SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”) is dated as of December
11, 2009, between Gulf Resources, Inc., a Delaware corporation (the “Company”),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively, the “Purchasers”).
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
 
ARTICLE I.
DEFINITIONS
 
1.1           Definitions.  The following terms have the meanings set forth in
this Section 1.1:
 
“8-K Filing” shall mean the current report on Form 8-K filed on EDGAR with the
Commission disclosing the sale of equity securities pursuant to this Agreement
and attaching as exhibits thereto all material Transaction Documents.
 
“Acquiring Person” shall have the meaning ascribed to such term in Section 4.6.
 
“Action” shall have the meaning ascribed to such term in Section 3.1(i).
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.
 
“Approved Stock Plan" means any employee benefit plan which has been approved by
the Board of Directors of the Company, pursuant to which the Company's
securities may be issued to any employee, officer, director or consultant for
services provided to the Company.
 
“Available Undersubscribed Amount” have the meaning ascribed to it in Section
4.10(c).
 
“Basic Amount” have the meaning ascribed to it in Section 4.10(c).
 
“Board of Directors” means the board of directors of the Company.
 
“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
 

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“Bylaws” shall have the meaning ascribed to it in Section 3.1(g).
 
“Certificate of Incorporation” shall have the meaning ascribed to it in Section
3.1(g).
 
“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.
 
“Closing Date” means the Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities, in each
case, have been satisfied or waived.
 
“Closing Statement” means the Closing Statement in the form on Annex A attached
hereto.
 
“Commission” means the United States Securities and Exchange Commission.
 
“Common Stock” means the common stock of the Company, par value $0.0005 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.
 
“Company Counsel” means Loeb & Loeb, with offices located at 345 Park Avenue,
New York, NY  10154.
 
"Contingent Obligation" means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto;
 
“Disclosure Schedules” shall have the meaning ascribed to such term in Section
3.1.
 
“Effective Date” shall have the meaning ascribed to such term in the
Registration Rights Agreement.
 
“Escrow Agent” means Sichenzia Ross Friedman Ference LLP, with offices located
at 61 Broadway, New York, New York 10006.
 
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 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
 
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (including, without limitation,
"capital leases" in accordance with generally accepted accounting principles)
(other than trade payables entered into in the ordinary course of business), (C)
all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above.
 
“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(v).
 
“Legend Removal Date” shall have the meaning ascribed to such term in Section
4.1(c).
 
“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
 
 “Material Adverse Effect” shall mean (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document.
 
“Material Permits” shall have the meaning ascribed to such term in Section
3.1(j).
 
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“Notice of Acceptance” have the meaning ascribed to it in Section 4.10(c).
 
“Offer” shall have the meaning ascribed to it in Section 4.10(c).
 
“Offer Notice” shall have the meaning ascribed to it in Section 4.10(c).
 
“Offer Period” have the meaning ascribed to it in Section 4.10(c).
 
“Offered Securities” have the meaning ascribed to it in Section 4.10(c).
 
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
 
“Public Information Failure” shall have the meaning ascribed to it in Section
4.2(b).
 
“Public Information Failure Payments” shall have the meaning ascribed to it in
Section 4.2(b).
 
“Refused Securities” shall have the meaning ascribed to it in Section 4.10(c).
 
“Registration Rights Agreement” means the Registration Rights Agreement, dated
the date hereof, among the Company and the Purchasers, in the form of Exhibit A
attached hereto.
 
“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale of the
Shares by each Purchaser as provided for in the Registration Rights Agreement.
 
“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).
 
 “Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
 
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“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
 
“Securities” means the Shares.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 
 “Shares” means the shares of Common Stock issued to each Purchaser pursuant to
this Agreement.
 
“Shareholder Approval” means such approval as may be required by the applicable
rules and regulations of the Nasdaq Capital Market (or any successor entity)
from the shareholders of the Company with respect to the transactions
contemplated by the Transaction Documents.
 
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock). 
 
 “Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Shares purchased hereunder as specified below such Purchaser’s name on
the signature page of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately available funds.
 
“Subsequent Placement” shall have the meaning ascribed to it in Section 4.10(b).
 
“Subsequent Placement Agreement” shall have the meaning ascribed to it in
Section 4.10(c).
 
“Subsequent Placement Documents” shall have the meaning ascribed to it in
Section 4.10(c).
 
“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a)
and shall, where applicable, also include any direct or indirect subsidiary of
the Company formed or acquired after the date hereof.
 
“Trading Day” means a day on which the principal Trading Market is open for
trading.
 
“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
Alternext, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, or the New York Stock Exchange (or any successors to any
of the foregoing).
 
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“Transaction Documents” means this Agreement, the Registration Rights Agreement,
all exhibits and schedules thereto and hereto and any other documents or
agreements executed in connection with the transactions contemplated hereunder.
 
“Transfer Agent” means American Stock Transfer & Trust Company, the current
transfer agent of the Company, with a mailing address of 59 Maiden Lane New
York, NY 10038 (Overnight/Deliveries: 6201 15th Avenue Brooklyn, NY 11219), and
any successor transfer agent of the Company.
 
“Trigger Date” shall have the meaning ascribed to it in Section 4.1(b).
 
“Undersubscribed Amount” have the meaning ascribed to it in Section 4.1(c).
 
ARTICLE II.
PURCHASE AND SALE
 
2.1           Closing.  On the Closing Date, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and the Purchasers, severally and not jointly, agree to purchase, up to an
aggregate of 2,941,181 Shares at a per share purchase price equal to $8.50 per
share. On or prior to the Closing Date, the Company shall deliver to each
Purchaser’s custodian the Certificates referenced in Section 2.2(a)(iii).  On
the Closing Date and only upon receipt of the Certificates referenced in Section
2.2(a)(iii), each Purchaser shall deliver to the Company via wire transfer of
immediately available funds equal to such Purchaser’s Subscription Amount as set
forth on the signature page hereto executed by such Purchaser.  The Company and
each Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing. Upon satisfaction of the covenants and conditions
set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of
Loeb & Loeb LLP at 345 Park Avenue, New York, NY 10154, or such other location
as the parties shall mutually agree.
 
2.2           Deliveries.
 
(a)           On or prior to the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the following:
 
 
(i)
this Agreement duly executed by the Company;

 
(ii)           legal opinions of U.S., PRC, Hong Kong and BVI Counsel,
substantially in the forms of Exhibit B, Exhibit C, Exhibit D, and Exhibit E
respectively, attached hereto;
 
(iii)           Good Standing Certificate of the Company and the BVI Company;
 
(iv)           Certificates evidencing the Securities purchased by each
Purchaser; and
 
 
(vi)
the Registration Rights Agreement duly executed by the Company.

 
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(b)           On or prior to the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Company the following:
 
(i)           this Agreement duly executed by such Purchaser;
 
(ii)           promptly after receipt of the Certificates referenced in Section
2.2(a)(iii), such Purchaser’s Subscription Amount by wire transfer to the
account as specified in writing by the Company;
 
(iv)           the Registration Rights Agreement, duly executed by such
Purchaser; and

(vi)           the Purchaser Questionnaire in the form on Annex B attached
hereto.

 
2.3           Closing Conditions.
 
(a)             The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:
 
(i)           the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein (unless as of
a specific date therein);
 
(ii)           all obligations, covenants and agreements of each Purchaser
required to be performed at or prior to the Closing Date shall have been
performed; and
 
(iii)           the delivery by each Purchaser of the items set forth in Section
2.2(b) of this Agreement.
 
(b)             The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being met:
 
(i)           the accuracy in all material respects (except that any
representation and warranty that is qualified as to "materiality" or "Material
Adverse Effect” shall be true and correct in all respects) when made and on the
Closing Date of the representations and warranties of the Company contained
herein (except for those which by their terms specifically refer to an earlier
date, in which case such representations and warranties shall have been true and
correct in all material respects (except that any representation and warranty
that is qualified as to "materiality" or "Material Adverse Effect” shall be true
and correct in all respects) as of such earlier date);
 
(ii)           all obligations, covenants and agreements of the Company required
to be performed at or prior to the Closing Date shall have been performed;
 
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(iii)           the delivery by the Company of the items set forth in Section
2.2(a) of this Agreement;
 
(iv)           there shall have been no Material Adverse Effect with respect to
the Company since the date hereof;
 
(v)           as of the Closing Date, the NASDAQ Capital Market, if
required,  shall have approved the additional listing application with respect
to the Shares; and
 
(vi)           from the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission or the Company’s principal
Trading Market (except for any suspension of trading of limited duration agreed
to by the Company, which suspension shall be terminated prior to the Closing).
 
ARTICLE III.
REPRESENTATIONS AND COVENANTS
 
3.1           Representations and Warranties of the Company.  Except as set
forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a
part hereof and shall qualify any representation or otherwise made herein to the
extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations and
warranties to each Purchaser:
 
(a)           Subsidiaries.  All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3.1(a).  The Company owns, directly or
indirectly, such percentage of the Subsidiary as set forth in Schedule 3.1(a)
and such ownership interest is free and clear of any Liens, and all of the
issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.  Other than as contemplated by
the Transaction Documents, there are no outstanding preemptive, conversion or
other rights, options, warrants or agreements granted or issued by or binding
upon any subsidiary for the purchase or acquisition of any shares of capital
stock of any subsidiary or any other securities convertible into, exchangeable
for or evidencing the rights to subscribe for any shares of such capital stock
that would have a dilutive effect on the Company’s ownership of its
subsidiaries. Other than as contemplated by the Transaction Documents, neither
the Company nor any subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Neither the Company
nor any subsidiary is party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of any
subsidiary.
 
