to practice, and whether or not yet made the subject of a pending patent application or applications; (b) ideas and conceptions of potentially patentable subject matter, including without limitation any patent disclosures, whether or not reduced to practice and whether or not yet made the subject of a pending patent application or applications; (c) national and multinational statutory invention registrations, patents, patent registrations and patent applications (including all reissues, divisions, continuations, continuations-in-part, extensions and reexaminations) and all rights therein provided by international treaties or conventions and all improvements to the inventions disclosed in each such registration, patent or application; (d) trademarks, service marks, trade dress, logos, trade names and corporate names, whether or not registered, including all common law rights, and registrations and applications for registration thereof, including without limitation all marks registered in the Trademark Office of the PRC and in the trademark offices of other nations throughout the world, and all rights therein provided by international treaties or conventions; (e) copyrights (registered or otherwise) and registrations and applications for registration thereof, and all rights therein provided by international treaties or conventions; (f) computer software, including without limitation source code, operating systems and specifications, data, data bases, files, documentation and other materials related thereto, data and documentation; (g) trade secrets and confidential, technical and business information (including ideas, formulas, processes, compositions, inventions, and conceptions of inventions whether patentable or unpatentable and whether or not reduced to practice); (h) whether or not confidential, technology (including know-how), manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information; (i) copies and tangible embodiments of all the foregoing, in whatever form or medium; (j) all rights to obtain and rights to apply for patents, and to register trademarks and copyrights; and (k) all rights to sue or recover and retain damages and costs and attorneys’ fees for present and past infringement of any of the foregoing.

          1.19 “Interim Financial Statements” shall mean the unaudited consolidated financial statements of the Company as of May 31, 2008, delivered by the Company to Purchaser and prepared by the Company in accordance with PRC GAAP.

          1.20 “Knowledge” when used with respect to the Company, shall mean the actual knowledge of the management of the Company, after due inquiry with the relevant departments in the Company.

          1.21 “Law” shall mean PRC national or local laws, regulations, rules, code, orders and other legal provisions.

          1.22 “Leased Real Property” shall mean the Real Property leased by the Company.”

          1.23 “Liabilities” shall mean debts and obligations, whether accrued or fixed, matured or unmatured, including without limitation those arising under any Law and applicable foreign law, Action or Governmental Order and those arising under any contract, agreement or arrangement.

          1.24 “Licensed Intellectual Property” shall mean all Intellectual Property licensed or sublicensed to the Company from a third party.

          1.25 “Losses” shall have the meaning set forth in Section 9.1.

          1.26 “Material Adverse Effect” shall mean any circumstance, change in, or effect on the Business or the Company that, individually or together with a series of related circumstances, changes in, or effects on, the Business or the Company: (a) is materially adverse to the Business, Assets, Liabilities, prospects, results of operations or the condition (financial or otherwise) of the Company; or (b) would materially adversely affect the ability of Purchaser or the Company immediately following the Closing to operate or conduct the Business in the manner in which it is currently operated or conducted by the Company.

          1.27 “MOFCOM” shall mean the Ministry of Commerce of the PRC.

          1.28 “Company” shall mean the Company as of the date of this Agreement, the details of which is set forth in Schedule C herein.

          1.29 “Ordinary Course of Business” or “Ordinary Course” shall mean the ordinary course of business of the Company or Purchaser, as the case may be, consistent with past custom and practice (including, if applicable, with respect to quantity, frequency and amount). For the avoidance of doubt, such terms shall not refer to the past accounting practices and policies of the Company.

          1.30 “Organizational Documents” shall mean this Agreement, the Shareholders (Joint Venture) Agreement and the Amended and Restated Articles of Association of the Company, which are executed on the same date herein.

          1.31 “Party” shall mean any of the parties hereto, and “Parties” shall mean all of the parties hereto.

          1.32 “Permits” shall mean all licenses, consents, exemptions, approvals, registrations, permits, certificates and other authorizations from or by any Governmental Authority, and applications thereof.

          1.33 “Person” shall mean any individual, partnership, firm, corporation, association, foundation, trust, unincorporated organization or other entity, including without limitation any Governmental Authority.

          1.34 “PRC” shall mean the People’s Republic of China, for purpose of this Agreement, excluding the territories of Taiwan, Hong Kong and Macau.

          1.35 “PRC GAAP” shall mean generally accepted accounting principles and practices as in effect from time to time in the PRC.

          1.36 “Purchase Price” shall be TwoMillion U.S. Dollars (US$2,000,000).

          1.37 “Purchased Shares” shall have the meaning set forth in the Recitals.

          1.38 “Real Property” shall mean the real property owned or leased by the Company.

          1.39 “SAIC” shall mean the State Administration of Industry and Commerce of the PRC or its local branch in Nanjing.

          1.40 “Shareholders (Joint Venture) Agreement” shall mean the shareholders (joint venture) agreement by and among the Company, the Purchaser, each of Sellers who remains a shareholder of the Company post Closing, dated the date hereof.

          1.41 “Sellers’ Representative” shall have the meaning set forth in the Recitals to this Agreement.

          1.42 “Tax” shall mean any tax or fees collected by the national and/or local government in accordance with the law and in respect of any Person and all penalties, charges, costs and interest relating thereto.

          1.43 “Valuation Report” shall mean the valuation report issued by Nanjing Great Wall Land and Real Estates Valuation and Asset Appraisal Firm, a PRC qualified asset appraisal firm mutually recognized by Flow and Sellers’ Representative and attached hereto in Schedule 7.6 in relation to the value of the Purchased Shares which have been reviewed and approved by the Parties.

          1.44 “Purchaser’s Bank” shall mean Bank of America.

          1.45 The term “above” and “below” used in connection with an amount herein shall be inclusive of such amount, while the term “more than” used in connection with an amount herein shall be exclusive of such amount.

2. Purchase of Purchased Shares

          2.1 Purchase and Sale of Purchased Shares. At Closing and on the terms and subject to the conditions set forth in this Agreement, Sellers shall sell and deliver to Purchaser, and Purchaser shall purchase from Sellers and pay therefor, the Purchased Shares, free and clear of any and all Encumbrances and in suitable form for transfer to Purchaser.

          2.2 Purchase Price. The consideration for the Purchased Shares shall be Two Million US Dollars(US$2,000,000), paid at one time in cash (US$) to the foreign exchange bank accounts in China both the set up of which and the payment of the consideration into which will have been approved by the competent branch or branches of the State Administration for Foreign Exchange of the PRC, designated by the Sellers’ Representative, within five (5) days upon issuance of Business License.

          2.3 Purchase Price Allocation. The following table sets forth the allocation of the consideration to be paid pursuant to this Agreement among Sellers, including the allocation of consideration to be paid to each Seller under the payment set forth in Section 2.2 above.

				Par Share		Total
	Names of	Transfer		Transfer		Consideration
No.	Shareholders	Amount		Price(US$)		(US$)
1	Chen Bo		287,960		1.33		383,946.67
2	Jin Wenling		289,520		1.33		386,026.66
3	Huang Zhaofu		246,050		1.33		328,066.66
4	Zhao Hongjun		76,900		1.33		102,533.33
5	Yang Min		76,900		1.33		102,533.33
6	Zhang Weixin		51,900		1.33		69,200.00
7	Zhang Rongcheng		51,900		1.33		69,200.00
8	Wei Mingxing		30,000		1.33		40,000.00
9	Liu Qian		30,000		1.33		40,000.00
10	Wu Tingting		30,000		1.33		40,000.00
11	Gao Zhigang		24,050		1.33		32,066.67
12	Tian Jing		24,050		1.33		32,066.66
13	Yang Zuhua		22,313		1.33		29,750.00
14	Jin Wenli		22,312		1.33		29,750.00

				Par Share		Total
	Names of	Transfer		Transfer		Consideration
No.	Shareholders	Amount		Price(US$)		(US$)
15	Sun Guohua		20,650		1.33		27,533.33
16	Liu Hong		20,650		1.33		27,533.33
17	Zhang Zuping		18,113		1.33		24,150.00
18	Tan Qiuqin		18,112		1.33		24,150.00
19	Zhou Xing		17,000		1.33		22,666.67
20	Zhang Huixin		12,320		1.33		16,426.67
21	Qi Ping		12,320		1.33		16,426.66
22	Wei Guidi		10,000		1.33		13,333.33
23	Gong Hongmei		10,000		1.33		13,333.33
24	Hu Wencai		7,200		1.33		9,600.00
25	Wu Ailing		6,800		1.33		9,066.67
26	Huang Jianqiang		6,700		1.33		8,933.33
27	Jiang Yezhou		6,000		1.33		8,000.00
28	Jiangzhenhan		5,930		1.33		7,906.67
29	Tai Qiuhui		5,930		1.33		7,906.66
30	Zhao Yinghua		5,000		1.33		6,666.67
31	Shi Yulan		5,000		1.33		6,666.67
32	Cheng Yilun		5,000		1.33		6,666.67
33	Zhu Ning		5,000		1.33		6,666.67
34	Chen Yang		5,000		1.33		6,666.67
35	Liu Xinhai		3,500		1.33		4,666.67
36	Chen Fanggui		3,000		1.33		4,000.00
37	Li Gang		3,000		1.33		4,000.00
38	Shen Dongfeng		2,500		1.33		3,333.33
39	Li Jian		2,500		1.33		3,333.33
40	Wu Wei		2,500		1.33		3,333.33

				Par Share		Total
	Names of	Transfer		Transfer		Consideration
No.	Shareholders	Amount		Price(US$)		(US$)
41	Zhao Shuangfeng		2,120		1.33		2,826.67
42	Li Yuhua		2,000		1.33		2,666.67
43	Tian Qifu		2,000		1.33		2,666.67
44	Sun Wei		2,000		1.33		2,666.67
45	Ma Jun		2,000		1.33		2,666.67
46	Sun Qinghai		2,000		1.33		2,666.67
47	Wang Shunmei		2,000		1.33		2,666.67
48	Yao Xiangwen		1,560		1.33		2,080.00
49	Sun Xu		740		1.33		986.67
	Total		1,500,000				2,000,000.00

3. Closing

          3.1 Time and Place of Closing. Subject to the satisfaction (or waivers by the Purchaser in respect of the conditions precedent set forth in Section 7, or by Sellers in respect of the conditions precedent set forth in Section 8, as the case may be) of the conditions precedent set forth in Sections 7 & 8 below, the consummation of the sale and purchase of the Purchased Shares shall take place at the offices of JC Master Law Offices at 15^th Floor, Daxinggong Mansion, 147 East Zhongshan Road, or such other place as may be agreed in writing by Purchaser and the Sellers’ Representative, within three (3) business days (“Closing Date”) from the date of the issuance of the Business License If within the three (3) business days after the date of Business License, the last of conditions precedent set forth in Sections 7 & 8 has not been satisfied or waived by Purchaser (in terms of Section 7) or by Sellers (in terms of Section 8), the Parties shall agree on a new Closing Date, but in any event no later than the three (3) months from the date of the issuance of the Business License, or if the Business License has not been issued as of the expiry of the above time, December 31, 2009 or the date on which the Governmental Authority issues a written document which disapproves the transaction contemplated hereunder (whichever is earlier) (the “Long Stop Date”), unless otherwise extended in writing by the Parties hereto.

          3.2 Deliveries at Closing. On the Closing Date, Sellers shall deliver to Purchaser the following documents: (1) a certified copy of the Amended Articles of Association set forth in Section 7.7, (2) a certified copy of the Shareholders (Joint Venture) Agreement set forth in Section 7.8, (3) Opinion of Counsel under Section 7.9 (4), Officer Certificate under Section 7.11, (5) Sellers’ Certificate under Section 7.12, (6) Approvals and Permit (if any) under Section 7.13 issued by Governmental Authority, and (7) share certificate indicating that Purchaser has purchased Purchased Shares at Closing which has been registered under the name of the

Purchaser under Section 7.14. In return, Purchaser shall deliver to Seller’s Representative an officer certificate under Section 8.2 has been satisfied.

          3.3 Post Closing Ownership Structure. Upon closing of this sale and purchase of the Purchased Shares, the Purchased Shares will account for 5% of the total issued and outstanding shares of the Company, and the new shareholding structure of the Company will be as set forth in Schedule B.

          3.4 Long Stop Date. Closing shall take place as soon as practical after the issuance of the Business License and the conditions precedent set forth in Sections 7 & 8 have been satisfied or waived, as the case may be, but in any event no later than the Long Stop Date, unless otherwise extended in writing by the Parties hereto. If Closing does not take place on or prior to the Long Stop Date, this Agreement shall automatically terminate in its entirety on the Long Stop Date and shall be of no further force or effect, and no Party hereto shall have any further rights, duties, liabilities or obligations of any nature whatsoever with respect to, in connection with, or otherwise arising, under the Agreement after the Long Stop Date.

4. Representations and Warranties of the Company and Sellers

          Except as disclosed in a correspondingly numbered schedule (the “Disclosure Schedule”) delivered to Purchaser dated as of the date of this Agreement, the Company and each of Sellers jointly and severally represent and warrant to Purchaser that all representations and warranties contained in this Section 4 are true as of the date hereof and as of the Closing. On or prior to the Closing, the Company and Sellers’ Representative shall prepare and deliver an updated Disclosure Schedule reflecting any update or change that occurred or came into existence after the date hereof. The disclosures set forth in the Disclosure Schedule shall apply to all representations and warranties under this Agreement so long as such disclosures identifies by section number the section and subsection to which such disclosure relates. No update or change in the Disclosure Schedule will affect a determination on whether a breach of any representation or warranty in this Section 4 has occurred as of the date hereof, which determination shall be made as if such update had not been delivered. As of the date of this Agreement, the Company and each of Sellers jointly and severally represent and warrant to, and agree with, Purchaser as follows:

          4.1 Organization, Authority and Qualification of the Company. The Company is a joint stock company duly organized and validly existing under the laws of the PRC and has all necessary power and authority to own, operate or lease the Assets now owned, operated or leased by it and to carry on the Business as it has been and is currently conducted and to execute, deliver and perform this Agreement, the other Organizational Documents and the Ancillary Agreements to which it will become a party. All corporate actions taken by the Company have been duly authorized, and the Company has not taken any action that conflicts with, constitutes a default under or results in a violation of any provision of its articles of association (or similar organizational documents). A true and correct copy of the articles of association (or similar organizational documents) of the Company, as in effect on the date hereof, has been delivered by the Company to Purchaser. The chops set forth in Schedule 4.1 are all chops currently used by the Company.