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(b)           Organization and Qualification.  The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted.  Each of the Company and the Subsidiaries is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in a Material Adverse Effect and no
Proceeding has been initiated in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or
qualification.
 
(c)           Authorization; Enforcement.  The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals.  Each
Transaction Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
 
(d)           No Conflicts.  The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of the Securities
and the consummation by it of the transactions contemplated hereby and thereby
to which it is a party do not and will not: (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.
 
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(e)           Filings, Consents and Approvals.  The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than: (i) the filings required pursuant to Section 4.4 of this Agreement,
(ii) the filing with the Commission pursuant to the Registration Rights
Agreement, (iii) the notice and/or application(s) to each applicable Trading
Market for the issuance and sale of the Shares, and the listing of the Shares
for trading thereon in the time and manner required thereby, (iv) the filing of
Form D with the Commission and such filings as are required to be made under
applicable state securities laws and (v) any Shareholder Approval, if required,
(collectively, the “Required Approvals”).
 
(f)           Issuance of the Securities.  The Shares are duly authorized and,
when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens other than restrictions on transfer provided for in the
Transaction Documents.
 
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(g)           Capitalization.  The capitalization of the Company is as set forth
on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of
shares of Common Stock owned beneficially, and of record, by Affiliates of the
Company as of the date hereof. All of such outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and nonassessable.  Except
as disclosed in Schedule 3.1(g): (i) none of the Company’s capital stock is
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company; (ii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any shares of capital stock of the Company or
any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or any of its Subsidiaries, other than pursuant to an
Approved Stock Plan; (iii) there are no outstanding debt securities, notes,
credit agreements, credit facilities or other agreements, documents or
instruments evidencing Indebtedness of the Company or any of its Subsidiaries
which are convertible into or exchangeable for any shares of capital stock of
the Company; (iv) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions and other agreements consistent with past practices), and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (v) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities; (vi) the Company does not have any stock
appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement; and (vii) there are no financing statements securing obligations
in any material amounts, either singly or in the aggregate, filed in connection
with the Company or any of its Subsidiaries; (viii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except
pursuant to the Registration Rights Agreement); and (ix) the Company and its
Subsidiaries have no liabilities or obligations required to be disclosed in the
SEC Reports but not so disclosed in the SEC Reports, other than those incurred
in the ordinary course of the Company's or its Subsidiaries' respective
businesses and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect.  The Company has made available to the Purchasers
true, correct and complete copies of the Company’s Certificate of Incorporation,
as amended and as in effect on the date hereof (the “Certificate of
Incorporation”), and the Company’s Bylaws, as amended and as in effect on the
date hereof (the “Bylaws”), and the terms of all securities convertible into, or
exercisable or exchangeable for, shares of Common Stock and the material rights
of the holders thereof in respect thereto.  No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.  The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such
securities. No further approval or authorization of any stockholder, the Board
of Directors or others is required for the issuance and sale of the Securities.
 
(h)           SEC Reports; Financial Statements.  Except as set forth on
Schedule 3.1 (h), the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by the Company under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the twelve months preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”) or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such
extension.  Except as set forth on Schedule 3.1(h), as of their respective
filing dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, and none
of the SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.  Except as set forth
on Schedule 3.1(h), the financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing.  Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments
 
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(i)           Litigation.  There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor, to the knowledge of the Company, any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty.  There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company.  The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
under the Exchange Act or the Securities Act.
 
(j)           Regulatory Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as currently conducted, except where the failure to
possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.
 
(k)           Private Placement.  Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.
 
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(l)           Listing and Maintenance Requirements.  The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act nor has the Company received any notification that the Commission
is contemplating terminating such registration.  The Company has not received
notice from any Trading Market on which the Common Stock is or has been listed
or quoted to the effect that the Company is not in compliance with the listing
or maintenance requirements of such Trading Market. The Company is unaware of
any facts or circumstances that could reasonably be expected to cause failure to
maintain the continued listing of the Common Stock on the Trading Market.
 
(m)           Disclosure.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information
that it believes constitutes or might constitute material, non-public
information.  The Company understands and confirms that the Purchasers will rely
on the foregoing representation in effecting transactions in securities of the
Company.  All of the disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
 
(n)           No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of (i) the Securities Act which would require the registration of
any such securities under the Securities Act, or (ii) any applicable shareholder
approval provisions of any Trading Market on which any of the securities of the
Company are listed or designated.
 
(o)           No General Solicitation. Neither the Company nor any person acting
on behalf of the Company has offered or sold any of the Securities by any form
of general solicitation or general advertising.  The Company has offered the
Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.
 
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(p)           Acknowledgment Regarding Purchasers’ Purchase of Securities.  The
Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby.  The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by any
Purchaser or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to the Purchasers’ purchase of the Securities.  The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
 
(q)           Regulation M Compliance.  The Company has not, and no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.
 
(r)           Material Changes; Undisclosed Events, Liabilities or
Developments.  Since the date of the latest audited financial statements
included within the SEC Reports, except as set forth on Schedule 3.1(r) or as
specifically disclosed in a subsequent SEC Report filed prior to the date
hereof: (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or disclosed in
filings made with the Commission, (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to an Approved Stock Plan.  The Company
does not have pending before the Commission any request for confidential
treatment of information.  Except for the issuance of the Securities
contemplated by this Agreement (i), no event, liability or development has
occurred or exists with respect to the Company or its Subsidiaries or their
respective business, properties, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws at
the time this representation is made or deemed made that has not been publicly
disclosed at least 1 Trading Day prior to the date that this representation is
made.
 
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(s)           Labor Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a member of a
union that relates to such employee’s relationship with the Company or such
Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a
collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good.  No executive officer,
to the knowledge of the Company, is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant in favor of any third party,
and the continued employment of each such executive officer does not subject the
Company or any of its Subsidiaries to any liability with respect to any of the
foregoing matters.  The Company and its Subsidiaries are in compliance with all
U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
 
(t)           Compliance.  Neither the Company nor any Subsidiary: (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body or (iii) is
or has been in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws applicable to its business and all such laws that affect the environment,
except in each case as could not have or reasonably be expected to result in a
Material Adverse Effect.
 
(u)           Title to Assets.  The Company and the Subsidiaries have valid
land-use rights to all real property granted to them by the PRC government and
good and marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each case free
and clear of all Liens, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and proposed
to be made of such property by the Company and the Subsidiaries and Liens for
the payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties.  Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.
 
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(v)           Patents and Trademarks.  The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as described
in the SEC Reports as necessary or material for use in connection with their
respective businesses and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property Rights”).  Neither the
Company nor any Subsidiary has received a notice (written or otherwise) that any
of the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person.  To the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual Property
Rights.  The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
 
(w)           Insurance.  The Company and each its Subsidiaries do not have
insurance.
 
(x)           Transactions With Affiliates and Employees.  Except as set forth
in the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $120,000 other than for: (i) payment of
salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including
stock option agreements under an Approved Stock Plan.
 
(y)           Sarbanes-Oxley.  The Chief Executive Officer and the Chief
Financial Officer of the Company have signed, and the Company has furnished to
the SEC, all certifications required by Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002.  Such certifications contain no qualifications or
exceptions to the matters certified therein and have not been modified or
withdrawn; and neither the Company nor any of its officers has received notice
from any governmental entity questioning or challenging the accuracy,
completeness, form or manner of filing or submission of such
certifications.  The Company is otherwise in compliance in all material respects
with all applicable effective provisions of the Sarbanes-Oxley Act of 2002 and
the rules and regulations issued thereunder by the SEC.  The Company has
established disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls
and procedures to ensure that information required to be disclosed by the
Company in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
SEC’s rules and forms.  The Company has established internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the Company and designed such internal control over financial reporting to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principals.  The Company’s certifying
officers have evaluated the effectiveness of the Company’s disclosure controls
and procedures and internal control over financial reporting as of the end of
the period covered by the Company’s most recently filed periodic report under
the Exchange Act (such date, the “Evaluation Date”).  The Company presented in
its most recently filed periodic report under the Exchange Act the conclusions
of the certifying officers about the effectiveness of the disclosure controls
and procedures and internal control over financial reporting based on their
evaluations as of the Evaluation Date.  Since the Evaluation Date, there have
been no changes in the Company’s internal control over financial reporting that
has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.
 
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(z)           Certain Fees.  Except as set forth in Schedule 3.1(zz), no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents.  The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by the Transaction
Documents.
 
(aa)           Investment Company. The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Securities, will not be or
be an Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.  The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act of 1940,
as amended.
 
(bb)           Registration Rights.  Except as set forth in Schedule 3.1(bb), no
Person has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
 
(cc)           Application of Takeover Protections.  The Company and the Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s
issuance of the Securities and the Purchasers’ ownership of the Securities.
 
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(dd)           Solvency.  Based on the consolidated financial condition of the
Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder: (i) the fair
saleable value of the Company’s assets exceeds the amount that will be required
to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its
business as now conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof, and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its liabilities when such
amounts are required to be paid.  The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt).  The
Company has no knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing
Date.  Schedule 3.1(dd) sets forth as of the date hereof all outstanding secured
and unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments.
 