          4.2 Organization, Authority and Qualification of Sellers. Each Seller has all necessary power and authority to enter into this Agreement, the other Organizational Documents and the Ancillary Agreements to which he or she will become a party, to carry out his or her obligations hereunder and thereunder and to consummate the transactions contemplated hereby

and thereby. This Agreement, the other Organizational Documents and the Ancillary Agreements to which each such Seller will become a party have been or will be duly executed and delivered by such Seller, and, when executed and delivered, will constitute legal, valid and binding obligations of such Seller enforceable against such Seller in accordance with their terms. Such Seller has not taken any action to rescind its power-of-attorney agreement with the Sellers’ Representative.

          4.3 Share Capital of the Company. As of the date hereof, the Company has a paid-in capital of Thirty Million Renminbi (RMB30,000,000) and the total issued and outstanding shares of Thirty Million (30,000,000) ordinary shares with a par value of One Renminbi (RMB1.00) per share. All of the issued and outstanding ordinary shares of the Company as set forth in Schedule A have been duly authorized, are validly issued, fully paid, and nonassessable. None of the Purchased Shares was issued in violation of any preemptive rights. There are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the share capital of the Company or obligating Sellers or the Company to issue or sell any other shares of, or any other interest in, the Company. In addition, there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any of the shares of the Company, including the Purchased Shares.

          4.4 Ownership of the Purchased Shares. Schedule A accurately and correctly sets out the Purchased Shares owned by each Seller. All of the Purchased Shares specified as owned by each such Seller are free and clear of any Encumbrances.

          4.5 Subsidiaries. Except as set forth on Schedule 4.5, the Company has no subsidiaries or branches or representative offices, proprietary interests or investments in securities, other than those held from time to time as short-term investments for the utilization of idle cash, and does not control, through stock ownership or otherwise, any corporation, partnership, joint venture, unincorporated association or other business entity.

          4.6 Corporate Books and Records. The minute books of the Company contain accurate records of all meetings and accurately reflect all other corporate actions and decisions taken or subsequently ratified by the shareholders and the board of directors of the Company. Complete and accurate copies of all such minute books and of the share register of the Company have been provided by the Company to Purchaser

          4.7 No Conflict. The execution, delivery and performance of this Agreement, the other Organizational Documents and the Ancillary Agreements by the Company and each of Sellers does not and will not (a) violate, conflict with or result in the breach of any provision of the articles of association of the Company; (b) assuming the receipt of all consents, approvals, waivers and authorizations and the making of the notices and filings set forth on Schedule 4.8, conflict with or violate (or cause an event which could have a Material Adverse Effect as a result of) any Law or Governmental Order applicable to the Assets, Business, the Company or the Purchased Shares; or (c) assuming the receipt of all consents, approvals, waivers and authorizations and the making of notices and filings set forth on Schedule 4.8required to be made or obtained by Purchaser, any Seller or the Company, conflict with, result in any breach of, constitute a default under, or result in the creation of any Encumbrance on any of the Purchased Shares or on any of the Assets pursuant to, any note, mortgage, contract, agreement, lease, sublease, license, sublicense, Permit, or other arrangement to which the Company or any of Sellers is a party or by which any of the Purchased Shares or any of such Assets is bound or affected.

          4.8 Consents and Approvals. The execution, delivery and performance of this Agreement, the other Organizational Documents and the Ancillary Agreements by the Company and any of Sellers does not and will not require any consent, approval, permit, authorization, filing or notification to any Governmental Authority, creditor or other Person, except as set forth in Schedule 4.8, all of which shall be acquired or made, as the case may be, prior to the Closing Date.

          4.9 Financial Statements and Books and Records.

          (a) True and complete copies of Financial Statements have been delivered by the Company to Purchaser and are attached hereto as Schedule 4.9. Except for those disclosed in the Disclosure Schedule 4.9 and those disclosed by the Company to the Purchaser through provision and delivery of documents to Deloitte Consulting (Shanghai) Co. Ltd. during the financial due diligence process the delivery of which have been confirmed by the Company and Deloitte Consulting (Shanghai) Co. Ltd., on the date of this Agreement and the Closing Date, the books of account and other financial records of the Company (i) accurately reflect in all material respects items of income and expense and Assets and Liabilities required to be reflected therein in accordance with PRC GAAP; (ii) are complete and correct in all material respects, and do not contain or reflect any material inaccuracies or discrepancies; and (iii) have been maintained in accordance with good accounting practices in all material respects.

          (b) There has been no change in Company’s accounting policies or the methods of making accounting estimates or changes in estimates that are material to the Financial Statements, other than as set forth in the Financial Statements. Except as disclosed in the Financial Statements, Company is not a guarantor or indemnitor of any indebtedness of any other Person.

          4.10 No Undisclosed Liabilities. Except as disclosed on Disclosure Schedule 4.10, there are no Liabilities of the Company exceeding Fifty Thousand Renminbi (RMB 50,000) (in terms of a single liability) or Three Hundred Thousand Renminbi (RMB 300,000) in aggregate outstanding amount under a same or similar transaction, other than the Liabilities reflected or reserved against on the Financial Statements and Liabilities that have arisen after the date of the Interim Financial Statements in the Ordinary Course of Business. Reserves are reflected on the Financial Statements against all Liabilities of the Company in amounts that have been established on a basis consistent with the past practices of the Company and in accordance with PRC GAAP applied consistently during the periods indicated. Other than as reflected on the Financial Statements, there are no contracts, agreements or transactions between Sellers and the Company.

          4.11 Accounts Receivable. Except to the extent reserved for on the Financial Statements or disclosed on Disclosure Schedule 4.11, all accounts receivable reflected on the Financial Statements and all accounts receivable existing on the Closing Date have arisen from the sale of goods or services in the Ordinary Course of Business and, to the Knowledge of the Company and Sellers, constitute only valid, undisputed claims of the Company which are not subject to valid claims of set-off or other defenses or counterclaims other than normal cash discounts accrued or returns in the Ordinary Course of Business. Except as set forth on Disclosure Schedule 4.11, to the Knowledge of the Company and Sellers, all accounts receivable reflected on the Financial Statements or arising from the date thereof until the Closing (subject to the reserve for bad debts, if any, reflected on the Financial Statements) are or will be as of the Closing Date collectible, without resort to litigation or extraordinary collection activity, within one (1) year after the Closing Date.

          4.12 Permits. Schedule 4.12 describes all material Permits from Governmental Authorities necessary to conduct the Business (except for those disclosed in the Disclosure Schedule 4.12), all of which have been secured and are valid and in full force and effect and there is no Action which would or is reasonably likely to, result in the suspension, cancellation, modification or revocations of any of its Permits. None of such Permits shall be invalidated or become voidable as a result of the consummation of the transactions contemplated hereby (except that certain Permits might be renewed to reflect Purchaser’s status as a new shareholder in the Company as a result of the transactions contemplated hereby). The Company is in compliance with the terms and conditions of all such Permits.

          4.13 Related Party Transactions. Except as disclosed in Disclosure Schedule 4.13, or the agreement, undertaking or lease within a consecutive twelve (12) months entered into between Company and Seller or Company’s affiliate in an amount no more than RMB 500,000 or as contemplated by this Agreement, no employee, officer, shareholder, partner, director or Affiliate of any Seller or the Company has any interest in any of the Assets or is a party to any agreement, commitment or lease with the Company or affecting the Business or the Assets.

          4.14 Litigation. Except as disclosed in Disclosure Schedule 4.14, there are no Actions by or against the Company, or affecting any of the Assets, pending before any Governmental Authority (or, to the Knowledge of the Company, threatened to be brought by or before any Governmental Authority). Neither the Company nor the Assets are subject to any Governmental Order (or, to the Knowledge of the Company, are there any such Governmental Orders threatened to be imposed by any Governmental Authority).

          4.15 Compliance with Laws. The Company has conducted the Business and used its Assets in accordance with all Laws and Governmental Orders applicable to the Company, and the Company is not in violation of any such Law or Governmental Order. The Company has not received notice of any violation of any Laws or Governmental Orders which has not been cured. To the Knowledge of the Company and Sellers, the Company is not subject to any applicable foreign law.

          4.16 Intellectual Property.

          (a) The rights of the Company in or to such Owned Intellectual Property and Licensed Intellectual Property do not conflict with or infringe on the rights of any other Person, and neither Sellers nor the Company has received any claim or written notice from any Person to such effect. Relevant products operated by the Company in connection with the patent owned by Sellers’ Representative are high-pressure waterjet cutter and cleaner and Schedule 4.16 also set forth all patents on high-pressure waterjet cutter and cleaner owned by Sellers’ Representative in connection with the operation of relevant the Company.

          (b) The Company owns all Owned Intellectual Property free and clear of any Encumbrance, other than any non-exclusive licenses granted by the Company in the Ordinary Course of Business. The Company has the right, pursuant to valid and enforceable licenses, to use the Licensed Intellectual Property in the manner in which the Licensed Intellectual Property is currently being used. No Actions have been made or asserted or are pending (and, to the Knowledge of the Company, no Action has been threatened) against the Company either (i) based upon or challenging or seeking to deny or restrict the use by the Company of any of the Owned Intellectual Property or the Licensed Intellectual Property; or (ii) alleging that any Owned Intellectual Property or Licensed Intellectual Property is being licensed, sublicensed or used in violation of patents, copyrights or trademarks or any other rights of any Person. To the Knowledge of the Company, no Person is using any patents,

copyrights, trademarks, service marks, trade names, trade secrets or similar property that are confusingly similar to the Owned Intellectual Property or the Licensed Intellectual Property that is exclusively licensed to the Company or that infringe upon the Owned Intellectual Property or the Licensed Intellectual Property that is exclusively licensed to the Company or upon the rights of the Company. The consummation of the transactions contemplated by this Agreement will not result in the termination or impairment of any of the Owned Intellectual Property or Licensed Intellectual Property or any of the rights of the Company in any of the Owned Intellectual Property or Licensed Intellectual Property.

          (c) No product, service, operation or business activity of the Company (including the use of any patents, copyrights, trademarks, service marks, trade names, trade secrets or similar property by its employees at the Company’s premises) infringes or has infringed upon or otherwise violates or has violated the Intellectual Property rights of any other Person, and no Actions have been made or asserted or are pending or threaten against the Company alleging that any product, service, operation or business activity of the Company infringes upon or violates the Intellectual Property rights of any other Person.

          4.17 Tangible Personal Property. Schedule 4.17 lists each item of tangible personal property with a value (as determined in accordance with PRC GAAP) over Ten Thousand Renminbi (RMB10,000]) (the “Tangible Personal Property”) used in the Business or owned or leased by the Company. Except for those disclosed in Disclosure Schedule 4.17,the Company has good and marketable title, or valid and effective leasehold rights in the case of leased property, to all Tangible Personal Property, free and clear of all Encumbrances. The Tangible Personal Property is in good repair and operating condition, normal wear and tear and required maintenance (which has heretofore been regularly performed) excepted.

          4.18 Assets.

          (a) The Company owns, leases or has the legal right to use all the properties and assets used or intended to be used in the conduct of the Business or otherwise owned, leased or used by the Company and Company has lawfully acquired all ownership in connection with such properties and assets as set forth in Schedule 4.18(a) and has paid in full all considerations and other relevant amounts, with respect to contract rights, is a party to and enjoys the right to the benefits of all contracts, agreements and other arrangements used or intended to be used by the Company or in or relating to the conduct of the Business (all such properties, assets and contract rights being the “Assets”). The Assets constitute all the properties, assets and rights forming a part of, used, held or intended to be used in the Business. At all times since the date of the Interim Financial Statements, the Company has caused the Assets to be maintained in accordance with good business practice, and all the Assets are in good operating condition and repair and are suitable for the continued conduct of the Business, subject to normal wear and tear.

          (b) Except for those disclosed in Disclosure Schedule 4.18(b), all Permits, infrastructure facilities such as power, water supply, telecommunications, equipment and tools necessary for the construction and operation of the two new factory builds (Phase One Plant, which shall mean the construction project of phase one plant located at No. 099 Wei Yi Avenue, Gaochun County Economic Development Zone, Nanjing Municipality, the detailed information in Schedule 4.18, and Phase Two Plant, which shall mean the construction project of phase one plant located at No. 099 Wei Yi Avenue, Gaochun County Economic Development Zone, Nanjing Municipality.) that are currently under construction have been

obtained and/or secured and the construction is on schedule. To the Knowledge of the Company, there have been no incidents or reasons that might cause the Company to be concerned that the construction of the two new factory buildings may be delayed or the Company might have problem operating these two new plants when they are completed.

          (c) To the Knowledge of the Company, the consummation of the transactions contemplated by this Agreement will not result in the incurrence of any penalty or other adverse consequence with respect to the Company’s respective interest in the Assets or the ownership or possession of any documents, books, records, agreements and financial data of any sort used by the Company in the conduct of the Business.

          4.19 Employee Benefit Matters. No event has occurred and there exists no condition or set of circumstances in connection with which the Company could be subject to any material Liability under the terms of such Employee Plans or under the Law, except those Liabilities that have accrued in the Ordinary Course of Business but are not due pursuant to the terms of any Employee Plan.

          4.20 Labor Matters. The Company is not a party to any collective bargaining agreement (collective contract) or other labor union contract applicable to persons employed by the Company, and currently there are no organizational campaigns, petitions or other unionization activities seeking recognition of a collective bargaining unit which could materially affect the Company. There are no controversies, strikes, slowdowns, lock-outs or work stoppages pending or threatened between the Company and any of the employees, and the Company has not experienced any such controversy, strike, slowdown, lock-outs or work stoppage within the past three years. Except as disclosed on Disclosure Schedule 4.20, the Company is currently in compliance with all applicable Laws relating to the employment of labor, including without limitation those related to wages, hours and collective bargaining, and is not liable for any arrears of wages, taxes, allowances, benefits, severance pay, penalties or other sums for failure to comply with any of the foregoing. Except as disclosed on Disclosure Schedule 4.20, the Company has paid in full to all current and former directors, officers and employees or adequately accrued for in accordance with PRC GAAP all wages, salaries, commissions, bonuses, benefits allowances, severance pay and other compensation due to or on behalf of the current and former directors, officers and employees. There are no Actions that have been asserted or is now pending or threatened with respect to the Company for unfair labor practices, payment of withholding taxes, payment of wages, salary or severance, safety and health standards or discrimination in employment practices. The Company has made all required contributions, concerning national pension, national medical insurance, work-related injury insurance, unemployment insurance and other mandatory social security matters in accordance with the laws and rules of local labor management authority and the contribution of such have been confirmed by the employees.