(ee)           Tax Returns.  Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.
 
(ff)           Foreign Corrupt Practices.  Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has: (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of law
or (iv) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
 
(gg)           Accountants.  The Company’s accounting firm is set forth on
Schedule 3.1(gg) of the Disclosure Schedules.  To the knowledge and belief of
the Company, such accounting firm: (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion with respect to
the financial statements to be included in the Company’s Annual Report for the
year ending December 31, 2009.
 
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(hh)           No Disagreements with Accountants and Lawyers.  Except as set
forth on Schedule 3.1(hh), there are no disagreements of any kind presently
existing, or reasonably anticipated by the Company to arise, between the Company
and the accountants and lawyers formerly or presently employed by the Company
which could affect the Company’s ability to perform any of its obligations under
any of the Transaction Documents, the Company is current with respect to any
fees owed to its accountants and lawyers.
 
(ii)           Subsidiaries; Equity Interests.  (a) The Company owns 100% of the
outstanding shares of Upper Class Group Limited, a company incorporated in the
British Virgin Islands,  which owns 100% of the outstanding shares of Hong Kong
Jiaxing, a company organized and existing under the laws of Hong Kong, which
owns 100% of the registered capital of Shouguang City Haoyuan Chemical Company
Limited, a company incorporated in Shouguang City, Shandong Province, the
People's Republic of China, which owns 100% of the registered capital of
Shouguang Yuxin Chemical Industry Co., Limited, a  company incorporated in the
People's Republic of China. All of such outstanding shares of capital stock have
been validly issued and are fully paid and nonassessable and are as of the date
of this Agreement owned as set forth above free and clear of all Liens and in
accordance with all applicable laws and regulations of the jurisdiction in which
such entity is formed.
 
(b)      Except for its interests in the entities set forth this Section
3.1(ii), the Company does not as of the date of this Agreement own, directly or
indirectly, any capital stock or other securities of, or have any beneficial
ownership interest in, or hold any equity or similar interest, or have any
investment in any corporation, limited liability company, partnership, limited
partnership, joint venture or other company, person or other entity.
 
3.2           Representations and Warranties of the Purchasers.    Each
Purchaser, for itself and for no other Purchaser, hereby represents and warrants
as of the date hereof and as of the Closing Date to the Company as follows
(unless as of a specific date therein):
 
(a)           Organization; Authority.  Such Purchaser is either an individual
or an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of the
Transaction Documents and performance by such Purchaser of the transactions
contemplated by the Transaction Documents have been duly authorized by all
necessary corporate, partnership, limited liability company or similar action,
as applicable, on the part of such Purchaser.  Each Transaction Document to
which it is a party has been duly executed by such Purchaser, and when delivered
by such Purchaser in accordance with the terms hereof, will constitute the valid
and legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.
 
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(b)           Own Account.  Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
in violation of the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s right to sell the
Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws).  Such Purchaser is acquiring
the Securities hereunder in the ordinary course of its business.
 
(c)           Purchaser Status.  At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is, either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act.  Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.
 
(d)           Experience of Such Purchaser.  Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.  Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
 
(e)           General Solicitation.  Such Purchaser is not, to its knowledge,
purchasing the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or, to such Purchaser's knowledge, any other general solicitation or
general advertisement.
 
(f)           Certain Transactions and Confidentiality.  Other than consummating
the transactions contemplated hereunder, such Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Purchaser, executed any purchases or sales, including
Short Sales, of the securities of the Company during the period commencing as of
the time that such Purchaser first received a term sheet (written or oral) from
the Company or any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and ending immediately
prior to the execution hereof.  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to other Persons
party to this Agreement, such Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Notwithstanding the foregoing, for
avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the identification of the
availability of, or securing of, available shares to borrow in order to effect
Short Sales or similar transactions in the future.
 
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(g)           Purchasers of Securities.  Each Purchaser is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby and no Purchaser is (i) an
officer or director of the Company or any of its Subsidiaries, (ii) an
"affiliate" of the Company or any of its Subsidiaries (as defined in Rule 144)
or (iii) a "beneficial owner" of more than 10% of the shares of Common Stock (as
defined for purposes of Rule 13d-3 of the Exchange Act.  No Purchaser is acting
as a financial advisor or fiduciary of the Company or any of its Subsidiaries
(or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by a
Purchaser or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Purchaser’s purchase of the Securities.
 
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
 
4.1           Transfer Restrictions.
 
(a)           The Securities may only be disposed of in compliance with state
and federal securities laws.  In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities
Act.  As a condition of transfer, any such transferee shall agree in writing to
be bound by the terms of this Agreement and the Registration Rights Agreement
and shall have the rights and obligations of a Purchaser under this Agreement
and the Registration Rights Agreement.
 
(b)           The Purchasers agree to the imprinting, so long as is required by
this Section 4.1, of a legend on any Shares in substantially the following form:
 
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NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
EXERCISABLE, IF APPLICABLE, HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY UNLESS SOLD OR TRANSFERRED TO A “QUALIFIED
INSTITUTIONAL BUYER” WITHIN THE MEANING OF RULE 144A UNDER THE 1933 ACT OR
UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  THIS SECURITY AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
 
(c)           Certificates evidencing the Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i) upon the resale
of the Shares while a registration statement (including the Registration
Statement) covering the resale of the Shares is effective under the Securities
Act, (ii) if such Shares are eligible for sale under Rule 144, following any
sale of such Shares pursuant to Rule 144, or (iii) if such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue a legal opinion to the Transfer Agent
promptly after the Effective Date if required by the Transfer Agent to effect
the removal of the legend hereunder.  If any Shares are sold at a time when
there is an effective registration statement to cover the resale of the Shares,
or if such Shares may be sold under Rule 144 and the Company is then in
compliance with the current public information required under Rule 144, or if
such Shares may be sold under Rule 144 without the requirement for the Company
to be in compliance with the current public information required under Rule 144
as to such Shares and without volume or manner-of-sale restrictions or if such
legend is not otherwise required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the staff
of the Commission) then such Shares shall be issued free of all legends.  The
Company agrees that following (i) upon the resale of the Shares following the
Effective Date, (ii) if such Shares are eligible for sale under Rule 144,
following any sale of such Shares pursuant to Rule 144 or (iii) at such time as
such legend is no longer required under this Section 4.1(c), it will, no later
than three Trading Days following the delivery by a Purchaser to the Company or
the Transfer Agent of a certificate representing the Shares, as applicable,
issued with a restrictive legend (such third Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 4.  Certificates for Shares subject to legend removal
hereunder shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser’s broker with the Depository Trust
Company System as directed by such Purchaser.
 
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(d)           Each Purchaser, severally and not jointly with the other
Purchasers, agrees with the Company that such Purchaser will sell any Securities
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a Registration Statement,
they will be sold in compliance with the plan of distribution set forth therein,
and acknowledges that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the
Company’s reliance upon this understanding.
 
4.2           Furnishing of Information; Public Information, Failure of
Registration.
 
(a)           If the Common Stock is not registered under Section 12(b) or 12(g)
of the Exchange Act on the date hereof, the Company agrees to cause the Common
Stock to be registered under Section 12(g) of the Exchange Act on or before the
Closing Date. Until the time that no Purchaser owns any Securities, the Company
covenants to maintain the registration of the Common Stock under Sections 12(b)
or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect
hereof and file within the applicable grace periods) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act even if
the Company is not then subject to the reporting requirements of the Exchange
Act.
 
(b)           At any time during the period commencing from the six (6) month
anniversary of the Closing Date and ending at such time that all of the
Securities, if a registration statement is not available for the resale of all
of the Securities, may be sold without restriction or limitation pursuant to
Rule 144 and without the requirement to be in compliance with Rule 144(c)(1), if
the Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a "Public Information Failure") then, as partial
relief for the damages to any holder of Securities by reason of any such delay
in or reduction of its ability to sell the Securities (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall pay to each such holder an amount in cash equal to two percent (2.0%) of
the aggregate Purchase Price of such holder's Securities that cannot be sold
resulting directly from such Public Information Failure on the day of a Public
Information Failure and on every thirtieth day (pro rated for periods totaling
less than thirty days) thereafter until the earlier of (i) the date such Public
Information Failure is cured and (ii) such time that such public information is
no longer required pursuant to Rule 144.  The payments to which a holder shall
be entitled pursuant to this Section 4(n) are referred to herein as "Public
Information Failure Payments."  Public Information Failure Payments shall be
paid on the earlier of (I) the last day of the calendar month during which such
Public Information Failure Payments are incurred and (II) the third Business Day
after the event or failure giving rise to the Public Information Failure
Payments is cured.  In the event the Company fails to make Public Information
Failure Payments in a timely manner, such Public Information Failure Payments
shall bear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full.
 
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4.3           Integration.  The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
 
4.4           Securities Laws Disclosure; Publicity.  The Company shall, by 8:30
a.m. (New York City time) on the Trading Day immediately following the date
hereof, issue a Current Report on Form 8-K and press release disclosing the
material terms of the transactions contemplated hereby, and including the
Transaction Documents as exhibits thereto.  Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except:
(a) as required by federal securities law in connection with (i) any
registration statement contemplated by the Registration Rights Agreement and
(ii) the filing of final Transaction Documents (including signature pages
thereto) with the Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under this clause
(b
 
4.5           Shareholder Rights Plan.  No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.
 
4.6           Non-Public Information.  From and after the filing of the 8-K
Filing with the SEC, no Purchaser shall be in possession of any material,
nonpublic information received from the Company, any of its Subsidiaries or any
of their respective officers, directors, employees or agents, that is not
disclosed in the 8-K Filing.  The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide any Purchaser with any material, nonpublic
information regarding the Company or any of its Subsidiaries from and after the
filing of the 8-K Filing with the SEC without the prior express written consent
of such Purchaser.  If a Purchaser has, or believes it has, received any such
material, nonpublic information regarding the Company or any of its Subsidiaries
from the Company, any of its Subsidiaries or any of their respective officers,
directors, affiliates or agents, it may provide the Company with written notice
thereof.  In the event of the disclosure of any material nonpublic information,
the Company shall comply with its obligations under Regulation FD promulgated
under the Securities Act and the Exchange Act by filing a press release and
current report on Form 8-K disclosing the material non-public information within
five days of its disclosure to any Purchaser.  Subject to the foregoing, neither
the Company, its Subsidiaries nor any Purchaser shall issue any press releases
or any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Purchaser, to make any press release or other public disclosure
with respect to such transactions (i) in substantial conformity with the 8-K
Filing and contemporaneously therewith and (ii) as is required by applicable law
and regulations (provided that in the case of clause (i) each Purchaser shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).  Without the prior written consent of
any applicable Purchaser, neither the Company nor any of its Subsidiaries or
affiliates shall disclose the name of such Purchaser in any filing,
announcement, release or otherwise.
 
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4.7           Use of Proceeds.  The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital and general corporate
purposes.
 
4.8           Listing of Securities. The Company shall, if applicable: (i) by
the Closing Date, prepare and file with such Trading Market an additional shares
listing application covering the Shares, (ii) take all steps necessary to cause
such shares of Common Stock to be approved for listing or quotation on such
Trading Market as soon as possible thereafter, (iii) provide to the Purchasers
evidence of such listing or quotation and (iv) maintain the listing or quotation
of such Common Stock on such Trading Market or another Trading Market.
 
4.9           Certain Transactions and Confidentiality. Each Purchaser,
severally and not jointly with the other Purchasers, covenants that neither it,
nor any Affiliate acting on its behalf or pursuant to any understanding with it
will execute any purchases or sales, including Short Sales, of any of the
Company’s securities during the period commencing with the execution of this
Agreement and ending at such time that the transactions contemplated by this
Agreement are first publicly announced pursuant to the initial press release as
described in Section 4.4.  Each Purchaser, severally and not jointly with the
other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company pursuant to
the initial press release as described in Section 4.4, such Purchaser will
maintain the confidentiality of the existence and terms of this transaction and
the information included in the Transaction Documents and the Disclosure
Schedules.  Notwithstanding the foregoing, and notwithstanding anything
contained in this Agreement to the contrary, the Company expressly acknowledges
and agrees that (i) no Purchaser makes any representation, warranty or covenant
hereby that it will not engage in effecting transactions in any securities of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release as described
in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from
effecting any transactions in any securities of the Company in accordance with
applicable securities laws from and after the time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the
initial press release as described in Section 4.4 and (iii) no Purchaser shall
have any duty of confidentiality to the Company or its Subsidiaries after the
issuance of the initial press release as described in Section 4.4. 
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser’s assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Securities covered by
this Agreement.
 
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4.10           Additional Issuances of Securities.
 
(a)           For purposes of this Section 4.10, the following definitions shall
apply.
 
(i)      "Common Stock Equivalents" means, collectively, Options and Convertible
Securities
 
(ii)      "Convertible Securities" means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for shares of Common
Stock.
 
(iii)     "Options" means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.
 
(iv)     “Excluded Securities” means any Common Stock issued or issuable or
deemed to be issued; (A) in connection with any Approved Stock Plan; (B) upon
conversion, exercise or exchange of any Options or Convertible Securities which
are outstanding as of the date hereof, provided that such issuance of Common
Stock upon exercise of such Options or Convertible Securities is made pursuant
to the terms of such Options or Convertible Securities in effect on the date
hereof are not amended, modified or changed on or after the dare hereof; (C) in
connection with any stock split, stock dividend, recapitalization or similar
transaction by the Company,  and (D) in connection with mergers, acquisitions,
strategic business partnerships or joint ventures, in each case on an
arm's-length basis, the primary purpose of which is not to raise additional
capital.
 

 
(b)           From the date hereof and until the earlier of (i) seven (7) months
after the Closing Date, provided that the Company is in compliance with the
current public information requirement under Rule 144(c) on such date and on
such date the Company is unaware of any of any facts or circumstances that might
prevent the Company from complying with its current public information
requirement set forth in Rule 144(c) in the foreseeable future and (ii) thirty
(30) days after the date when a Registration Statement is effective, covering
the resale of all of the Registrable Securities (as defined in the Registration
Rights Agreement) (the "Trigger Date"), the Company will not, directly or
indirectly, file any registration statement with the SEC other than the
Registration Statement (as defined in the Registration Rights Agreement).  From
the date hereof until the Trigger Date, the Company will not, (i) directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or its Subsidiaries' equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares of
Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent Placement") or
(ii) be party to any solicitations, negotiations or discussions with regard to
the foregoing.
 
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(c)           From the Trigger Date until the second anniversary of the Closing
Date, the Company will not, directly or indirectly, effect any Subsequent
Placement unless the Company shall have first complied with this Section 4.10.
 
(i)      The Company shall deliver to each Purchaser an irrevocable written
notice (the "Offer Notice") of any proposed or intended issuance or sale or
exchange (the "Offer") of the securities being offered (the "Offered
Securities") in a Subsequent Placement, which Offer Notice shall (w) identify
and describe the Offered Securities, (x) describe the price and other terms upon
which they are to be issued, sold or exchanged, and the number or amount of the
Offered Securities to be issued, sold or exchanged, (y) identify the persons or
entities (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (z) offer to issue and sell to or
exchange with such Purchasers all of the Offered Securities, allocated among
such Purchasers (a) based on such Purchaser's pro rata portion of the aggregate
number of shares of Common Stock purchased hereunder (the "Basic Amount"), and
(b) with respect to each Purchaser that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Purchasers as such Purchaser shall indicate it will purchase or acquire
should the other Purchasers subscribe for less than their Basic Amounts (the
"Undersubscription Amount"), which process shall be repeated once until the
Purchasers shall have an opportunity to subscribe for any remaining
Undersubscription Amount.
 
(ii)           To accept an Offer, in whole or in part, such Purchaser must
deliver a written notice to the Company prior to the end of the fifth (5th)
Business Day after such Purchaser's receipt of the Offer Notice (the "Offer
Period"), setting forth the portion of such Purchaser's Basic Amount that such
Purchaser elects to purchase and, if such Purchaser shall elect to purchase all
of its Basic Amount, the Undersubscription Amount, if any, that such Purchaser
elects to purchase (in either case, the "Notice of Acceptance").  If the Basic
Amounts subscribed for by all Purchasers are less than the total of all of the
Basic Amounts, then each Purchaser who has set forth an Undersubscription Amount
in its Notice of Acceptance shall be entitled to purchase, in addition to the
Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; provided, however, that if the Undersubscription Amounts subscribed for
exceed the difference between the total of all the Basic Amounts and the Basic
Amounts subscribed for (the "Available Undersubscription Amount"), each
Purchaser who has subscribed for any Undersubscription Amount shall be entitled
to purchase only that portion of the Available Undersubscription Amount as the
Basic Amount of such Purchaser bears to the total Basic Amounts of all
Purchasers that have subscribed for Undersubscription Amounts, subject to
rounding by the Company to the extent its deems reasonably
necessary.  Notwithstanding anything to the contrary contained herein, if the
Company desires to modify or amend the terms and conditions of the Offer prior
to the expiration of the Offer Period, the Company may deliver to the Purchasers
a new Offer Notice and the Offer Period shall expire on the third (3rd) Business
Day after such Purchaser's receipt of such new Offer Notice.
 
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(iii)           The Company shall have fourteen (14) calendar days from the
expiration of the Offer Period above to offer, issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of Acceptance has not
been given by the Purchasers (the "Refused Securities") pursuant to a definitive
agreement (the "Subsequent Placement Agreement")  but only to the offerees
described in the Offer Notice (if so described therein) and only upon terms and
conditions (including, without limitation, unit prices and interest rates) that
are not more favorable to the acquiring person or persons or less favorable to
the Company than those set forth in the Offer Notice and (ii) to publicly
announce (a) the execution of such Subsequent Placement Agreement, and (b)
either (x) the consummation of the transactions contemplated by such Subsequent
Placement Agreement or (y) the termination of such Subsequent Placement
Agreement, which shall be filed with the SEC on a Current Report on Form 8-K
with such Subsequent Placement Agreement and any documents contemplated therein
filed as exhibits thereto.
 
(iv)           In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms specified
in Section 4.10(c)(ii) above), then each Purchaser may, at its sole option and
in its sole discretion, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that such Purchaser elected to
purchase pursuant to Section 4.10(c)(ii) above multiplied by a fraction, (i) the
numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Purchasers pursuant to Section 4.10(c)(ii)
above prior to such reduction) and (ii) the denominator of which shall be the
original amount of the Offered Securities.  In the event that any Purchaser so
elects to reduce the number or amount of Offered Securities specified in its
Notice of Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Purchasers in accordance with Section
4.10(c)(ii) above.
 