          4.21 Taxes. Except for those disclosed in Disclosure Schedule 4.21, since the date of the establishment of the Company, all returns and reports in respect of Taxes required to be filed with respect to the Companyi, as the case may be, have been duly disclosed to the Purchaser. No adjustment relating to such returns has been proposed formally or informally by any Tax Authority and the Company is not (i) a party to any agreement, arrangement or election with any Tax Authority or (ii) liable for Taxes in relation to transfer pricing. There are no pending or threatened Actions for the assessment or collection of Taxes against the Company. The Company is not subject to any additional unpaid Tax investigation and no notices of any dispute regarding Tax receivable from the Company have been received by the Company.

          4.22 Insurance. The Company maintains insurance policies consistent with customary practices and standards of companies engaged in businesses and operations similar to those of the Company. A list of such insurance policies (including the policy number, the amount of coverage, the type of insurance, insurance carrier, annual premium, date of expiration and any pending claims or contributions thereunder which are material to the Company) is contained on Schedule 4.22.

          4.23 Environment.

          (a) Except for those disclosed in Disclosure Schedule 4.23, the Company has not engaged in or permitted any operations or activities upon, or any use or occupancy of, any parcel of the Real Property (or any portion thereof) for the purpose of or in any way involving the handling, manufacture, treatment, storage, use, generation, release, discharge, refining, dumping or disposal of any Hazardous Materials on, under, in or about any parcel of the Real Property, or transported any Hazardous Materials to, from or across any parcel of the Real Property.

          (b) The Company is in compliance with, and there are no existing violations by the Company under, all applicable PRC Environmental Laws in all respects, and no investment or expense is required by the Company in order to maintain such compliance.

          (c) The Company has obtained all Permits and filed all notices which are required to be obtained or filed by it or those engaged by it for use of the Assets and the conduct of the Business under applicable Environmental Laws, and there has been no change in the facts and circumstances reported or assumed in the application for or granting of such Permits.

          (d) The Company is in compliance with all terms and conditions of such required Permits, including without limitation filing all notices, reports and other statements which are required to be obtained or filed under such Permits.

          4.24 Product Liability and Product Warranty. To the Knowledge of the Company and Sellers, the Company has not distributed, supplied or sold products which are or alleged to be faulty, defective or which do not comply with any representations or warranties expressly or impliedly made by the Company. The Company has or has had, during the last two (2) years before the date of the Agreement, no legal liability, whether based on strict liability, negligence, breach of warranty (express or implied), breach of contract or otherwise, in respect of any product, component or other item manufactured, sold, designed or produced prior to the Closing, or services rendered prior to the Closing.

          4.25 Brokers. Other than payments disclosed on Disclosure Schedule 4.25, no broker or finder is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any Seller.

          4.26 Full Disclosure. No representation or warranty or other statement made with respect to the Company in this Agreement (including those in the Disclosure Schedule), the Financial Statements or any certificate delivered pursuant to the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make such representation or warranty or other statement, in light of the circumstances in which it was made, not misleading.

          4.27 No Other Representation or Warranty. Except for the representations and warranties contained in this Section 4, Company or Sellers make no other express or implied representation or warranty herein.

5. Representations and Warranties of Purchaser

          As of the date of this Agreement, Purchaser represents and warrants to, and agree with, Sellers and the Company as follows:

          5.1 Organization. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Washington, the United States of America, with full power and authority to conduct its business in the manner in which it has been conducted and to execute, deliver and perform this Agreement, the Shareholders (Joint Venture) Agreement and the Amended Articles of Association of the Company (hereinafter, collectively referred to as the “Organizational Documents”).

          5.2 Authority. The execution, delivery and performance of the Organizational Documents and the Ancillary Agreements by Purchaser have been duly authorized by all necessary corporate action. The Organizational Documents and the Ancillary Agreements, when executed and delivered by Purchaser, shall be legal, valid and binding obligations of Purchaser, enforceable against it, in accordance with the terms hereof and thereof.

          5.3 Full Disclosure. No representation or warranty or other statement made with respect to the Purchaser in this Agreement (including those in the relevant Schedules) or any certificate delivered pursuant to the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make such representation or warranty or other statement, in light of the circumstances in which it was made, not misleading.

          5.4 No Other Representations or Warranties. Except for the representations and warranties contained in this Section 5, Purchaser make no other express or implied representation or warranty herein.

6. Further Agreements of the Parties

          6.1 Pyramid Five Year Plan. The Purchaser undertakes that it will use commercially reasonable efforts, together with the Sellers who remain as the Company’s shareholder post-closing, to realize Pyramid Five Year Plan. .

          6.2 Warranty on Payment of Amount Due before Closing. Sellers warrant that all of the following payment liabilities shall have been paid off at Closing: (i) unpaid liabilities on infrastructure (including Phase One Plant and Phase Two Plant) and Phase Two Plant (including electronic (hanging) crane and finished constructions), but excluding unpaid liabilities for all machines and equipments of Phase Two Plant required for the future manufacturing of the Company, (ii) land grant fees payable by the Company, and

          6.3 Creditor’s Rights and Liabilities. Without prejudice to Sellers’ warranties under Section 6.2 hereof, upon issuance of the Business License, the Company will be converted from a PRC domestic joint stock company into a PRC foreign invested joint stock company. The purchaser and the sellers agree herein that the company after conversion shall succeed to the creditor’s rights and liabilities of the company before conversion.

          6.4 Government Approvals, Registration and Change of Licenses and Certificates. Upon execution of the Organizational Documents, the Parties shall, as soon as practicable but subject to the consents in writing of Purchaser and Seller’s Representative, submit (i) the transactions contemplated under this Agreement, (ii) the application for the conversion of the Company into a foreign-invested joint stock company, (iii) the Organizational Documents and (iv) all other documents required by Law, for approvals by Governmental Authority (the “Government Approval”). In addition, the Parties shall use their commercially reasonable best efforts to provide all necessary information and materials required by the Governmental Authority and to obtain the Government Approvals as soon as practical. Upon receipt of the Government Approvals, the Company shall also make all necessary filings and registrations for the change of the Company’s licenses and certificates, including without limitation the Business License, the tax certificates, foreign exchange certificate and finance registration certificate, to reflect Purchaser’s majority shareholding in the Company.

          6.5 Certificate for Receipt of Foreign Exchange for Share Transfer. Each Seller shall, and Seller’s Representative shall procure that each Seller, upon the receipt of their respective portion of the payments for the sale of the Purchased Shares set forth in Section 2.2 above, deliver to Purchaser a copy of the Certificate for Receipt of Foreign Exchange for Share Transfer for Purchaser’s records and assist the Company in completion of the legal procedures in connection with the foreign exchange registration.

          6.6 Conduct of Business. Between the date hereof and the Closing Date, unless otherwise agreed in advance in writing by Purchaser, the Company shall, and Sellers shall procure that the Company:

          (a) conduct the Business only in the usual and Ordinary Course of Business;

          (b) refrain from further amending the Amended Articles of Association of the Company or its internal rules or regulations;

          (c) refrain from issuing or selling any new shares, notes, bonds or other securities of the Company;

          (d) refrain from making any material change in its accounting practices or procedures other than changes required by PRC GAAP;

          (e) except as required by Law, not take any action that would render, or which reasonably may be expected to render, any representation or warranty made by Sellers in this Agreement untrue at the Closing Date;

          (f) refrain from (i) making any purchases, sales or transfers of any material properties; iii) mortgaging, pledging, subjecting to lien or otherwise encumbering any of its material Assets; (iv) borrowing or lending any funds outside of the Ordinary Course of Business or in an amount more than Eight Hundred Thousand Renminbi (RMB800,000); and (v) making any fixed asset investment (including without limitation, investment in Phase Two Plant);

          (g) refrain from incurring any Liabilities other than those that are in the Ordinary Course of Business or in an amount more than Eight Hundred Thousand Renminbi (RMB800,000);

          (h) refrain from making any repayment of the Company’s existing outstanding debts ahead of the original payment schedules of such debts or any single repayment of such debt in excess of Eight Hundred Thousand Renminbi (RMB800,000) without the consent of Purchaser.

          (i) except as required by Law, refrain from making any change in the compensation or benefit payable or to become payable to any of its employees or agents or making any new bonus payment or arrangement or benefit to or with any of them;

          (j) have in effect and maintain all insurance now in force as described in Schedule 4.22;

          (k) except as contemplated by this Agreement, refrain from making any dividend declaration or any other distributions;

          (l) use its best efforts to preserve the Business organization intact, to keep available the services of its present officers and employees and to make no changes therein, and to preserve the goodwill of all suppliers, customers, sales representatives and others having business relations with the Company; and

          (m) use its best efforts to maintain the Assets in accordance with good business practice and in good operating condition and repair.

          6.7 No Shop. Between the date of this Agreement and the Closing Date, or unless earlier terminated in accordance with this Agreement, none of the Sellers’ Representative, Sellers, the Company nor any of their respective officers, directors, Affiliates, employees, representatives or agents, shall, directly or indirectly, solicit, initiate or participate in any way in discussions or negotiations with, or provide any information or assistance to, any Person or group of Persons (other than Purchaser) concerning any sale or other disposition of any shares in the Company (including the Purchased Shares), Business or the Assets (other than sales of inventory in the Ordinary Course of Business) or assist or participate in, facilitate or encourage any effort or attempt by any other Person to do or seek any of the foregoing. Sellers and the Company shall promptly communicate to Purchaser in writing the terms of any proposal or contract which he/she or the Company may receive in respect of any such transaction. From the date hereof to the Closing Date, unless this Agreement is early terminated, Purchaser shall not conduct negotiation with any third party with same or similar Business as Company in Asia on acquisition, equity or cooperative joint venture or other similar cooperation.

          6.8 No Abuse of Information. Purchaser undertakes that if the transaction contemplated herein does not close according to Section 3.1, Purchaser shall not take advantage of the information of Company acquired hereunder to jeopardize the interests of Company or Sellers. To avoid doubt, the disclosure made by Purchaser in accordance with Section 12.15 (Confidentiality) or reasonable use in accordance with applicable law shall not be deemed as jeopardizing the interests of Company or Sellers.

          6.9 The Ultimate Ownership of Undistributed Profit Prior to Closing. Parties acknowledge that all undistributed profit prior to Closing may be declared and distributed to the Sellers prior to the Closing Date. After the Closing Date, all profit of Company including the undistributed profit of previous years (if any) shall be distributed in accordance with the PRC law (for purpose of Purchaser, dividend distribution shall be made based on the purchase price

actually paid-in). The specific arrangement is set forth in Sections 13.3 Shareholders (Joint Venture) Agreement and Amended Articles of Association.

          6.10 Execution of Shareholders (Joint Venture) Agreement and the Amended Articles of Association. On the date hereof, the Purchaser and each Seller who will remain as the shareholder of the Company post-Closing shall also execute a Shareholders (Joint Venture) Agreement and Amended Articles of Association in a form and content mutually agreed by Purchaser and Sellers.

7. Conditions Precedent to Obligations of Purchaser. All obligations of Purchaser to consummate the transactions contemplated herein will be subject to the satisfaction of all of the following conditions on or before the Closing Date, any one or more of which may be waived in writing by Purchaser solely at Purchaser’s discretion (to avoid doubt, Purchaser hereby acknowledges that except for Sections 7.1, 7.2, 7.3, 7.4, 7.7, 7.8,7.9, 7.11, 7.12,7.13,7.14 other conditions precedents under Section 7 have been satisfied or waived by Purchaser as of the date hereof:

          7.1 Representations and Warranties. All representations and warranties made by Sellers and the Company herein shall be true and correct in all respects as of the date hereof and as of the Closing Date with the same force and effect as though such representations and warranties had been made as of the Closing Date (other than those representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be accurate as of such date or with respect to such period).

          7.2 Compliance of Covenants. All of the covenants, terms and conditions of this Agreement to be complied with by Sellers and the Company on or before the Closing Date (including without limitation the covenants set forth in Section 6 above) shall have been complied with in all respects.

          7.3 No Material Adverse Effect. No fact, event or circumstance shall have occurred which has had or could reasonably be expected to have a Material Adverse Effect.

          7.4 No Legal Prohibition. No Law, judgment, injunction or order shall be enacted, promulgated, entered or enforced by any Governmental Authority that would prohibit consummation by the Parties of the transactions contemplated herein.

          7.5 Opinion of Counsel as of the Date hereof. Purchaser shall have received the opinion of counsel issued by the legal counsel of Sellers, i.e. Shanghai Brilliance Law Firm Nanjing Branch dated as of the date hereof, the form and content of which is satisfactory to Purchaser.

          7.6 Valuation Report. Purchaser shall have received a copy of the Valuation Report attached hereto as Schedule 7.6 and Purchaser and Sellers are satisfied with the content of the Valuation Report.

          7.7 Amended Articles of Association. The Amended Articles of Association shall be in full force and effect under the Law of the PRC and shall have been filed with the SAIC.

          7.8 Shareholders (Joint Venture) Agreement. Purchaser shall have received a copy of the Shareholders (Joint Venture) Agreement, duly authorized and executed by the Parties thereto, approved by MOFCOM, with full effect under PRC law and registered with SAIC.

          7.9 Opinion of Counsel as of Closing Date. Purchaser shall have received the opinion of Shanghai Brilliance Law Firm Nanjing Branch, counsel for Sellers, dated as of the Closing Date, in the form set forth in Exhibit 7.9.

          7.10 Authorization of the Organizational Documents and the Ancillary Agreements. The execution, delivery and performance of the Organizational Documents and the Ancillary Agreements by the Company have been duly authorized and approved by the shareholders and the board of directors of the Company.

          7.11 Officer Certificate. Purchaser shall have received an officer certificate in the form set forth in Exhibit 7.11, duly executed by Seller’s Representative in his capacity as the chief executive officer of the Company certifying that (x) a true and correct copy of the resolutions of the board of directors and the shareholders of the Company, approving and authorizing the transactions contemplated herein and the execution, delivery and performance of the Organizational Documents and the Ancillary Agreements by the Company, (y) a true and correct copy of the Company’ register of shareholders and the Amended Articles of Association showing Purchaser as the holder the Purchased Shares, (z) setting forth the incumbency of Seller’s Representative executing the Organizational Documents and the Ancillary Agreements on behalf of the Company.

          7.12 Sellers’ Certificate. Purchaser shall have received an certificate in form set forth in Exhibit 7.12, duly executed by each of Sellers certifying that (i) the conditions precedent set forth in Sections 7.1, 7.2, 7.3 and 7.4 above have been satisfied as of the Closing Date.

          7.13 Government Approvals and Licenses. All Government Approvals and Permits required for the consummation of the transactions contemplated herein and the Organizational Documents have been obtained.

          7.14 Share Certificates. Purchaser shall have received the share certificate representing the Purchased Shares purchased by Purchaser at Closing and registered in the name of Purchaser.