(v)          Upon the closing of the issuance, sale or exchange of all or less
than all of the Refused Securities, the Purchasers shall acquire from the
Company, and the Company shall issue to the Purchasers, the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant
to  4.10(c)(ii) above if the Purchasers have so elected, upon the terms and
conditions specified in the Offer.  The purchase by the Purchasers of any
Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Purchasers of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
Purchasers and their respective counsel.
 
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(vi)          Any Offered Securities not acquired by the Purchasers or other
persons in accordance with Section 4.10(c)(ii) above may not be issued, sold or
exchanged until they are again offered to the Purchasers under the procedures
specified in this Agreement.
 
(vii)           The Company and the Purchasers agree that if any Purchaser
elects to participate in the Offer, neither the Subsequent Placement Agreement
with respect to such Offer nor any other transaction documents related thereto
(collectively, the "Subsequent Placement Documents") shall include any term or
provisions whereby any Purchaser shall be required to agree to any restrictions
in trading as to any securities of the Company owned by such Purchaser prior to
such Subsequent Placement.
 
(viii)           Notwithstanding anything to the contrary in this Section 4.10
and unless otherwise agreed to by the Purchasers, the Company shall either
confirm in writing to the Purchasers that the transaction with respect to the
Subsequent Placement has been abandoned or shall publicly disclose its intention
to issue the Offered Securities, in either case in such a manner such that the
Purchasers will not be in possession of material non-public information, by the
fifteenth (15th) Business Day following delivery of the Offer Notice.  If by the
fifteenth (15th) Business Day following delivery of the Offer Notice no public
disclosure regarding a transaction with respect to the Offered Securities has
been made, and no notice regarding the abandonment of such transaction has been
received by the Purchasers, such transaction shall be deemed to have been
abandoned and the Purchasers shall not be deemed to be in possession of any
material, non-public information with respect to the Company.  Should the
Company decide to pursue such transaction with respect to the Offered
Securities, the Company shall provide each Purchaser with another Offer Notice
and each Purchaser will again have the right of participation set forth in this
Section 4.10.  The Company shall not be permitted to deliver more than one such
Offer Notice to the Purchasers in any 60 day period.
 
(d)           The restrictions contained in subsections (b) and (c) of this
Section 4.10 shall not apply in connection with the issuance of any (i) Excluded
Securities; (ii) any bona fide firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act; or
(iii) “shelf” registration statement for an "at-the-market offering" as defined
in Rule 415(a)(4) under the Securities Act; provided, however that with respect
to subparagraphs (d)(ii) and (iii), such registration statement shall not be
filed earlier than thirty (30) days after the Closing Date; and provided,
further, that in the event the Company files such registration statement, the
Company shall delay effectiveness of any such registration statement until the
Effective Date.
 
4.11           S-3 Eligibility.  In connection with the registration of the
Shares pursuant to the terms of the Registration Rights Agreement, the Company
shall (i) use its best efforts to meet the requirements of use of Form S-3 as
set forth in General Instructions I.A. of Form S-3, or (ii) comply with its
obligations to register the shares on a Registration Statement on Form S-1 under
the Securities Act.
 
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ARTICLE V.
MISCELLANEOUS
 
5.1           Termination.  This Agreement may be terminated by any Purchaser,
as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by
written notice to the other parties, if the Closing has not been consummated on
or before January 1, 2010.
 
5.2           Fees and Expenses.  Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.  The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities to the Purchasers.
 
5.3           Entire Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
 
5.4           Notices.  Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number set forth on the signature pages attached hereto on a
day that is not a Trading Day or later than 5:30 p.m. (New York City time) on
any Trading Day, (c) the second (2nd) Trading Day following the date of mailing,
if sent by U.S. nationally recognized overnight courier service or (d) upon
actual receipt by the party to whom such notice is required to be given.  The
address for such notices and communications shall be as set forth on the
signature pages attached hereto.
 
5.5           Amendments; Waivers.  No provision of this Agreement may be
waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers holding at least
75% in interest of the Securities purchased hereunder or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right.
 
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5.6           Headings.  The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
 
5.7           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Purchaser (other than by
merger).  Any Purchaser may assign any or all of its rights under this Agreement
to any Person to whom such Purchaser assigns or transfers any Securities,
provided that such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction Documents that
apply to the “Purchasers.”
 
5.8           No Third-Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.10.
 
5.9           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York.  Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing contained herein shall be deemed to limit
in any way any right to serve process in any other manner permitted by law.   If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
 
5.10           Survival.  The representations and warranties contained herein
shall survive the Closing and the delivery of the Securities.
 
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5.11           Execution.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart.  In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original
thereof.
 
5.12           Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
 
5.13           Replacement of Securities.  If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.
 
5.14           Remedies.  In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive and
not to assert in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
 
5.15           Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
 
32

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5.16           Independent Nature of Purchasers’ Obligations and Rights.  The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document.  Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement or out of the other Transaction Documents, and it
shall not be necessary for any other Purchaser to be joined as an additional
party in any proceeding for such purpose.  Each Purchaser has been represented
by its own separate legal counsel in their review and negotiation of the
Transaction Documents.
 
5.17           Saturdays, Sundays, Holidays, etc.  If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.
 
5.18           Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto. In
addition, each and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement.
 
5.19           WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.
 

 
(Signature Pages Follow)
 
33

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
GULF RESOURCES, INC.
 
Address for Notice:
       
By: 
/s/ Xiaobin Liu
 
Chenming Industrial Park,
  Name:  Xiaobin Liu  
Shouguang City
  Title: Chief Executive Officer  
Shandong, China 262714
     
Attention:  Xiaobin Liu
Fax: +86 536 5670007
       
With a copy to (which shall not constitute notice):
 
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
Attention:  Mitchell S. Nussbaum, Esq.
Tel. No.: (212) 407-4000
Fax No.: (212) 407-4990
               

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
 
34

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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Alder Capital Partners I. L.P.
 
Signature of Authorized Signatory of Purchaser: /s/ Michael Licosati
 
Name of Authorized Signatory: Michael Licosati
 
Title of Authorized Signatory: Managing Partner

Email Address of Authorized Signatory: mlicosati@aldercap.com
 
Facsimile Number of Authorized Signatory: 858-259-3272
 
Address for Notice of Purchaser:
Alder Capital, LLC
1223 Camino Del Mar
Del Mar, CA 92014

 
Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $750,000

Common Shares: 88,236

EIN Number: 

[SIGNATURE PAGES CONTINUE]
 
35

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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Ancora Greater China Fund LP
 
Signature of Authorized Signatory of Purchaser: /s/ John P. Micklitsch
 
Name of Authorized Signatory: John P. Micklitsch
 
Title of Authorized Signatory: Managing Partner
 
Email Address of Authorized Signatory: johnmick@ancora.ws
 
Facsimile Number of Authorized Signatory: 216-825-4001
 
Address for Notice of Purchaser:
2000 Auburn Dr.
Suite 300
Beachwood, OH 44122

 

Address for Delivery of Securities for Purchaser (if not same as address for
notice): same

Subscription Amount: $300,000

Common Shares: 35,294

EIN Number: 

[SIGNATURE PAGES CONTINUE]
 
36

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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Guerrilla Partners, LP
 
Signature of Authorized Signatory of Purchaser: /s/ Jivka Hristov
 
Name of Authorized Signatory: Jivka Hristov
 
Title of Authorized Signatory: Administrative Director
 
Email Address of Authorized Signatory: jivka@guerrillacapital.com
 
Facsimile Number of Authorized Signatory: 212-692-7624
 
Address for Notice of Purchaser:
237 Park Avenue, 9th Floor
New York, NY 10017

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $255,000

Common Shares: 30,000

EIN Number:  

[SIGNATURE PAGES CONTINUE]
 
37

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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Hua-Mei 21st Century Partners, LP
 
Signature of Authorized Signatory of Purchaser: /s/ Jivka Hristov
 
Name of Authorized Signatory: Jivka Hristov
 
Title of Authorized Signatory: Administrative Director
 
Email Address of Authorized Signatory: jivka@guerrillacapital.com
 
Facsimile Number of Authorized Signatory: 212-692-7690
 
Address for Notice of Purchaser:
237 Park Avenue, 9th Floor
New York, NY 10017

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $595,000

Common Shares: 70,000

EIN Number:  

[SIGNATURE PAGES CONTINUE]
 
38

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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Jayhawk Private Equity Fund II, LP
 
Signature of Authorized Signatory of Purchaser: /s/ Michael O. Schmitz
 
Name of Authorized Signatory: Michael O. Schmitz
 
Title of Authorized Signatory: Chief Financial Officer
 
Email Address of Authorized Signatory: mike.schmitz@jayhawkcapital.com
 
Facsimile Number of Authorized Signatory: 866-832-1238
 
Address for Notice of Purchaser:
930 Tahoe Blvd 802-281
Incline Village, NV 89451

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $600,000

Common Shares: 70,588

EIN Number:  

[SIGNATURE PAGES CONTINUE]

39

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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Fidelity Advisor Series I: Fidelity Advisor Value Strategies
Fund
 
Signature of Authorized Signatory of Purchaser: /s/ Paul Murphy
 
Name of Authorized Signatory: Paul Murphy
 
Title of Authorized Signatory: Assistant Treasurer
 
Email Address of Authorized Signatory:
_____________________________________________
 