          7.15 Social Insurance and Housing Fund. Sellers shall have provided to Purchaser a certificate issued by a competent Government Authority acceptable to Purchaser in connection with the contribution of social insurance and housing fund amounts in connection with the Company.

          7.16 Company’s Ownership Certificate on Land Use Right and Land Grant Price. Company shall have obtained the State-owned Land Use Right Certificate for the fifty mu land where the Phase Two Plant is located under which Company shall have been entered as the owner of the granted land use right. Company shall have obtained the Property Ownership Certificate in connection with the Phase Two Plant under which Company shall have been entered as the owner of such property (the detailed information of the land and property is set forth in Schedule 7.17) and shall have lawfully paid off all land grant price and relevant tax and fees in connection with the 74 mu land owned by it.

8. Conditions Precedent to Obligations of Sellers and the Company

          The obligations of the Company and Sellers under this Agreement to consummate the transactions contemplated hereby will be subject to the satisfaction of all of the following conditions, any one of which may be waived in writing by the Company and the Sellers.

          8.1 Representations and Warranties. All representations and warranties made by Purchaser contained in this Agreement shall be true and correct in all respects as of the date hereof and as of the Closing Date, with the same force and effect as though such representations and warranties had been made as of the Closing Date.

          8.2 Officer Certificate. Seller’s Representative shall have received a certificate from Purchaser in the form set forth in Exhibit 8.2 signed by the chief executive officer or other authorized person of Purchaser certifying that the conditions set forth in Section 8.1 have been satisfied as of the Closing Date.

          8.3 Certificate of Purchaser’s Bank. Purchaser shall have provided to Sellers’ Representative a document issued by Purchaser’s Bank which evidences that the Purchaser has the ability to pay the Purchaser Price under this Agreement. The form of such certificate of Purchaser’s Bank is set forth in Exhibit 8.3.

          8.4 Approval Required by Purchaser. All approvals and permits required to consummate this Agreement and other Organizational Document by the shareholders of the Purchaser, securities exchange, anti-trust review committee and Governmental Authorities shall have been obtained.

9. Indemnification

          9.1 Indemnification by Sellers for Representations and Warranties and Covenants of the Company and Sellers. Sellers shall jointly and severally indemnify and hold harmless Purchaser against and in respect of any and all Liabilities, losses, damages, claims, costs and expenses (collectively, the “Losses”) imposed on, sustained, incurred or suffered by Purchaser, whether in respect of third-party claims against the Company or Purchaser, claims among the Parties, or otherwise, arising out of, resulting from, or due to (i) any breach of or inaccuracy in any representation or warranty set forth in Section 4 for the period such representation or warranty survives or (ii) any breach, violation or non-fulfillment of any covenant or agreement of the Company and Sellers contained in this Agreement.

          9.2 Indemnification by Purchaser for its Representations and Warranties. Purchaser shall indemnify, defend and hold harmless Sellers from, against and in respect of any Losses imposed on, sustained, incurred or suffered by, or asserted against, any of Sellers, whether in respect of third-party claims, claims among the Parties, or otherwise, arising out of, resulting from, or due to (i) any breach of or inaccuracy in any representation or warranty set forth in Section 5 for the period such representation or warranty survives or (ii) any breach, violation or non-fulfillment of any covenant or agreement of Purchaser contained in this Agreement.

10. Survival of Representations, Warranties, Covenants and Indemnification Obligations

All representations, warranties, covenants and indemnification obligations of the Parties contained in this Agreement, or made pursuant hereto, shall survive the Closing and any investigation at any time made by or on behalf of one Party for a period of two (2) years after the Closing Date; provided, however, that the breaches of representations, warranties covenants and indemnification obligations relating to fraud and as to the representations and warranties contained in Sections 4.1, 4.2, 4.3, 4.4, 5.1, 5.2, 6.1, 6.8, 6.9, shall not terminate but shall continue indefinitely. If any such claim shall have been made in writing and in

accordance with the provisions of Section 9 prior to such expiration, such expiration shall not affect or in any way impair the rights of a Party to indemnification in respect of the particular matter as to which the claim was made, whether or not the amount of indemnification to which a Party is entitled in respect of such matter shall have been determined prior to such expiration.

11. Termination

          11.1 Termination. This Agreement shall become effective upon execution of the Agreements by all Parties but may be terminated prior to the Closing:

          (a) by Purchaser or Seller’s Representative, as the case may be, by giving a thirty (30) day prior written notice of a breach, in the event of a breach of the representations, warranties, covenants or agreements under this Agreement by one Party and such breaching Party fails to cure the breach within thirty (30) days after the delivery of such written notice by the non-breaching Party;

          (b) by Purchaser or Seller’s Representative alone by means of written notice if Governmental Approval is not obtained in connection with the transaction contemplated under this Agreement and the Organizational Documents on or before the Long Stop Date; or

          (c) by Purchaser or Seller’s Representative alone by means of written notice if Closing does not take place on or before the Long Stop Date.

          11.2 Effects of Termination. In the event of the termination of this Agreement in accordance with Section 11.1, this Agreement shall thereafter become void and have no effect, and no Party shall have any liability to the other Parties, except for the obligations of the Parties contained in Section 12 (and any related definitional provisions set forth in Section 1), and except that nothing in this Section 11 shall relieve any Party from liability for any breach of this Agreement that arose prior to such termination, for which liability the provisions of Section 9 shall remain in effect in accordance with the provisions and limitations of such Section. In addition, Parties undertake that notwithstanding the termination of this Agreement, neither Party shall, in a manner in violation of applicable laws, take advantage of commercial information of the other Party derived from the transaction to harm the other Party’s interests. This provision shall not be affected by the termination of this Agreement.

12. Miscellaneous

          12.1 Expenses and Taxes.

          (a) Each Party shall bear its own expenses (including without limitation legal and accounting fees) incurred in connection with the preparation and execution of this Agreement, the other Organizational Documents and the Ancillary Agreements and the consummation of the transactions contemplated herein. In addition, each Party shall be responsible for its own Taxes, including any transfer Taxes, which may be payable in respect of the transactions contemplated hereby

          (b) Notwithstanding the foregoing, in the event that the Agreement is terminated pursuant to Section 11.1(a) above, the non-breaching Party shall be entitled to seek indemnification from the breaching Party for all of its out of pocket expenses incurred in

connection with the preparation and execution of this Agreement, the other Organizational Documents and the Ancillary Agreements and the consummation of the transactions contemplated herein, including without limitation all fees and expenses incurred by the financial, legal and accounting advisors of such non-breaching Party. If Sellers and the Company are the breaching Parties, Sellers and the Company shall be jointly and severally liable to the out-of-pocket expenses of Purchaser.

          12.2 Further Assurances. Each Party shall from time to time execute and deliver all further documents and instruments and do all acts and things as the other Party may, either before or after the Closing Date, reasonably required in order to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement.

          12.3 Entire Agreement. This Agreement (including all Schedules and Exhibits hereto) and the agreements referred to in or contemplated by this Agreement constitute the entire understanding and agreement among the Parties and supersede any and all prior or contemporaneous, oral or written, representations, communications, understandings and agreements among the Parties with respect to the subject matter hereof or thereof to the extent inconsistent with or contradictory to this Agreement or such other agreements.

          12.4 Incorporation by Reference. The Schedules and Exhibits attached hereto or referred to herein are deemed to be a part of this Agreement and are incorporated herein by reference.

          12.5 Modifications. This Agreement shall not be modified, amended, canceled or altered in any way, and may not be modified by custom, usage of trade or course of dealing, except by an instrument in writing signed by all Parties. All amendments or modifications of this Agreement shall be binding upon the Parties despite any lack of consideration so long as the same shall be in writing and executed by the Parties.

          12.6 Waiver. The performance of any obligation required of a Party hereunder may be waived only by a written waiver signed by the other Parties, and such waiver shall be effective only with respect to the specific obligation described. The waiver by any Party of a breach of any provision of this Agreement by any other Party shall not operate or be construed as a waiver of any subsequent breach of the same provision or another provision of this Agreement.

          12.7 Assignment. Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.

          12.8 Severability. If any provision hereof is found invalid, illegal or unenforceable pursuant to any Governmental Order, the remainder of this Agreement shall remain valid, legal and enforceable according to its terms, and such invalid, illegal or unenforceable provision shall be replaced with a provision that approximates the substance and spirit of the invalid, illegal or unenforceable provision as closely as possible without being invalid, illegal or unenforceable.

          12.9 Governing Law. This Agreement and all disputes arising out of or in connection with this Agreement shall be governed by, interpreted under, and construed and enforceable in accordance with, the laws of the PRC.

          12.10 Arbitration.

          (a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity of this Agreement or any clause of this Agreement shall be referred to China International Trade and Economics Arbitration Commission—Shanghai branch and resolved by arbitration under its arbitration rules ( which rules are incorporated by reference into this Agreement.

          (b) The place of arbitration shall be Shanghai.

          (c) The language to be used in the arbitration shall be in Chinese language.

          (d) The arbitral tribunal shall consist of three arbitrators. Purchaser and Sellers’ Representative shall each appoint one arbitrator. The two arbitrators thus appointed shall choose the third arbitrator who will act as the presiding arbitrator of the arbitral tribunal. If, within thirty (30) days after the receipt of one Party’s notification of the appointment of an arbitrator, the other Party has not notified the first Party of the arbitrator such Party has appointed, the first Party may request the China International Trade and Economics Arbitration Commission—Shanghai branch to appoint the second arbitrator.

          (e) Any arbitration decisions or awards in accordance with these procedures shall be final and binding upon the Parties.

          (f) Notwithstanding the foregoing, any Party may apply to a court of competent jurisdiction to seek interim protective measures in support of the arbitral proceedings or to enforce the arbitration decisions or awards.

          12.11 Notices. All notices, demands, requests, consents or other communications hereunder shall be in writing and shall be given by personal delivery, by express courier, by registered or certified mail with return receipt requested, or by telex or facsimile, to the Parties at the addresses shown below, or to such other address as may be designated by written notice given by any Party to the other Parties. Unless conclusively proved otherwise, all notices, demands, requests, consents or other communications hereunder shall be deemed effective upon delivery if personally delivered, fifteen (15) days after dispatch if sent by express courier, thirty (30) days after dispatch if sent by registered or certified mail with return receipt requested, or confirmation of the receipt of the facsimile by the recipient if sent by telex or facsimile.

(a)	If to Purchaser, to: Flow International Corporation 23500, 64th Avenue South Kent Washington 98032 USA Attention: Chief Executive Officer Facsimile No.: _+1 253 813 3311
	With a copy to:
	K&L Gates LLP 925 Fourth Avenue, Suite 2900 Seattle, WA 98104-1158 U.S.A. Attention: David Tang Facsimile No.: _+1 206 370 6186

(b)	if to the Company or the Sellers’ Representative, to: Dardi International Corporation No. 99, Weiyi Road Gaochun Economic Development Area Nanjing 211300 PRC Attention: Chief Executive Officer Facsimile No.: ___86 25 5732 4297
(c)	With a copy to: JC Master Law Offices 15th Floor, Daxinggong Mansion 147 East Zhongshan Road Nanjing 210002 PRC Attention: Justin Ma Facsimile No.:86-25-8450-5533

          12.12 Counterparts. This Agreement may be executed in one or more counterparts (each of which may be transmitted by facsimile), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

          12.13 Captions. The section headings and captions contained herein are for purposes of reference and convenience only and shall not in any way affect the meaning or interpretation of this Agreement.

          12.14 Number and Gender. Whenever used in this Agreement, the singular terms shall include the plural and the plural terms shall include the singular, and the use of any gender shall be applicable to all genders.

          12.15 Confidentiality.

          (a) No Party shall disclose, disseminate or cause to be disclosed the terms and conditions of this Agreement, except insofar as disclosure is reasonably necessary to carry out and effectuate the terms of this Agreement or as required by a court of competent jurisdiction or governmental agency, and insofar as any Party is required by Law (not limited to PRC law) to disclose. Specifically, the Parties acknowledge that as a listed company in the US, Flow may be required to disclose the terms and conditions of this Agreement from time to time in accordance with applicable Law.

          (b) Purchaser and Sellers acknowledge that the confidentiality obligations set forth herein shall not extend to information, knowledge and data that is publicly available or becomes publicly available through no act or omission of the Party owing a duty of confidentiality, or becomes available on a non-confidential basis from a source other than the Party owing a duty of confidentiality so long as such source is not known by such Party to be bound by a confidentiality agreement with or other obligations of secrecy to the relevant other Party or required to be disclosed by a Governmental Authority.

          (c) In the event of a breach of the obligations hereunder by Purchaser or Sellers, the non-breaching Parties, in addition to all other available remedies, will be entitled to

injunctive relief to enforce the provisions of this Section 12.15 in any court of competent jurisdiction.

          12.16 Language. The Agreement is executed in both English and Chinese. Both language versions shall have equal validity. Each Party acknowledges that it has reviewed both language versions and that they are substantially the same in all material respects. In the event of any discrepancy between these two versions, the Chinese version shall prevail, provided that the intent of the Parties has been fully taken into consideration.

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SIGNATURE PAGE—SHARE PURCHASE AGREEMENT

          IN WITNESS WHEREOF, the Parties have signed or caused their respective duly authorized officers to sign this Agreement, all as of the date first written above.

FLOW INTERNATIONAL CORPORATION
By:
Name: Title:	Charles Brown CEO
DARDI INTERNATIONAL CORPORATION
By:
Name: Title:	Chen Bo Chairman of Board & CEO
SELLERS’ REPRESENTATIVE
Chen Bo
Other SELLERS:
Signature of each of the persons set forth on Schedule A

Exhibit 7.9

Opinion of Counsel as of Closing Date

Exhibit 7.11

Form of Company’s Officer Certificate

Exhibit 7.12

Form of Sellers’ Certificate

Exhibit 8.2

Form of Purchaser’s Officer Certificate

Exhibit 8.3

Form of Purchaser’s Bank Certificate

Schedule A: Pre-Closing Share Ownership

Schedule B: Post-Closing Share Ownership

Schedule C: Particulars of the Company Prior to Closing

Schedule 2.3: Purchase Price Allocations

Schedule 4.1: All Chops

Schedule 4.5: Subsidiaries

Schedule 4.8: Consents and Approvals

Schedule 4.9(a): Financial Statements

Schedule 4.12: Permits

Schedule 4.16: Intellectual Property

Schedule 4.17: Tangible Personal Property

Schedule 4.18(a): Assets

Schedule 4.19: Employee Benefit Matters

Schedule 4.22: Insurance

Schedule 7.6: Valuation Report

Schedule 7.15: Sellers Representative’s Patent Licensing.

Schedule 7.17: detailed information of the land and property

EX-99.3

Exhibit 99.3

SHAREHOLDERS (JOINT VENTURE) AGREEMENT

     This SHAREHOLDERS (JOINT VENTURE) AGREEMENT (this “Agreement”) is entered into as of November 18, 2008, by and among Dardi International Corporation, a joint stock company duly organized and existing under the laws of the PRC (the “Company”), Flow International Corporation, a corporation organized and existing under the laws of the State of Washington, USA (“Flow”) and each of Chen Bo and other remaining shareholders of the Company set forth on Schedule 2.1 hereto (the “Chinese Shareholders”).

     Flow and each of the Chinese Shareholders shall hereinafter be referred to individually as a “Party” or “Shareholder” and collectively as the “Parties” or “Shareholders”.

RECITALS

     A. As of the date hereof, the Company is a PRC domestic joint stock company with a paid-in capital of Thirty Million Renminbi (RMB30,000,000) and the total issued and outstanding shares of Thirty Million (30,000,000) ordinary shares with a par value of One Renminbi (RMB1.00) per share.

     B. Flow has entered into a share purchase agreement (the “Share Purchase Agreement”) dated the date hereof, with the original shareholders of the Company pursuant to which (i) the Company’s paid-in capital (registered capital) is Renminbi Thirty Million (RMB30,000,000) and the aggregate issued and outstanding shares are thirty million ordinary shares with a par value of RMB1.00 per share and (ii) shareholders of the Company will sell to Flow, and Flow will purchase from such shareholders, One Million Five Hundred Thousand (1,500,000) ordinary shares of the Company (the “Purchased Shares”) Upon consummation of the transactions contemplated in the Share Purchase Agreement (“Closing”), the Purchased Shares will represent approximately 5%of the total issued and outstanding capital of the Company.

     C. The Company will be converted into a PRC foreign invested joint stock company in accordance with the Company Law of the PRC (the “Company Law”), the Interim Rules on Several Issues Concerning the Establishment of Foreign Investment Joint stock Companies (the “Interim Rules”) , such other applicable Law and the provisions of this Agreement, and

     D. The Parties wish to enter into this Agreement for the purposes, of (i) converting the Company from a PRC domestic joint stock company into a PRC foreign invested joint stock company, (ii) recording their understandings regarding certain aspects of the operation and management of the Company and (iii) providing for certain provisions regarding the future dealings of the ordinary shares of the Company by the Parties.

AGREEMENT

     INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and the mutual representations, warranties, covenants and agreements in this Agreement, the Parties hereby agree as follows:

13. Definitions and Interpretation

     For purposes of this Agreement, the following terms shall have the following meanings, unless the context clearly requires otherwise:

     13.1 “Acceptance Period” shall have the meaning set forth in Section 8.1 below.

     13.2 “Affiliate” shall mean, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, “control” shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); provided, that, beneficial ownership of 30% or more of the voting securities (or the equivalents) of a Person shall be deemed to be control. With respect to any Person who is an individual, “Affiliates” shall mean such individual’s spouse and descendants (whether natural or adopted) and any trust solely for the benefit of such individual and/or such individual’s spouse, their respective ancestors and/or descendants (whether natural or adopted).

     13.3 “Amended Articles of Association” shall mean the amended articles of association of the Company, dated the date hereof, duly executed and approved by the Shareholders of the Company, including Flow, and the Governmental Authority.

     13.4 “Asset Valuation Institution” shall have the meaning set forth in Section 14.3.

     13.5 “Board” shall mean the board of directors of the Company.

     13.6 “Business” shall mean the design, development, manufacture or sale of waterjet or abrasive waterjet cutting or cleaning systems and other tools, equipment and pumps that utilize high pressure technology as has been conducted by the Company on or prior to the date hereof or may be conducted by the Company in the future.

     13.7 “Business License” shall mean the updated business license of the Company to be issued by SAIC after the transactions contemplated herein and the conversion of the Company into a foreign invested joint stock company have been approved by MOFCOM.

     13.8 “Closing” shall have the meaning set forth in the Recital.

     13.9 “Competitor” shall mean any Person (other than Flow and its Affiliates in compliance with the standard set forth in Section 7.5) that conducts following business (including a division of a major corporation or industrial group) or hold, directly or indirectly, an equity interest of over five percent (5%) in the following business: (i) in case of an existing business, receives revenues from engaging in the activities relating to the Business in any fiscal year of such business over a three (3) full fiscal year period immediately preceding the date of the Transfer Notice, or (ii) in case of a newly formed business, is expected to receive revenues from engaging in the activities relating to the Business.

     13.10 “Company Law” shall mean the Company Law of the People’s Republic of China, as amended from time to time.

     13.11 “Company’s Notice of Intention to Sell” shall have the meaning set forth in Section 8.1 below.

     13.12 “Effective Date” shall mean the date of this Agreement.

     13.13 “Encumbrance” shall mean any security interest, pledge, mortgage, lien, option, charge, claim, preferential arrangement property attachment, evidence attachment, other enforcement measures or restriction of any kind, including without limitation any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

     13.14 “Chinese Shareholder Exercising Notice” shall have the meaning set forth in Section 7.4(a).

     13.15 “Exercising Party” shall have the meaning set forth in Section 7.4 or Section 8.1, as the case may be.

     13.16 “Financial and Accounting System” shall have the meaning set forth in Section 13.1.

     13.17 “Force Majeure” shall have the meaning set forth in Section 15.1.

     13.18 “Governmental Authority” shall mean any PRC national, provincial or local governmental, regulatory or administrative authority, agency or commission which exercises executive, regulatory or administrative authority over the transactions contemplated herein.

     13.19 “Governmental Order” shall mean any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any PRC Governmental Authority.

     13.20 “Interim Rules” shall have the meaning set forth in the Recital.

     13.21 “Law” shall mean any national, local statute, law, ordinance, regulation, rule, code, order, other requirement or rule of law.

     13.22 “Liquidation Committee” shall have the meaning set forth in Section 14.2.

     13.23 “Liquidation Plan” shall have the meaning set forth in Section 14.3..

     13.24 “Liquidation Proposal” shall have the meaning set forth in Section 14.1.

     13.25 “Liquidation Value” shall have the meaning set forth in Section 14.3.

     13.26 “Liquidation Value Notice” shall have the meaning set forth in Section 14.3.

     13.27 “Company” shall mean the Company as of the date of execution of the Share Purchase Agreement.

     13.28 “New Securities” shall have the meaning set forth in Section 8.1 below.

     13.29 “Non-Selling Parties” shall have the meaning set forth in Section 7.3.

     13.30 “Notice of Intention to Liquidate” shall have the meaning set forth in Section 14.1.

     13.31 “Offered Shares” shall have the meaning set forth in Section 7.3.

     13.32 “Option Exercising Notice” shall have the meaning set forth in Section 7.4(b).

     13.33 “Ordinary Course of Business” or “Ordinary Course” shall mean the ordinary course of business of the Company consistent with past custom and practice (including, if applicable, with respect to quantity, frequency and amount).

     13.34 “Person” shall mean any individual, partnership, firm, corporation, association, foundation, trust, unincorporated organization or other entity, including without limitation any Governmental Authority (not limited to PRC Governmental Authority).

     13.35 “PRC” shall mean the People’s Republic of China, for purpose of this Agreement, excluding the territories of Taiwan, Hong Kong and Macau.

     13.36 “PRC GAAP” shall mean generally accepted accounting principles and practices as in effect from time to time in the PRC.

     13.37 “Pro Rata Share” shall have the meanings set forth in Section 7.4 or Section 8.1, as the case may be.

     13.38 “Purchased Shares” shall have the meaning set forth in the Recital.

     13.39 “Refusal Notice” shall have the meaning set forth in Section 14.3.

     13.40 “SAIC” shall mean the State Administration of Industry and Commerce of the PRC or its local branch in Nanjing.

     13.41 “Selling Party” shall have the meaning set forth in Section 7.3

     13.42 “Share Purchase Agreement” shall have the meaning set forth in the Recitals.

     13.43 “Statutory Auditor” shall have the meaning set forth in Section 13.2(a).

     13.44 “Transfer” shall have the meaning set forth in Section 7.3.

     13.45 “Transfer Notice” shall have the meaning set forth in Section 7.3.

14. Parties to this Agreement

     14.1 Particulars of the Parties. The Parties to this Agreement are:

(a) Flow International Corporation, a corporation organized and existing under the laws of the State of Washington, USA with its principal place of business at 23500 64^th Avenue South, Kent, Washington 98032, USA.

Authorized Representative of Flow:
Name:	Charles Brown
Title:	Chief Executive Officer
Nationality:	USA

(b) Chen Bo: a PRC national (ID: 320104195501020412) with its residential address at Room 6-2-802, Huajing Garden, 88# Madao

Street, Qinhuai District, Nanjing and other Chinese Shareholders set forth on Schedule 2.1 hereto.

     14.2 Parties’ Authorized Representatives. Each Party shall have the right to change its legal or authorized representative (if any) and shall promptly notify other Parties of such change and the name, position and nationality of its new authorized representative.

15. Particulars of the Company

     15.1 Joint Stock Company. The Company is a PRC domestic joint sock company incorporated on March 31, 2006. Pursuant to the Company Law, the Interim Rules, other applicable Laws, and the provisions of this Agreement, upon issuance of the Business License, the Company will be converted from a PRC domestic joint stock company into a PRC foreign invested joint stock company.

     15.2 Name of Company. The name of the Company shall be “” in Chinese and “Dardi International Corporation” in English.

     15.3 Registered Address of Company. The registered address of the Company shall be “” in Chinese and “No. 99, Weiyi Road, Gaochun Economic Development Area, Nanjing 211300, PRC” in English.

     15.4 Limited Liability. The Company shall be a joint stock company with limited liability. Shareholders of the Company shall be liable to the Company to the extent of the shares they have subscribed and purchased for. The Company shall be liable for its debts to the extent of all of its assets.

     15.5 Compliance of Law. The Company shall be a legal person under the laws of the PRC. The Company shall be subject to the jurisdiction of and shall be protected by the Law of the PRC. The activities of the Company shall comply with the applicable Law of the PRC.

16. Purpose, Scope and Scale of Operation

     16.1 Purpose of Company. The purpose of the Company shall be to utilize the combined technological, management, operational and marketing strengths of the Parties within the approved scope of business of the Company to achieve good economic results and a return on investment satisfactory to the Parties.

     16.2 Business Scope. The business scope of the Company shall be research, development, production, sale and technical services of super-high pressure waterjet, high-pressure cleaner, numerical controlled tools, pressure equipment, super-high pressure system, hydraulic pressure installation; spare parts thereof and relevant applied products; export and import of products, set installation and spare parts related to the business operation.

     16.3 Business Plan. The Parties have formulated a business plan of the Company for the next five years, Flow undertakes that it will make commercially reasonable efforts, to jointly realize the five year Pyramid Plan with Chinese shareholders post closing. The Board shall use its commercially reasonable efforts to implement the business plan in view of the actual market conditions, the operating and financial conditions of the Company, and the Board may expand or revise the business plan from time to time in light of such conditions. Each of the Parties shall

have the right, but not the obligation, to use its commercially reasonable efforts to assist the Company in implementing the business plan. To the extent that the business plan calls for any Party to contribute additional assets, technology or business, or to provide technical assistance services, to the Company, such contribution and/or provision of services must be made at the sole discretion of such Party. In addition, the Company shall pay fair market value for such assets, technology, business and services and separate agreements for such contribution and/or provision of services shall be entered into between the Company and such Party.

17. Issuance of Shares and Shareholding Structure

     17.1 Registered Capital. The registered capital of the Company shall be Thirty Million Renminbi (RMB 30,000,000) as of the Effective Date. The paid-in registered capital of the Company as of the Effective Date shall be Thirty Million Renminbi (RMB 30,000,000).

     17.2 Issuance of Shares. The entire capital of the Company shall be divided into shares of equal value. The share of the Company shall take the form of share certificates, which shall be vouchers signed and issued by the Company that evidence the shares held by the Shareholders. The shares issued by the Company shall be in the form of registered shares only.

     17.3 Share Capital of the Company. As of the Effective Date, the entire issued and outstanding capital of the Company shall consist of 30,000,000 ordinary shares with a par value of One Renminbi (RMB1.00) per share, all of which have been duly authorized, validly issued, fully paid, and nonassessable.

     17.4 Share Certificates. The Company shall have issued and delivered share certificates to each Shareholder evidencing the number of shares held by such Shareholder. The registered shares shall be transferred by means as prescribed by applicable Law, but in any event in accordance with the procedures set forth in this Agreement.

     17.5 Register of Shareholders of the Company. The Company shall keep a register of shareholders at the Company, which shall state the following: (1) the names and domiciles of the Shareholder; (2) the number of shares held by each Shareholder; (3) the serial numbers of the shares certificates held by each Shareholder; and (4) the date on which each Shareholder acquired its shares.

     17.6 Shareholding Structure. As at the date of issuance of Business License, the number of shares owned by each Shareholders and their respective shareholding in the Company are set forth in Schedule 5.6, among which Flow owns 1,500,000 ordinary shares representing 5% of the aggregate shares of the Company and Chinese Shareholders owns 28,500,000 ordinary shares, representing 95% of the aggregate shares of the Company.

18. Additional Financing

     18.1 External Financing. The Company may borrow additional financing from for its operations from time to time. The Parties shall use their commercially reasonable efforts to assist the Company in obtaining such additional financing. However, no Party shall be required to provide any guarantee or collateral as security for such financing unless such guarantee or collateral is provided by each Party in proportion to their respective shareholding in the Company at the time of such financing and the provision of such guarantee or collateral by each Party are on a several basis.

     18.2 Shareholder Loans. The Company may also obtain additional financing by way of shareholder loans. However, the provision of any shareholder loan to the Company shall be at the sole discretion of each Party. In addition, no Party shall be required to provide any shareholder loan to the Company unless shareholder loans are provided to the Company by each Party in proportion to their respective shareholding in the Company at the time of such financing.

19. Share Transfer Restriction and Right of First Refusal

     19.1 No Encumbrance on the Shares. No Party shall pledge, mortgage or otherwise encumber the shares owned by it unless it first obtains the written consents of the other Parties and the Board.