Facsimile Number of Authorized Signatory:
__________________________________________
 
Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $1,533,315

Common Shares: 180,390

EIN Number:

[SIGNATURE PAGES CONTINUE]
 
40

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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Fidelity Securities Fund: Fidelity Dividend Growth Fund
 
Signature of Authorized Signatory of Purchaser: /s/ Paul Murphy
 
Name of Authorized Signatory: Paul Murphy
 
Title of Authorized Signatory: Assistant Treasurer
 
Email Address of Authorized Signatory:
_____________________________________________
 
Facsimile Number of Authorized Signatory:
__________________________________________
 
Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $16,102,910

Common Shares: 1,894,460

EIN Number:

[SIGNATURE PAGES CONTINUE]
 
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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Variable Insurance Products Fund III: Balanced Portfolio
 
Signature of Authorized Signatory of Purchaser: /s/ Paul Murphy
 
Name of Authorized Signatory: Paul Murphy
 
Title of Authorized Signatory: Assistant Treasurer
 
Email Address of Authorized Signatory:
_____________________________________________
 
Facsimile Number of Authorized Signatory:
__________________________________________
 
Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $2,191,725

Common Shares: 257,850

EIN Number:

[SIGNATURE PAGES CONTINUE]
 
42

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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Variable Insurance Products Fund III: Value Strategies
Portfolio
 
Signature of Authorized Signatory of Purchaser: /s/ Paul Murphy
 
Name of Authorized Signatory: Paul Murphy
 
Title of Authorized Signatory: Assistant Treasurer
 
Email Address of Authorized Signatory:
_____________________________________________
 
Facsimile Number of Authorized Signatory:
__________________________________________
 
Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $466,735

Common Shares: 54,910

EIN Number:

[SIGNATURE PAGES CONTINUE]
 
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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Fidelity Advisor Series I: Fidelity Advisor Dividend Growth
Fund
 
Signature of Authorized Signatory of Purchaser: /s/ Paul Murphy
 
Name of Authorized Signatory: Paul Murphy
 
Title of Authorized Signatory: Assistant Treasurer
 
Email Address of Authorized Signatory:
_____________________________________________
 
Facsimile Number of Authorized Signatory:
__________________________________________
 
Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $1,705,355

Common Shares: 200,630

EIN Number:

[SIGNATURE PAGES CONTINUE]

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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Straus Partners, L.P.
 
Signature of Authorized Signatory of Purchaser: /s/ Melville Straus
 
Name of Authorized Signatory: Melville Straus
 
Title of Authorized Signatory: Managing Principal
 
Email Address of Authorized Signatory: amarks@strauspartners.com
 
Facsimile Number of Authorized Signatory: 212-415-7256
 
Address for Notice of Purchaser:
Straus Asset Management
320 Park Avenue
10th Floor
New York, NY 10022-6815

 
Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $400,000

Common Shares: 47,059

EIN Number:  

[SIGNATURE PAGES CONTINUE]
 
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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Straus-GEPT Partners, L.P.
 
Signature of Authorized Signatory of Purchaser: /s/ Melville Straus
 
Name of Authorized Signatory: Melville Straus
 
Title of Authorized Signatory: Managing Principal
 
Email Address of Authorized Signatory: amarks@strauspartners.com
 
Facsimile Number of Authorized Signatory: 212-415-7256
 
Address for Notice of Purchaser:
Straus Asset Management
320 Park Avenue
10th Floor
New York, NY 10022-6815

 
Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $100,000

Common Shares: 11,765

EIN Number:  

[SIGNATURE PAGES CONTINUE]

 
 
46

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Annex A

CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $25,000,040 (the “Purchase Price”)
of Common Stock  from Gulf Resources, Inc. a Delaware corporation (the
“Company”).  Of the Purchase Price, $3,000,000 will be wired into an account
maintained by the Escrow Agent.  All such funds received in the account will be
disbursed in accordance with this Closing Statement.

Disbursement Date:
________ ___, 2009

--------------------------------------------------------------------------------

 

I.   PURCHASE PRICE
 
   
Gross Proceeds to be Received
$3,000,000
   
II.      DISBURSEMENTS
 
   
 [
$
 
 
$
   
$
   
$
   
$
   
Total Amount Disbursed:
$
           
WIRE INSTRUCTIONS:
 
 
 
To: _____________________________________
 
 
 
 
 
 
To: _____________________________________
 

 
47

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ANNEX B
CONFIDENTIAL PURCHASER QUESTIONNAIRE

GULF RESOURCES, INC.

THIS QUESTIONNAIRE MUST BE ANSWERED FULLY AND RETURNED ALONG WITH YOUR COMPLETED
SUBSCRIPTION AGREEMENT IN CONNECTION WITH YOUR PROSPECTIVE PURCHASE OF
SECURITIES FROM GULF RESOURCES, INC.  (THE “COMPANY”).

THE INFORMATION SUPPLIED IN THIS QUESTIONNAIRE WILL BE HELD IN STRICT
CONFIDENCE.  NO INFORMATION WILL BE DISCLOSED EXCEPT TO THE EXTENT THAT SUCH
DISCLOSURE IS REQUIRED BY LAW OR REGULATION, OTHERWISE DEMANDED BY PROPER LEGAL
PROCESS OR IN LITIGATION INVOLVING THE COMPANY AND ITS CONTROLLING PERSONS.

Capitalized terms used herein without definition shall have the respective
meanings given such terms as set forth in the Securities Purchase Agreement
between the Company and the Purchaser signatory thereto (the “Purchaser
Agreement”) dated as of December __, 2009.

(1)           The undersigned represents and warrants that he, she or it comes
within at least one category marked below, and that for any category marked, he,
she or it has truthfully set forth, where applicable, the factual basis or
reason the undersigned comes within that category.  The undersigned agrees to
furnish any additional information which the Company deems necessary in order to
verify the answers set forth below.

Category A  __
The undersigned is an individual (not a partnership, corporation, etc.) whose
individual net worth, or joint net worth with his or her spouse, presently
exceeds $1,000,000.

Explanation.  In calculating net worth you may include equity in personal
property and real estate, including your principal residence, cash, short-term
investments, stock and securities.  Equity in personal property and real estate
should be based on the fair market value of such property less debt secured by
such property.

Category B  __
The undersigned is an individual (not a partnership, corporation, etc.) who had
an income in excess of $200,000 in each of the two most recent years, or joint
income with his or her spouse in excess of $300,000 in each of those years (in
each case including foreign income, tax exempt income and full amount of capital
gains and losses but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable expectation of reaching
the same income level in the current year.

Category C  __
The undersigned is a director or executive officer of the Company which is
issuing and selling the Securities.

Category D  __
The undersigned is a bank, as defined in Section 3(a)(2) of the Securities Act
of 1933, as amended (the “Act”); a savings and loan associa­tion or other
institution as defined in Section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; any insurance company as defined in
Section 2(13) of the Act; any investment company registered under the Investment
Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such act, which is
either a bank, savings and loan association, insurance company, or registered
investment advisor, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors (describe entity).

 

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48

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Category E  __
The undersigned is a private business development company as defined in section
202(a) (22) of the Investment Advisors Act of 1940 (describe entity)

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Category F  __
The undersigned is either a corporation, partnership, Massachusetts business
trust, or non-profit organization within the meaning of Section 501(c)(3) of the
Internal Revenue Code, in each case not formed for the specific purpose of
acquiring the Securities and with total assets in excess of $5,000,000.
(describe entity)

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 
Category G  __
The undersigned is a trust with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Securities, where the purchase is
directed by a “sophisticated investor” as defined in
Regulation  506(b)(2)(ii) under the Act.

Category H  __
The undersigned is an entity (other than a trust) in which all of the equity
owners are “accredited investors” within one or more of the above
categories.  If relying upon this Category alone, each equity owner must
complete a separate copy of this Purchaser Questionnaire.  (describe entity)

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

The undersigned agrees that the undersigned will notify the Company at any time
on or prior to the applicable Closing (as defined in the Memorandum) in the
event that the representations and warranties in this Purchaser Questionnaire
shall cease to be true, accurate and complete.

(2)           Suitability (please answer each question)

 
(a)
For an individual, please describe your current employment, including the
company by which you are employed and its principal business:

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 
49

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(b)
For individuals, do you expect your current level of income to significantly
decrease in the foreseeable future?

 
YES
   
NO
   

 
 
 
(c)
For trust, corporate, partnership and other institutional subscribers, do you
expect your total assets to significantly decrease in the foreseeable future?

YES
   
NO
   

 
 
 
(d)
For all subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the Securities for which you seek to
purchase?

YES
   
NO
   

 
 
 
(e)
For all subscribers, do you understand that there is no guarantee of financial
return on this investment and that you run the risk of losing your entire
investment?

 
YES
   
NO
   

 
 
 
(3)           Manner in which title is to be held: (circle one)

(a)           Individual Ownership
(b)           Community Property
(c)           Joint Tenant with Right of Survivorship (both parties must sign)
(d)           Partnership
(e)           Tenants in Common
(f)            Company
(g)           Trust
(h)           Other

(4)           FINRA Affiliation.

Are you affiliated or associated with an FINRA member firm (please check one):
 
YES
   
NO
   

 
If Yes, please describe how you are affiliated/associated:

_________________________________________________________
_________________________________________________________
_________________________________________________________
 
50

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*If subscriber is a Registered Representative with an FINRA member firm, have
the following acknowledgment signed by the appropriate party:

The undersigned FINRA member firm acknowledges receipt of the notice required by
the FINRA Conduct Rules.