     19.2 No transfer of Shares to a Competitor. No Party shall transfer their shares to a Competitor directly or indirectly.

     19.3 Transfer Notice. Subject to Sections 7.1, 7.2 and7.5 of this Agreement, if at any time a Party (a “Selling Party”) proposes to sell, transfer, assign or otherwise dispose (including as a result of the enforcement by a third party of the security interest referred to in Section 7.1 above) of any of its shares to one or more third parties (a “Transfer”), then the Selling Party shall give the other Parties (the “Non-Selling Parties”, each a “Non-Selling Party”) and the Company at least forty-five (45) days’ written notice of its intention to make the transfer (the “Transfer Notice”), which notice shall include in reasonable detail (i) the number of shares to be transferred (the “Offered Shares”), (ii) the identity of the prospective transferee(s), (iii) the consideration and the material terms and conditions upon which the proposed Transfer is to be consummated, and (iv) all other information necessary to fully describe the proposed Transfer. The Transfer Notice shall include a written certification by the Selling Party that (i) it has received a firm offer from the prospective transferee(s) and in good faith believes that a binding agreement for the Transfer is obtainable on the terms set forth in the Transfer Notice and (ii) the prospective transferee(s) is not a Competitor. The Transfer Notice shall also include a copy of any written proposal, term sheet or letter of intent or other agreement relating to the proposed Transfer, and shall describe the Parties’ right of first refusal under this Section 7 with respect to the proposed Transfer.

     19.4 Right of First Refusal of the Non-Selling Parties.

     (a) Most Favored Right of First Refusal Among Chinese Shareholders. If the Selling Party under Section 7.3 is a Chinese Shareholder, the Chinese Shareholders who are Non-Selling Parties (prior to Flow) shall have twenty (20) days after the receipt of the Transfer Notice to elect to purchase their respective Chinese Shareholder Pro Rata Shares of the Offered Shares at the price per share and subject to and on the same terms and conditions as specified in the Transfer Notice. Each of the Chinese Shareholders who are Non-Selling Parties may exercise such right of first refusal and thereby purchase all or any portion of its Chinese Shareholder Pro Rata Share of such Offered Shares by notifying the Selling Party and the Company in writing, before the expiration of the twenty (20) day period, as to the number of Offered Shares it desires to purchase pursuant to this Section 7.4(a). The failure of any Chinese Shareholder who is Non-Selling Party to deliver such notice within the specified time period shall be deemed to be its election not to purchase any such Offered Shares. If a a Chinese Shareholder who is a Non-Selling Party (the “Chinese Shareholder Exercising Party”) gives the Selling Party and the Company notice (“Chinese Shareholder Exercise Notice”) within the requisite time period that it desires to purchase all or any portion of its Chinese Shareholder Pro Rata Share of the Offered Shares, then payment for the Offered Shares to be purchased by the Chinese Shareholder

Exercising Party shall be made by cheque or wire transfer of immediately available funds to the Selling Party’s designated account, against delivery of the share certificates representing the relevant Offered Shares to be purchased at the place agreed upon between the Parties and at the time of the scheduled closing therefor, which shall be no later than forty-five (45) days after the date of the Transfer Notice, unless the Transfer Notice contemplated a later closing date with the prospective third party transferee(s). The Chinese Shareholder Exercising Party shall also be responsible for, with the assistance of the Company, obtaining relevant approvals (if necessary) from the PRC Governmental Authority for such share transfer. If the approval of the PRC Governmental Authority can not be obtained within the forty-five (45) day period or prior the date of the scheduled closing date and the approval of the PRC Governmental Authority is the only outstanding item for the closing of such share transfer, then the forty-five (45) day period or the scheduled closing date shall be extended to such date when the approval or disapproval of the PRC Governmental Authority for such share transfer is obtained. For the purpose of this Section, “Chinese Shareholder Pro Rata Share” shall mean the proportion of which (i) the numerator is the aggregate number of shares held by such Non-Selling Party and (ii) the denominator is the aggregate number of shares held by all Chinese Shareholders who are Non-Selling Parties. If not all of the Chinese Shareholders who are Non-Selling Parties have elected to exercise their most favored right of first refusal pursuant to this Section 7.4(a), the Chinese Shareholder Exercising Party shall be entitled to amend its Exercise Notice to purchase such number of Offered Shares that are not to be purchased by other Chinese Shareholder who is Non-Selling Party pursuant to this Section 7.4(a), provided that such additional purchase is also consummated with the forty-five (45) day period after the date of the Transfer Notice. If there are more than one Chinese Shareholder Exercising Party that wishes to exercise their most favored rights of first refusal to purchase such un-purchased Offered Shares, the Chinese Shareholder Exercising Parties shall purchase such un-purchased Offered Shares on the pro rata basis according to the proportion of which the numerator is its respective shareholding in the Company and the denominator is the aggregate shareholding in the Company of all the Chinese Shareholder Exercising Parties.

     (b) Right of First Refusal of Non-Selling Parties. If the Selling Party under Section 7.3 is Flow or the Chinese Shareholders who are Non-Selling Party have not purchased all Offered Shares by the Selling Party who is a Chinese Shareholder according to Section 7.4(a), then the Non-Selling Parties shall have forty-five (45) days after the receipt of the Transfer Notice (in case that the Selling Party is Flow) or forty-five (45) days after the date on which the period time provided in Section 7.4(a) expires and it is confirmed that there are un-purchased Offered Shares by the Seller Party who is a Chinese Shareholder (in case that the Selling Party is Chinese Shareholder) to elect to purchase their respective Pro Rata Shares of the Offered Shares at the price per share and subject to and on the same terms and conditions as specified in the Transfer Notice. Each of the Non-Selling Parties may exercise such right of first refusal and thereby purchase all or any portion of its Pro Rata Share of such Offered Shares by notifying the Selling Party and the Company in writing, before the expiration of the forty-five (45) day period, as to the number of Offered Shares it desires to purchase pursuant to this Section 7.4. The failure of any Non-Selling Party to deliver such notice within the specified time period shall be deemed to be its election not to purchase any such Offered Shares. If a Non-Selling Party (the “Exercising Party”) gives the Selling Party and the Company notice (“Exercise Notice”) within the requisite time period that it desires to purchase all or any portion of its Pro Rata Share of the Offered Shares, then payment for the Offered Shares to be purchased by the Exercising Party shall be made by cheque or wire transfer of immediately available funds to the Selling Party’s designated account, against delivery of the share certificates representing the relevant Offered Shares to be purchased at the place agreed upon between the Parties and at the time of the scheduled closing therefor, which shall be no later than ninety (90) days after the date of the Transfer Notice, unless the Transfer Notice contemplated a later closing date with the prospective

third party transferee(s). The Exercising Party shall also be responsible for, with the assistance of the Company, obtaining relevant approvals from the PRC Governmental Authority for such share transfer. If the approval of the PRC Governmental Authority can not be obtained within the ninety (90) day period or prior the date of the scheduled closing date and the approval of the PRC Governmental Authority is the only outstanding item for the closing of such share transfer, then the ninety (90) day period or the scheduled closing date shall be extended to such date when the approval or disapproval of the PRC Governmental Authority for such share transfer is obtained. For the purpose of this Section, “Pro Rata Share” shall mean the proportion of which (i) the numerator is the aggregate number of shares held by the Non-Selling Party and (ii) the denominator is the aggregate number of shares held by all Non-Selling Parties. If not all of the Non-Selling Parties have elected to exercise their rights of first refusal pursuant to this Section 7.4, the Exercising Party shall be entitled to amend its Exercise Notice to purchase such number of Offered Shares that are not to be purchased by other Non-Selling Party pursuant to this Section 7.4, provided that such additional purchase is also consummated with the ninety (90) day period after the date of the Transfer Notice. If there are more than one Exercising Party that wishes to exercise their rights of first refusal to purchase such un-purchased Offered Shares, the Exercising Parties shall purchase such un-purchased Offered Shares on a pro rata basis according to the proportion of which the numerator is its respective shareholding in the Company and the denominator is the aggregate shareholding in the Company of all the Exercising Parties.

     19.5 Permitted Transfer. The restrictions set forth in Sections 7.3 and 7.4 shall not apply with respect to any Transfer of shares by any Party (i) in the case of a Party that is an individual, pursuant to applicable Law of descent and distribution or to such individual’s spouse and descendants (whether natural or adopted) and any trust solely for the benefit of such individual and/or such individual’s spouse, their respective ancestors and/or descendants (whether natural or adopted), (ii) in the case of a Party that is not an individual, to its Affiliates, and (iii) transfer between Shareholders. For purpose of this section, the “Affiliate” shall mean, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, “control” shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); to avoid doubt, directly or indirectly ownership of 100% of the voting securities (or the equivalents) of a Person shall be deemed to be control.

     19.6 Non-exercise of Rights. To the extent that the Non-Selling Parties have not exercised their rights to purchase the Offered Shares within the time periods specified in Section 7.4, the Selling Party shall have a period of thirty (30) days (i) in the case that no Non-Selling Party elects to exercise its right of first refusal pursuant to Section 7.4, from the expiration of the forty-five (45) day period from the receipt of the Transfer Notice by the Non-Selling Parties, or (ii) in the case that one or more Non-Selling Parties elect to exercise their rights of first refusal pursuant to Section 7.4, from the expiration of the ninety (90) day period from the date of the Transfer Notice, to sell the un-purchased Offered Shares to the third-party transferee(s) identified in the Transfer Notice, on terms and conditions (including without limitation the purchase price) no more favorable than those specified in the Transfer Notice. In the event the Selling Party fails to consummate the sale or disposition of the un-purchased Offered Shares within the thirty (30) day period referred to above in accordance with this provision, the Non-Selling Parties’ rights of first refusal shall apply to any Transfer of the un-purchased Offered Shares again if the Selling Party wishes to continue such Transfer until such right lapses in accordance with the terms of this Section 7.

     19.7 Joinder Agreement. Prior to any prospective transferee’s acquisition of any shares pursuant to a Transfer permitted by this Section 7, such prospective transferee must agree to take the shares subject to and to be fully bound by the terms of this Agreement by executing a joinder to this Agreement in the form of Exhibit 7.7 attached hereto and delivering such executed joinder to the secretary of the Company prior to the effectiveness of such Transfer (unless such Transfer is pursuant to applicable Law of descent and distribution, in which case, such executed joinder shall be delivered to the secretary of the Company as soon as reasonably possible after such Transfer).

     19.8 Transfer in Violation of Agreement. Any Transfer or attempted Transfer of any shares in violation of any provision of this Agreement shall be null and void, and the Company shall not record such Transfer on its register of shareholders or treat any purported transferee of such shares as the owner of such shares for any purpose. The Company shall also report to SAIC to establish proper procedures to prohibit any such Transfer or attempted Transfer of any shares in violation of any provision of this Agreement.

20. Preemptive Rights

     20.1 Preemptive Rights. Subject to the applicable Law and approval by the shareholders’ meeting in accordance with this Agreement and Amended Articles of Association, if the Company wishes to issue and sell any shares or any options, warrants or other rights to acquire its shares (the “New Securities”) to any Person or Persons (other than a Permitted Issuance pursuant to Section 8.4 below), the Company shall promptly deliver a notice of intention to sell (the “Company’s Notice of Intention to Sell”) to each Party setting forth a description of the New Securities to be sold and the proposed purchase price and terms of sale of such New Securities. Upon receipt of the Company’s Notice of Intention to Sell, each Party shall have the right to elect to purchase, at the price and on the terms stated in the Company’s Notice of Intention to Sell, all or a portion of the number of New Securities equal to the product of (x) each Party’s Pro Rata Share, multiplied by (y) the number of New Securities proposed to be issued. Such election shall be made by each electing Party (also an “Exercising Party”) by written notice to the Company and the other Parties within fifteen (15) days from the date of the Company’s Notice of Intention to Sell (the “Acceptance Period”). For the purpose of this Section, “Pro Rata Share” shall mean the proportion of which (i) the numerator is the aggregate number of shares held by the Exercising Party and (ii) the denominator is the aggregate number of shares held by all Parties.

     20.2 No Exercise of Rights. To the extent an effective acceptance shall not be received by the Company from a Party pursuant to Section 8.1 above in respect of any of the New Securities to be issued pursuant to the applicable Company’s Notice of Intention to Sell, then the Company may at its election, within a period of one hundred twenty (120) days following the expiration of the Acceptance Period, issue and sell such remaining New Securities to be issued and sold to another Person (including, without limitation, other Shareholders) at a price and upon terms no more favorable to such Person than those stated in the applicable Company’s Notice of Intention to Sell; provided, that the failure by a Party to exercise its option to purchase with respect to one issuance and sale of New Securities shall not affect its option to purchase New Securities in any subsequent issuance and sale. In the event the Company has not sold the New Securities covered by a Company’s Notice of Intention to Sell within such one hundred twenty (120) day period, the Company shall not thereafter issue or sell any such New Securities without first offering such New Securities to each Party in the manner provided in this Section 8.

     20.3 Procedures to Exercise the Preemptive Rights. If a Party gives the Company notice, pursuant to the provisions of this Section 8 that such Party desires to purchase any of the New Securities, payment therefor shall be made by check or wire transfer of immediately available funds to the Company’s designated accounts, against delivery of the certificates representing such New Securities (which New Securities shall be issued free and clear of any liens) at the executive offices of the Company no later than the closing date fixed by the Company for the sale of the applicable New Securities in the Company’s Notice of Intention to Sell, provided that such closing date shall be no later than thirty (30) days after the expiration of the Acceptance Period. If the approval of the PRC Governmental Authority is required for any share purchase by any Party pursuant to this Section 8 and the approval of the PRC Governmental Authority is the only outstanding item for the closing of such share purchase, then the thirty (30) day period shall be extended to such date when the approval or disapproval of the PRC Governmental Authority for such share purchase is obtained.

     20.4 Permitted Issuance. Notwithstanding the foregoing, this Section 8 shall not apply to the following issuance of New Securities:

          (a) New Securities issued in connection with a bona fide arm’s-length acquisition of any entity or business by the Company, whether by merger, consolidation, purchase of assets, sale or exchange of shares or otherwise, the terms of which have been approved by the Board;

          (b) New Securities issued as a dividend or distribution on the ordinary shares of the Company; and

          (c) New Securities issued in relation to the IPO of the Company.

21. Shareholders Meeting

     21.1 General. A shareholders general meeting of the Company shall consist of all the Shareholders of the Company, shall be the highest authority of the Company and shall exercise its functions and powers in accordance with the relevant provisions of the Company Law.

     21.2 Annual Meeting and Interim Meeting. An annual shareholders general meeting shall be convened each year. An interim shareholders general meeting may be convened in accordance with the procedures set forth in the relevant provisions of the Company Law. Unless otherwise provided in this Agreement and the Amended Articles of Association of the Company, all other matters relating to the procedures for convening a shareholders general meeting such as notice requirements, the quorum, voting requirements, etc. shall be handled in accordance with the relevant provisions of the Company Law.

     21.3 Written Resolution in lieu of a Meeting. In lieu of any meeting of the Shareholders, a written resolution may be adopted by the Shareholders if such resolution is sent to all Shareholders and is affirmatively signed and adopted by the Shareholders who hold sufficient numbers of shares to adopt such resolution at a duly convened meeting of the Shareholders. Such resolution may be executed in separate counterparts (each of which may be transmitted by facsimile) each of which shall be an original and all of which taken together shall constitute one and the same resolution. If a non-counterpart original resolution signed by all approving Shareholders is required for submission to any Governmental Authority of the PRC, the secretary of the Company shall be responsible for arranging the signature of the same, and all approving Shareholders shall provide full and timely co-operation in the signature thereof.

     21.4 Cumulative Voting. Without prejudice to Sections 10.1 and 11.1 on the number and percentage of persons to be appointed by each Party as agreed among the Parties, a system of Cumulative Voting shall be adopted by shareholders at the time of election of directors and supervisors. The term of “Cumulative Voting” shall mean that when directors or supervisors are elected by the shareholders’ meeting, each share shall enjoy number of votes equivalent to the number of directors or supervisors to be elected, and shareholders may vote jointly when voting. To avoid doubt, the detailed arrangement of the Board of Directors and Board of Supervisors of the Company shall be controlled by Sections 10.1 and 11.1 of this Agreement.

     21.5 Shareholders Resolution. Any resolution adopted by the shareholders’ meeting shall be voted in accordance with the relevant provisions of the Company Law, provided that any resolution on any of the following items shall only be adopted by an affirmative vote of no less than ninety-six percent (96%) of the voting shares of all shareholders: increase or decrease in registered capital, amendment to the Company’s articles of association, merger, spin-off, dissolution, change of corporate form, or adoption of liquidation plan and liquidation report. To avoid doubt, any resolution concerning the development and public offering of company shares on the stock exchange shall be adopted by an affirmative vote of no less than ninety (90%) of the voting shares of all shareholders.

22. Board of Directors

     22.1 Composition of the Board, Chairman of the Board and Legal Representative. Each Party shall vote all shares of the Company over which such Party has voting control, and shall take all other necessary or desirable actions within such Party’s control (whether in such Party’s capacity as a shareholder, director or otherwise, including, without limitation, attendance at shareholders or board meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all necessary and desirable actions within its control (including, without limitation, calling special Board and shareholders meetings and making any necessary filings with SAIC), so that:

          (a) The authorized number of directors on the Board shall be established at five persons, all of whom designated by Chinese shareholders.

          (b) One director designated by Chinese shareholders shall always be the chairman of the Board.

          (c) Any director, the chairman of the Board or the legal representative of the Company designated by Chinese Shareholdersmay be removed from his positions at any time and from time to time, with or without cause, by and in the sole discretion of the original designating Party after a written notice by such Party to the Board of the Company.

          (d) In the event that a person designated by Chinese Shareholders to be a member of the Board, as the case may be, for any reason ceases to serve as a member of the Board during his term of office, the resulting vacancy on the Board shall be filled by a representative designated by the original designating Party.

     22.2 Term of the Directors. Each director shall be appointed for a term of three (3) years and may serve consecutive terms if re-designated by the Party originally designate him for such position.

     22.3 Expenses of the Directors. The chairman, the legal representative and the directors shall serve in their positions without remuneration. However, the Company shall reimburse each director, the chairman and the legal representative for the reasonable out-of-pocket expenses incurred by them in performing their duties.

     22.4 Powers and Duties of the Board. Unless otherwise provided in this Agreement and the Amended Articles of Association of the Company, the powers and duties of the Board shall be as set forth in the relevant provisions of the Company Law. To avoid doubt, resolutions on the following items shall be unanimously consented by all directors of the Company on a Board meeting lawfully convened:

          (a) approving the plan of increase or decrease of the registered capital of the Company;

          (b) approving the transfer of shares of the Company by the shareholders of the Company in accordance with Section7.3; and

          (c) approving major investments of the Company in an amount more than One Hundred Million Renminbi (RMB 100,000,000) in accordance with the authorization of the shareholders’ Assembly.

     22.5 Meetings of the Board, Quorum and Decisions of the Board. The first Board meeting shall be held within thirty (30) days from the Closing. Thereafter, meetings shall be held at least once every quarter. Interim Board meetings may also be convened by the chairman of the Board upon a ten (10) day prior written notice to each director. Unless otherwise provided in this Agreement and the Amended and Restated Articles of Association of the Company, all other matters relating to the meetings of the Board, the quorum and the decisions of the Board shall be handled in accordance with the relevant provisions of the Company Law.

     22.6 Attendance of Meetings in Person, by Power of Attorney or by Telephone Conference. Directors may attend the Board meetings in person, by a power of attorney in favor of another director or by telephone conference.

     22.7 Written Resolution in lieu of a Meeting. In lieu of any meeting of the Board, a written resolution may be adopted by the Board if such resolution is sent to all directors then holding office and is affirmatively signed and adopted by the number of directors who could adopt such resolution at a duly convened meeting of the Board. Such resolution may be executed in separate counterparts (each of which may be transmitted by facsimile) each of which shall be an original and all of which taken together shall constitute one and the same resolution. Such resolutions shall be delivered to the Board for inclusion in the Company’s minutes. If a non-counterpart original resolution signed by all approving directors is required for submission to any Governmental Authority of the PRC, the secretary of the Company shall be responsible for arranging the signature of the same, and all approving directors shall provide full and timely co-operation in the signature thereof.

     22.8 Flow Board Observer. A representative of Flow shall have the right to notice of and to attend relevant meetings of the Board or any committees of the Board, and to receive relevant information and materials distributed or presented to directors of the Company. A representative of Flow shall have the right to read relevant minutes and resolutions adopted by the Board.

23. Board of Supervisors

     23.1 Composition of the Board of Supervisors. Each Party shall vote all shares of the Company over which such Party has voting control, and shall take all other necessary or desirable actions within such Party’s control and to the extent permitted by Company Law and other relevant Law, the Company shall take all necessary and desirable actions within its control (including, without limitation, calling special Board of Supervisors meetings and making any necessary filings with SAIC), so that:

          (a) The authorized number of supervisors shall be established at threepersons and that the following persons shall be elected to the Board of Supervisors:

               (i) Two person designated jointly by Chinese Shareholders as supervisor who shall serve as the representative of the Chinese Shareholders; and

               (ii) One person elected by the Company’s conference of employee representatives, a general meeting of the employees or other democratic means.

          (b) Any supervisor of the Company designated by Flow or Chen Bo, as the case may be, may be removed from his/her position at any time and from time to time, with or without cause, by and in the sole discretion of Flow or Chen Bo, as the case may be, after a written notice by Flow or Chen Bo, as the case may be, to the Board of Supervisors of the Company.

          (c) In the event that a person designated by Flow or Chinese Shareholders or elected by Company’s conference of employee representatives, general meeting of employees or other democratic means, as the case may be, to be a member of the Board of the Supervisors for any reason ceases to serve as a member of the Board of the Supervisors during his/her term of office, the resulting vacancy on the Board of the Supervisors shall be filled by a representative designated by Flow or Chinese Shareholders or elected by Company’s conference of employee representatives, general meeting of employees or other democratic means, as the case may be.

          (d) The directors and senior management of the Company shall not concurrently serve as supervisors.

     23.2 Chairman of the Board of Supervisors. The Board of Supervisors shall have one chairman. The chairmen of the Board of Supervisors shall be elected and shall be removed or replaced by a majority vote of the Supervisors then in office, whereby the relevant Supervisor being proposed to be appointed, removed or replaced is also entitled to vote in such decision.

     23.3 Term of the Supervisors. Each supervisor shall be appointed for a term of three (3) years and may serve consecutive terms if re-designated or re-elected pursuant to Section 11.1 above.

     23.4 Expenses of the Supervisors. The supervisors shall serve in their positions without remuneration. However, the Company shall reimburse each supervisor for the reasonable out-of-pocket expenses incurred by such supervisor in performing his/her duties.

     23.5 Powers and Duties of the Board of Supervisors. Unless otherwise provided in this Agreement and the Amended Articles of Association of the Company, the powers and duties of the Board of Supervisors shall be as set forth in the relevant provisions of the Company Law.

     23.6 Meetings of the Board of Supervisors, Quorum and Decisions of the Board of Supervisors. The first meeting of the Board of Supervisors shall be held within thirty (30) days from the Closing. Thereafter, meetings shall be held at least once every six (6) months. The quorum for a meeting of the Board of Supervisors shall be at least four (4) supervisors attending in person or by power of attorney or by telephone conference. Interim meetings may also be convened by the chairman of the Board of Supervisors upon a ten (10) day prior written notice to each supervisor. Decisions of the Board of Supervisors shall be based on the majority vote. Unless otherwise provided in this Agreement and the Amended Articles of Association of the Company, all other matters relating to the meetings of the Board of Supervisors and the decisions of the Board of Supervisors shall be handled in accordance with the relevant provisions of the Company Law.

24. Operation and Management

     24.1 Management System. The Company shall adopt a management system under which the management of the Company shall report to and work under the supervision and direction of the Board of Directors.

     24.2 Management Team. The executive management team of the Company shall consist of one General Manager/Chief Executive Officer, deputy general managers. The General Manager/Chief Executive Officer shall always be responsible for the day-to-day operations and management of the Company and, unless otherwise set forth in this Agreement and the Amended Articles of Association, has such duties and powers as set forth in the Company Law. The General Manager/Chief Executive Officer shall be nominated by Chinese Shareholders and appointed by the Board. The Board may create other positions for the management team of the Company and set the duties and responsibilities of such management team as it deems appropriate, and the hiring or dismissal of such person shall be decided by the General Manager/Chief Executive Officer. Parties agree the General Manager/Chief Executive Officer shall be responsible for the daily operation and management of the Company and shall exercise the following powers and functions in accordance with the Company Law:

          (a) Taking charge of the manufacture, operation and management of the Company;

          (b) Organizing the implementation of the Board resolutions;

          (c) Organizing the implementation of the annual business plan and investment plan of the Company;

          (d) Draft and propose the internal management organization of the Company;

          (e) Draft and propose the basic management system of the Company;

          (f) Propose the detailed Company rules and regulations;

          (g) Propose hiring or dismissal of the deputy general manager and any other management personnel other than the executive management team;

          (h) Organize the implementation of the legal affairs of the Company, provided that Flow shall be responsible for the overseas legal affairs in relation to overseas listing, disclosure of Company information and so on;

          (i) Other powers and authorities granted by the Board.

     24.3 Expatriates Seconded by Flow. The Parties understand that in order to maintain the competitiveness of the Company, Flow may second managers and technical experts to the management team and technical team of the Company either on a long term basis as employees of the Company or on a short term basis as consultants of the Company. The Parties agree if the General Manager/Chief Executive Officer of the Company requests secondment of foreign expatriate, the expenses for the international and local travel, lodging and living subsidy in PRC for such expatriate shall be borne by Flow. For avoidance of any doubt, under whichever circumstances above, the salary of such foreign expatriate shall be borne by Flow.

     24.4 Intellectual Property of the Company. The Company shall take measures to protect its intellectual property rights that it creates or develops in the course of its business activities. The Company shall establish a system for identifying, filing and/or registering all relevant intellectual property rights developed by the employees of the Company in the name of the Company. Specifically, the Company shall procure that all employees of the Company (including the management team) enter into standardized employment contracts and Confidential Information and Invention Assignment Agreement so as to ensure that as far as possible under applicable Law, the benefits of all inventions by the employees of the Company shall be reserved to, and shall be the property of, the Company.

     24.5 Trademark. The Parties agree that the Company’s name shall remain “Dardi International Corporation” and the “Dardi” trademarks and logos (in both Chinese and English) shall continue to be used on the products manufactured, marketed and sold by the Company and any marketing and promotion materials of the Company.

     24.6 Sales and Marketing. Flow and the Company agree to use their commercially reasonable efforts to coordinate the sales and marketing of the Company’s products as well as the products of Flow. Flow and the Company will sell and market a product line that is joint developed and is tailored to the demand of the global market and the price for such jointly developed product line shall be determined jointly by Company and Flow through consultation. Each Party will sell a full spectrum of such product line within their respective territories. .

25. Financial, Accounting, Auditing System and Profit Distribution

     25.1 Accounting System.

          (a) The financial and accounting system of the Company and its subsidiaries (the “Financial and Accounting System”) shall be formulated and adopted in accordance with the provisions of applicable Law, the particular circumstances of the Company and its subsidiaries and, to the extent permitted by applicable Law, those methods and principles that are consistent with or most nearly approximate PRC GAAP. The Financial and Accounting System shall be approved by the Board.

          (b) All accounting vouchers, receipts, statements and account books of the Company and its subsidiaries shall be maintained at the Company’s legal address and shall be written in Chinese.

          (c) The Company shall use Renminbi as its accounting unit. Cash, bank deposits and funds in other currencies, as well as outstanding claims and debts, gains, expenses and so forth in other currencies, shall be recorded in the actual currency in which they are acquired, incurred, received or disbursed, and converted into Renminbi for accounting purposes.

          (d) The Company shall adopt internationally-adopted accrual basis and debit and credit accounting system in the keeping of accounts

          (e) The financial statements prepared by the Company in accordance with the Financial and Accounting System shall be true and complete and shall fairly represent the financial position of the Company as of the date of each such statement and the results of operations for the fiscal period covered thereby. Changes in the Financial and Accounting System may be implemented only upon approval by the Board.

     25.2 Auditing.

          (a) The Company shall engage an nationally recognized independent accounting firm as its statutory auditor (the “Statutory Auditor”) to examine and verify the financial statements of the Company in accordance with applicable Law and the relevant PRC GAAP. The Statutory Auditor shall be capable of performing accounting work meeting the standards under PRC GAAP. The Company’s Statutory Auditor shall be appointed or removed by the Board. Flow shall have the right to audit the Company’s books and records, at its own expense.

          (b) The accounting office of the Company shall prepare and submit quarterly and annual consolidated financial statements of the Company to the Board, as required by the Board, and shall submit the same to relevant departments of the PRC government in accordance with the applicable Law. Such quarterly and annual consolidated financial statements shall be audited or reviewed by the Statutory Auditor in accordance with the requirements of the Board and applicable Law.

     25.3 Basic Principles in Profit Distribution. Parties agree that after-tax distributable profit after making up losses of previous years and setting aside the reserves, shall be distributed according to the then current shareholding structure of Parties.