_________________________________
Name of FINRA Member Firm

By: ______________________________
                          Authorized Officer

Date: ____________________________

(5) For Trust Subscribers

A. Certain trusts generally may not qualify as accredited investors except under
special circumstances.  Therefore, if you intend to purchase the shares of the
Company’s stock in whole or in part through a trust, please answer each of the
following questions.

Is the trustee of the trust a national or state bank that is acting in its
fiduciary capacity in making the investment on behalf of the trust?

Yes o                                         No o

Does this investment in the Company exceed 10% of the trust assets?

Yes o                                         No o

B. If the trust is a revocable trust, please complete Question 1 below.  If the
trust is an irrevocable trust, please complete Question 2 below.

1.           REVOCABLE TRUSTS

Can the trust be amended or revoked at any time by its grantors:

Yes o                                         No o

If yes, please answer the following questions relating to each grantor (please
add sheets if necessary):

Grantor Name: _________________________

Net worth of grantor (including spouse, if applicable), including home, home
furnishings and automobiles exceeds $1,000,000?

Yes o                                         No o

OR

Income (exclusive of any income attributable to spouse) was in excess of
$200,000 for 2006 and 2007 and is reasonably expected to be in excess of
$200,000 for 2008?

Yes o                                         No o

OR
 
51

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Income (including income attributable to spouse) was in excess of $300,000 for
2006 and 2007 and is reasonably expected to be in excess of $300,000 for 2008?

Yes o                                         No o

2.             IRREVOCABLE TRUSTS

If the trust is an irrevocable trust, please answer the following questions:

Please provide the name of each trustee:

Trustee Name: ________________________________________

Trustee Name: ________________________________________

Does the trust have assets greater than $5 million?

Yes o                                         No o

Do you have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of an investment in the
Company?

Yes o                                         No o

Indicate how often you invest in:

Marketable Securities

Often o                      Occasionally
o                                Seldom o                      Never o

Restricted Securities

Often o                      Occasionally
o                                Seldom o                      Never o

Venture Capital Companies

Often o                      Occasionally
o                                Seldom o                      Never o

[Remainder of page intentionally left blank]
 
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The undersigned has been informed of the significance to the Company of the
foregoing representations and answers contained in this Confidential Purchaser
Questionnaire and such representations and answers have been provided with the
understanding that the Company and the Selling Agent will rely on them.
 

   
Individual
     
Date: ________________________
 
_______________________________
Name of Individual
(Please type or print)
 
 
_______________________________
Signature of Individual

_______________________________
Name of Joint Owner
(Please type or print)

_______________________________
Signature (Joint Owner)

Partnership, Corporation or
Other Entity
     
Date: ________________________
 
_______________________________
Print or Type Entity Name

 
By: Name:_______________________
                          Print or Type Name

 
Title: ___________________________

 
_________________________________
Signature

 
Title: ____________________________

 
_________________________________
Signature (other authorized signatory)

 
 
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Exhibit B
 
  Ladies and Gentlemen:
 
We have acted as counsel to Gulf Resources, Inc. a Delaware corporation (the
“Company”), in connection with the execution and delivery by the Company of the
Securities Purchase Agreement dated as of December__, 2009 (the “Agreement”), by
and among the Company and the purchasers identified on the signature pages
thereto (the “Purchasers”).  This opinion is given to you pursuant to Section
2.2(a)(ii) of the Agreement.  (Capitalized terms not otherwise defined herein
are defined as set forth in the Agreement.)
 
We have participated in the preparation and negotiation of the Agreement and the
Exhibits and Schedules thereto, and the other documents referred to therein.
 
In rendering the opinions expressed below, we have examined originals or copies
of: (i) the Transaction Documents, (ii) the Company’s Certificate of
Incorporation, as amended, as in effect on the date hereof (the “Certificate of
Incorporation”) as attached hereto as Exhibit “A”, (iii) Certificate of Good
Standing of the Secretary of the State of Delaware, as attached hereto as
Exhibit “B” for the Company (the “Certificate”), (iv) a certificate of an
officer of the Company attached hereto as Exhibit “C” (the “Officer’s
Certificate”), (v) resolutions (the “Resolutions”) of the Company’s Board of
Directors attached hereto as Exhibit “D”, authorizing and approving the
transactions contemplated by the Transaction Documents, and (vi) the Company’s
By-laws, as in effect on the date hereof (the “By-laws”) as attached hereto as
Exhibit “E” and such certificates of public officials, corporate documents and
records and other certificates, opinions, agreements and instruments and have
made such other investigations as we have deemed necessary in connection with
the opinions hereinafter set forth. In rendering the opinions expressed below,
we have relied, as to factual matters, upon the representations and warranties
of the Company contained in the Agreement.
 
Based on the foregoing, subject to the qualifications stated herein and upon
such investigation as we have deemed necessary, we give you our opinion as
follows:
 
1.           The Company is a corporation duly organized, validly existing and,
based solely on the Certificate, is in good standing under the laws of the State
of Delaware.  Pursuant to Delaware law and the Certificate of Incorporation and
Bylaws, the Company has the requisite corporate power and authority to carry on
its business as now conducted.
 
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2.           All action on the part of the Company, its directors and its
stockholders necessary for: (i) the authorization, execution and delivery by the
Company of the Transaction Documents, (ii) the authorization, issuance, sale and
delivery of the Shares and (iii) the consummation by the Company of the
transactions contemplated by the Transaction Documents, has been duly
taken.  The Transaction Documents have been duly and validly authorized,
executed and delivered by the Company and constitute the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with their terms, except that (a) such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors’ rights in general and (b) the remedies of specific performance and
injunctive and other forms of injunctive relief may be subject to equitable
defenses.

3.           The Shares which are being issued on the date hereof pursuant to
the Agreement have been duly authorized and validly issued and are fully paid
and nonassessable and free of preemptive or similar rights, and have been issued
in compliance with applicable securities laws, rules and regulations.
 
4.           The execution, delivery and performance by the Company of, and the
compliance by the Company with the terms of, the Transaction Documents and the
issuance, sale and delivery of the Shares pursuant to the Agreement do not
conflict with or result in a violation of (i) any provision of federal
securities to the Company or its Subsidiaries or (ii) the Certificate of
Incorporation or By-laws or other similar organizational documents of the
Company or its Subsidiaries.
 
5.           Assuming the representations made by the Purchasers in the
Transaction Documents are true and correct, the initial sale of the Securities
as contemplated by the Transaction Documents is exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended.
 
6.           The authorized capital stock of the Company consists of ______
shares of Common Stock, par value $0.0005.  The Company has advised us that, as
of the date hereof, and excluding any shares of Common Stock to be issued
pursuant to the terms of the Transaction Documents and any shares of Common
Stock to be issued upon the conversion or exercise of outstanding securities
convertible or exercisable into shares of Common Stock, there are ______, shares
of Common Stock issued and outstanding.
 
7.           There is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body or any governmental agency or
self-regulatory organization pending or threatened against or affecting the
Company, wherein an unfavorable decision, ruling or finding would have a
Material Adverse Effect or which would adversely affect the validity or
enforceability of or the authority or ability of the Company to perform its
obligations under the Transaction Documents.
 
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8.           The Company is not in violation of any terms of its Certificate of
Incorporation or Bylaws.  The Company’s execution, delivery and performance of
and compliance with the Transaction Documents and the issuance of the Shares do
not violate any provision of its Certificate of Incorporation or Bylaws or any
provision of any applicable federal or state law, rule or regulation.  The
Company’s execution, delivery and performance of and compliance with the
Transaction Documents and the issuance of the Shares have not resulted in and
will not result in any violation of, or constitute default under (or an event
which with the passage of time or the giving of notice or both would constitute
a default under), or (other than pursuant to the Transaction Documents) result
in the creation of any lien, security interest or encumbrance on the assets or
properties of the Company pursuant to any contract, agreement, instrument,
judgment or decree binding upon the Company which, individually or in the
aggregate, would have a Material Adverse Effect (as defined in the Agreement).
 
9.           The Company is not, and as a result of and immediately upon Closing
will not be, an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended.

The opinions expressed herein are subject to the following assumptions,
limitations, qualifications and exceptions:
 
A.        We have made such legal and factual examinations and inquiries as we
have deemed advisable or necessary for the purpose of rendering this opinion.
 
B.        We have examined and relied upon, copies of such corporate records of
the Company, certificates of public officials and such other documents and
questions of law that we consider necessary or advisable for the purpose of
rendering this opinion.  In such examination we have assumed the genuineness of
all signatures on original documents, the authenticity and completeness of all
documents, certificates and instruments submitted to us as originals, the
conformity to original documents of all copies submitted to us as copies
thereof, the legal capacity of natural persons, and the due execution and
delivery of all documents, certificates and instruments (except as to due
execution and delivery by the Company) where due execution and delivery are a
prerequisite to the effectiveness thereof.  As to various questions of fact
material to our opinion, we have relied without independent investigation on,
and assumed the accuracy and completeness of, the Officer’s Certificate, all
certificates and written statements of the Company and the officers of the
Company including those in the Agreement.  We have not made any investigation as
to the facts underlying the matters covered by the Officer’s Certificate or
statements of the Company or the officers of the Company.