26. Dissolution and Liquidation of the Company

     26.1 Dissolution and Liquidation. The dissolution and liquidation of the Company shall be conducted in accordance with this Agreement, the Amended Articles of Association and the relevant provisions of the Company Law. The Company may be dissolved and liquidated upon the occurrence of the following events:

          (a) a material breach by a Party of its obligations under this Agreement and the Share Purchase Agreement (including the ancillary agreements set forth in its exhibits) and such breach has caused, or has the potential effect of causing, substantial damages to the Company’s business, operation, financial conditions and prospects;

          (b) a serious disagreement by the Parties in respect of the Company’s operation, business and direction and such disagreement has caused, or has the potential effect of causing, a major stalemate at the Company, thereby materially damaging the Company’s business, operation, financial conditions and prospects; or

          (c) such other reasons as set forth in the relevant provisions of the Company Law.

          Upon the occurrence of any of the above events, the Parties shall first negotiate in good faith to resolve the situation. Any Party may give written notice of intention to dissolve and liquidate the Company (the “Notice of Intention to Liquidate”) to the other Parties and urge all Parties to resolve the situation in good faith within sixty (60) days after the date of the Notice of Intention to Liquidate or such other longer period as the notifying Party deems appropriate. If the situation is still unresolved within the sixty (60) day period or such other longer period as specified in the Notice of Intention to Liquidate, the notifying Party may submit a formal proposal of dissolution and liquidation (the “Liquidation Proposal”) to the Board. This Liquidation Proposal shall then be dealt with by the Board and the shareholders in accordance with the relevant provisions of the Company Law.

     26.2 Liquidation Committee. In the event of a dissolution and liquidation event, the Board shall establish a liquidation committee (the “Liquidation Committee”) within fifteen (15) days from the occurrence of such dissolution and liquidation event. The Liquidation Committee shall in principle consist of all of the existing directors of the Company at the time, unless otherwise required by applicable Law and the court of competent. The chairman of the Board shall serve as the chairman of the Liquidation Committee. The Liquidation Committee shall conduct a thorough survey of the property, claims and debts of the Company, to draw up a balance sheet and inventory of assets, to propose a basis for the valuation of the Company and to perform such other duties and responsibilities as set forth in the relevant provisions of the Company Law.

     26.3 Liquidation Plan. The Liquidation Committee shall also prepare a liquidation plan (the “Liquidation Plan”) which shall be submitted to shareholders for approval. For the purpose of preparing the Liquidation Plan, the Liquidation Committee shall appoint a PRC certified public accounting firm affiliated with an international accounting firm as the asset valuation institution (the “Asset Valuation Institution”) and cause such Asset Valuation Institution to carry out the inspection of all the assets, indebtedness and other liabilities of the Company and a detailed valuation of all such assets (the “Liquidation Value”). The Liquidation Committee shall notify each Party of the Liquidation Value within sixty (60) days after the appointment of the Asset Valuation Institution (the “Liquidation Value Notice”). Each Party may, within fifteen (15) days of the date of the Liquidation Value Notice, notify the other Parties and the Liquidation Committee of its refusal to accept the Liquidation Value on any or all of the assets subject to liquidation (the “Refusal Notice”). Should any Party notify the other Parties and the Liquidation Committee with such Refusal Notice within the relevant time period set forth above, the Parties shall, within thirty (30) days of such Refusal Notice, agree upon a revised Liquidation Value on any or all of the assets of the Company to be liquidated. Failure by the Parties to reach an agreement on the revised Liquidation Value within thirty (30) days of the Refusal Notice or failure by any Party to notify the other Parties and the Liquidation Committee with such Refusal Notice within fifteen (15) days of the date the Liquidation Value Notice shall be deemed to constitute agreement to the Liquidation Value. The liquidation plan shall be approved by the Shareholders of the Company in accordance with the relevant provisions of the Company Law. Upon the approval of the Liquidation Plan by the Shareholders, the Liquidation

Committee shall submit the Liquidation Plan to the relevant Governmental Authority of the PRC for records and then carry out the liquidation in accordance with the Liquidation Plan.

     26.4 Implementation of the Liquidation Plan. The Liquidation Committee shall conduct a sale of the assets of the Company based on the Liquidation Value of such assets. The Liquidation Committee shall seek the highest prices for the assets of the Company, provide that the highest prices for any assets shall in no event be less than [thirty percent (30%)] of the respective Liquidation Value assigned for such assets. The assets of the Company, other than cash or cash equivalent, shall first be offered to the Parties for purchase, if no Party wishes to purchase such assets, offered to third parties (who are not Affiliates of the Parties) for purchase. The proceeds of liquidation shall be used to first pay the liquidation expenses, the wages, social insurance premiums and statutory compensation of the employees, unpaid tax and then all debts of the Company. If there are any remaining assets in the Company after payment of the items referred to in the preceding sentence, such assets shall be distributed among the Parties in accordance with their respective shareholding in the Company.

     26.5 Completion of Liquidation. Upon completion of the liquidation, the Liquidation Committee shall prepare a liquidation report and submit the same for approval by the Shareholders meeting. The Liquidation Committee shall also submit such report to the relevant Governmental Authority of the PRC and apply for the cancellation of the Company’s registration and termination of the Company.

27. Force Majeure

     27.1 Definition of Force Majeure. “Force Majeure” shall mean all events which are beyond the control of the Parties to this Agreement, and which are unforeseen, unavoidable and insurmountable, and which prevent total or partial performance by any of the Parties. Such events shall include earthquakes, typhoons, epidemic, flood, fire, war, strikes, riots, acts of governments, changes in law or the application thereof or any other instances which cannot be foreseen, prevented or controlled, including instances which are accepted as Force Majeure in general international commercial practice.

     27.2 Consequence of Force Majeure.

          (a) If an event of Force Majeure occurs, the performance of the material obligations under this Agreement of the Party or Parties affected by such Force Majeure event shall, to the extent and for the duration that they are affected by such Force Majeure event, be suspended and shall automatically be extended, without penalty or liability, for a period equal to such suspension.

          (b) The Party claiming Force Majeure shall promptly give notice to the other Parties by appropriate means, and shall furnish reasonably substantial proof of the occurrence and duration of the adverse consequences of such Force Majeure. The Party claiming Force Majeure shall also use all reasonable efforts to mitigate or terminate the effects of Force Majeure on its obligations hereunder.

          (c) If an event of Force Majeure occurs, the Parties shall immediately consult with each other in order to find an equitable solution and shall use all reasonable efforts to minimise the consequences of such event of Force Majeure.

28. Miscellaneous

     28.1 Further Assurances. Each Party shall from time to time execute and deliver all further documents and instruments and do all acts and things as the other Parties may, either before or after the Effective Date, reasonably required in order to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement. Each Party shall comply with all terms and conditions of this Agreement and shall take all necessary and advisory actions to effect this Agreement.

     28.2 Entire Agreement. This Agreement (including all Schedules and Exhibits hereto) and the agreements referred to in or contemplated by this Agreement constitute the entire understanding and agreement among the Parties and supersede any and all prior or contemporaneous, oral or written, representations, communications, understandings and agreements among the Parties with respect to the subject matter hereof or thereof to the extent inconsistent with or contradictory to this Agreement or such other agreements.

     28.3 Effectiveness and Enforceability of this Agreement. Notwithstanding other provisions of this Agreement, the Closing of the transactions contemplated in the Share Purchase Agreement is a condition precedent to the effectiveness and enforceability of this Agreement. The provisions of this Agreement shall become effective immediately upon the Closing of the Share Purchase Agreement without further action.

     28.4 Incorporation by Reference. The Schedules and Exhibits attached hereto or referred to herein are deemed to be a part of this Agreement and are incorporated herein by reference.

     28.5 Modifications. This Agreement shall not be modified, amended, canceled or altered in any way, and may not be modified by custom, usage of trade or course of dealing, except by an instrument in writing signed by all Parties. All amendments or modifications of this Agreement shall be binding upon the Parties despite any lack of consideration so long as the same shall be in writing and executed by the Parties.

     28.6 Waiver. The performance of any obligation required of a Party hereunder may be waived only by a written waiver signed by the other Parties, and such waiver shall be effective only with respect to the specific obligation described. The waiver by any Party of a breach of any provision of this Agreement by any other Party shall not operate or be construed as a waiver of any subsequent breach of the same provision or another provision of this Agreement.

     28.7 Assignment. Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.

     28.8 Severability. If any provision hereof is found invalid, illegal or unenforceable pursuant to any Governmental Order, the remainder of this Agreement shall remain valid, legal and enforceable according to its terms, and such invalid, illegal or unenforceable provision shall be replaced with a provision that approximates the substance and spirit of the invalid, illegal or unenforceable provision as closely as possible without being invalid, illegal or unenforceable.

     28.9 Governing Law. This Agreement and all disputes arising out of or in connection with this Agreement shall be governed by, interpreted under, and construed and enforceable in accordance with, the laws of the PRC.

     28.10 Arbitration.

          (a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity of this Agreement or any clause of this Agreement shall be referred to China International Trade and Economics Commission—Shanghai branch and resolved by arbitration under its arbitration rules, which rules are incorporated by reference into this Agreement.

          (b) The place of arbitration shall be Shanghai.

          (c) The language to be used in the arbitration shall be in Chinese language.

          (d) The arbitral tribunal shall consist of three arbitrators. Flow and Chen Bo shall each appoint one arbitrator. The two arbitrators thus appointed shall choose the third arbitrator who will act as the presiding arbitrator of the arbitral tribunal. If, within thirty (30) days after the receipt of one Party’s notification of the appointment of an arbitrator, the other Party has not notified the first Party of the arbitrator such Party has appointed, the first Party may request the China International Trade and Economics Commission—Shanghai branch to appoint the second arbitrator.

          (e) Any arbitration decisions or awards in accordance with these procedures shall be final and binding upon the Parties.

          (f) Notwithstanding the foregoing, any Party may apply to a court of competent jurisdiction to seek interim protective measures in support of the arbitral proceedings or to enforce the arbitration decisions or awards.

     28.11 Notices. All notices, demands, requests, consents or other communications hereunder shall be in writing and shall be given by personal delivery, by express courier, by registered or certified mail with return receipt requested, or by telex or facsimile, to the Parties at the addresses shown below, or to such other address as may be designated by written notice given by any Party to the other Parties. Unless conclusively proved otherwise, all notices, demands, requests, consents or other communications hereunder shall be deemed effective upon delivery if personally delivered, fifteen (15) days after dispatch if sent by express courier, thirty (30) days after dispatch if sent by registered or certified mail with return receipt requested, or confirmation of the receipt of the facsimile by the recipient if sent by telex or facsimile.

(a)	If to Flow, to:
	Flow International Corporation 23500, 64th Avenue South Kent Washington 98032 USA Attention: General Manager/Chief Executive Officer Facsimile No.: +1-253-813-3311
	With a copy to:
	K&L Gates LLP 925 Fourth Avenue, Suite 2900 Seattle, WA 98104-1158

	U.S.A. Attention: David Tang Facsimile No.: +1-206-370-6186
(b)	if to the Company, to:
	Dardi International Corporation No. 99, Weiyi Road Gaochun Economic Development Area Nanjing 211300 PRC Attention: Mr. Chen Bo, CEO Facsimile No.: +86-25-5732-4297
(c)	if to any Employee Shareholder, to:
	such Employee Shareholder’s residential address set forth in Schedule 2.1.
	With a copy to:
	JC Master Law Offices 15th Floor, Daxinggong Mansion 147 East Zhongshan Road Nanjing 210002 PRC Attention: Justin Ma Facsimile No.:86-25-8450-5533

     28.12 Counterparts. This Agreement may be executed in one or more counterparts (each of which may be transmitted by facsimile), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

     28.13 Captions. The section headings and captions contained herein are for purposes of reference and convenience only and shall not in any way affect the meaning or interpretation of this Agreement.

     28.14 Number and Gender. Whenever used in this Agreement, the singular terms shall include the plural and the plural terms shall include the singular, and the use of any gender shall be applicable to all genders.

     28.15 Confidentiality.

          (a) No Party shall disclose, disseminate or cause to be disclosed the terms and conditions of this Agreement, except insofar as disclosure is reasonably necessary to carry out and effectuate the terms of this Agreement or as required by a court of competent jurisdiction or governmental agency, and insofar as any Party is required by Law to disclose. Specifically, the Parties acknowledge that as a listed company in the US, Flow may be required to disclose the terms and conditions of this Agreement from time to time in accordance with applicable Law.

          (b) The Parties agree that the confidentiality obligations set forth herein shall not extend to information, knowledge and data that is publicly available or becomes publicly available through no act or omission of the Party owing a duty of confidentiality, or becomes available on a non-confidential basis from a source other than the Party owing a duty of confidentiality so long as such source is not known by such Party to be bound by a confidentiality agreement with or other obligations of secrecy to the relevant other Party or required to be disclosed by a Governmental Authority (not limited to PRC Governmental Authority).

          (c) In the event of a breach of the obligations hereunder by any Party, the non-breaching Parties, in addition to all other available remedies, will be entitled to injunctive relief to enforce the provisions of this Section 16.15 in any court of competent jurisdiction.

     28.16 Language. The Agreement is executed in both English and Chinese. Both language versions shall have equal validity. Each Party acknowledges that it has reviewed both language versions and that they are substantially the same in all material respects. In the event of any discrepancy between these two versions, the Chinese version shall prevail, provided that the intent of the Parties has been fully taken into consideration.

     28.17 Termination and Invalidity. Without prejudice to other circumstances as provided by applicable Laws, this Agreement shall be terminated and become invalid under the following circumstances:

          (a) Share Purchase Agreement is terminated in accordance with Section 11.1 therein.

          (b) Company is wound up and deregistered with SAIC in accordance with Section 14 herein.

     28.18 Effect of Termination. Except for the obligations of any Party provided in Section 16 herein (and any relevant definition in Section 1), this Agreement shall become void subsequently upon termination in accordance with Section 16.17, and no Party shall be liable for any other Party, provided that nothing in this Section 16.18 shall relieve any Party from any liabilities it shall bear due to any breach of this Agreement occurred prior to such termination.

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SIGNATURE PAGE—SHAREHOLDERS AGREEMENT (JOINT VENTURE CONTRACT)

     IN WITNESS WHEREOF, the Parties have signed or caused their respective duly authorized officers to sign this Agreement, all as of the date first written above.

[FLOW INTERNATIONAL CORPORATION]

By:

Name: Charles Brown

Title: CEO

DARDI INTERNATIONAL CORPORATION

By:

Name: Chen Bo

Title: Chairman of the Board & CEO

CHINESE SHAREHOLDERS:

By:

Name:

Signature of each of the Chinese Shareholders
set forth in Schedule 2.1