C.         As used in this opinion, the phrase “to our knowledge” and the like
mean to the current actual knowledge of the attorneys in this firm who have
devoted substantive attention to this transaction, without any independent
investigation.  We have not made any investigation of other attorneys of this
firm, or as to the facts underlying the matters covered by the certificates or
statements of the Company or officers, directors or stockholders of the
Company.  We have not independently verified and express no opinion herein with
regard to compliance by the Company with any representations, warranties or
covenants in the Agreement or documents or instruments executed and delivered in
connection therewith.
 
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D.         For purposes of this opinion, we have assumed that you have all
requisite power and authority, and have taken any and all necessary corporate
action, to execute and deliver the Agreement and the other Transaction Documents
and we are assuming the representations and warranties made by the Purchasers in
the Agreement and pursuant thereto are true and correct.
 
E.          Our opinion is based upon our knowledge of the facts as of the date
hereof and assumes no event will take place in the future which would affect the
opinions set forth herein other than future events contemplated by the Agreement
and the other Transaction Documents.  We assume no duty to communicate with you
with respect to any change in law or facts which comes to our attention
hereafter.  We have assumed that there are no oral modifications or written
agreements or understandings which limit, modify or otherwise alter the terms,
provisions, and conditions of, or relate to, the transactions contemplated in
the Agreement and the other Transaction Documents.
 
F.          In rendering the opinion in paragraph 1 with respect to legal
existence and good standing of the Company, we have relied solely upon the
certificate of the Secretary of the State of Delaware.
 
G.          In addition to the exceptions and limitations above, we advise you
that certain provisions of the Securities Purchase Agreement and the other
Transaction Documents may be further limited or rendered unenforceable by the
effect of laws, rules, regulations, court decisions and constitutional
requirements in and of the States of New York, Delaware or the United States
that:

(i)           limit or affect the enforcement of provisions of a contract that
purport to waive, or require waiver of, the obligations of good faith, fair
dealing, diligence and reasonableness;

(ii)           provide that forum selection clauses in contracts are not
necessarily binding on the court(s) in the forum selected;

(iii)           limit the availability of a remedy under certain circumstances;
 
(iv)           provide a time limitation after which a remedy may not be
enforced;

(v)           limit the enforceability of provisions releasing, exculpating or
exempting a party from, or requiring indemnification of a party for, liability
for its own action or inaction, to the extent the action or inaction involves
negligence, recklessness, willful misconduct, unlawful conduct, violation of
public policy or litigation against another party determined adversely to such
party;
 
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(vi)           may, where less than all of a contract may be unenforceable,
limit the enforceability of the balance of the contract to circumstances in
which the unenforceable portion is not an essential part of the agreed exchange;
or

(vii)           govern and afford judicial discretion regarding the
determination of damages and entitlement to attorney’s fees and other costs;

H.           We have made such examination of New York, Delaware and federal law
as we have deemed relevant for purposes of this opinion.  We do not purport to
be experts in the laws of any state other than New York and, accordingly, we
express no opinion herein as to the laws of any state or jurisdiction other that
the State of New York, the State of Delaware and the United States of America. 
We express no opinion as to laws, rules, and regulation of the British Virgin
Islands, People’s Republic of China and Hong Kong Special Administrative Region.
We express no opinion as to any county, municipal, city, town or village
ordinance, rule, regulation or administrative decision.

Our opinions set forth above are also subject to the following qualifications:

 (a)           We express no opinion as to the enforceability of (i) the choice
of New York law under the Agreement and the other Transaction Documents in an
action or proceeding in a Federal court or state court outside of the State of
New York and (ii) any consent to subject matter jurisdiction of any Federal
court.

(b)           We express no opinion as to the effect of the law of the State of
New York or any other jurisdiction wherein Purchaser may be located or wherein
enforcement of the Agreement or
the other Transaction Documents may be sought which limits the rates of interest
legally chargeable or collectible.

(c)           We express no opinion as to the requirements of, effects of, or
any entity’s compliance with laws or regulations related to (i) any state or
federal laws or regulations applicable to Investor in connection with the
transactions described in the Agreement or the Transaction Documents, (ii)
environmental or hazardous substance laws, rules or regulations, (iii) land use
or zoning laws, ordinances, regulations or restrictions, (iv) antitrust and
unfair competition laws, (v) fiduciary duty laws, (vi) pension and employee
benefit laws, (vii) labor laws, (viii) building codes, (ix) landlord/tenant
laws, (x) the Americans With Disabilities Act, (xi) State “Blue Sky” Laws or
(xii) any tax laws or related regulations.

(d)           We express no opinion concerning the enforceability of provisions
of any agreement purporting to indemnify any person for violations of applicable
securities law.
 
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This opinion is furnished to the Purchasers solely for its benefit in connection
with the transactions described above and may not be relied upon by any other
person or for any other purpose without our prior written consent.

 
Very truly yours,
 
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EXHIBIT A

Certificate of Incorporation
 
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EXHIBIT B

GOOD STANDING CERTIFICATE
 
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EXHIBIT C

GULF RESOURCES, INC.

OFFICER’S CERTIFICATE
 
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EXHIBIT D

Board Resolutions Authorizing Transaction
 
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EXHIBIT E

By-laws
 
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Exhibit C

December __, 2009
 
To the Addressees set out in Schedule 1
(the “Investors”)
 

Dear Sir/Madam:

We are a firm of lawyers qualified to practice and practicing in the People’s
Republic of China (the “PRC”) and we have acted as PRC Legal counsel to Gulf
Resources, Inc. (the “Company”), whose PRC subsidiaries include Shouguang City
Haoyuan Chemical Company Limited (“SCHC”), a domestic company established on
[  ], and Shouguang Yuxin Chemical Industry Co., Limited, a wholly-owned
subsidiary of SCHC and a domestic company established on [  ] (“SYCI”, and with
SCHC, collectively the “PRC Companies”).  We have been requested by the Company
to render this opinion in connection with: (1) the legal ownership structure of
the PRC Companies; and (2) the legality and validity of the transaction
structure post the closing of the Transaction under the PRC laws.
 [  ].

For the purpose of giving this opinion, we have examined the following documents
(collectively the “Documents”);

(a) A copy of the charter documents of the PRC Companies, including each of the
most current Business Licenses, Certificates of Approval, Taxation Registration
Certificates and Articles of Association;

(b) A copy of the executed Board Resolutions and General Meeting Resolutions of
the PRC Companies authorizing their respective ownership structure; and

(c) The public records of the PRC Companies on file and available for inspection
at the Companies Registry of the PRC maintained by the State Administration for
Industry and Commerce and such other relevant government bodies as of the
issuance date of this opinion.
 
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We have reviewed such other documents and made such enquiries as to questions of
law as we have deemed necessary in order to render the opinions set forth below.

A company search conducted in the Companies Registry and other governmental
bodies of the PRC is limited in respect to the information it
produces.  Further, a company search does not determine conclusively whether or
not an order has been made or a resolution has been passed for the winding up of
a company or for the appointment of a liquidator or other person to control the
assets of a company, as notice of such matters might not be filed immediately
and, once filed, might not appear immediately on a company’s public
file.  Moreover, a company search carried out in the PRC is unlikely to reveal
any information as to any such procedure initiated by a company in any other
jurisdiction.

For the purpose of this opinion, we have assumed:

(a) the genuineness of all signatures and seals, the conformity to originals of
all Documents purporting to be copies of originals and the authenticity of the
originals of such Documents;

(b) all the obligations under the Documents of each party thereto (other than
the PRC companies) are legal, valid and binding on that party in accordance with
the terms;

(c) the due compliance with all matters (including, without limitation, the
obtaining of necessary consents, licenses and approvals, and the making of
necessary filings and registrations) required under any laws other than the laws
of the PRC and compliance with the provisions of such laws (other than the laws
of the PRC) as are applicable to the Documents and the parties thereto and the
legality, validity and enforceability of the Documents under such laws (other
than the laws of the PRC);

(d) that such Documents containing resolutions of directors and members
shareholders respectively, or extracts of minutes of meetings of the directors
and meetings of the members/shareholders, respectively, accurately and genuinely
represent proceedings of meetings of the directors and/or the
members/shareholders, respectively, of which adequate notice was either given or
waived, and any necessary quorum present throughout;
 
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(e) the accuracy and completeness of all factual representations (if any) made
in the Documents;

(f) that insofar as any obligation under the Documents is to be performed in any
jurisdiction outside the PRC, its performance will not be illegal or
unenforceable by virtue of the law of that jurisdiction;

(g) that the information disclosed by the company searches referred to above is
accurate and complete as at the time of this opinion and conforms to records
maintained by the company and that, in the case of each company search, such
search did not fail to disclose any information which had been filed with or
delivered to the Companies Registry of the PRC but had not been processed at the
time when the search was conducted; and

(h) that there has been no change in the information contained in the latest
annual tax return of the PRC Companies as of the issuance date of this opinion.

We have made no investigation on and expressed no opinion in relation to the
laws of any country or territory other than the PRC.  This opinion is limited to
and is given on the basis of the current law and practice in the PRC and is to
be construed in accordance with, and is governed by, the laws of the PRC.

Based upon and subject to the foregoing and further subject to the
qualifications set forth below, we are of the opinion that as at the date
hereof:

(i) SCHC has been duly organized and is validly existing as a company under the
laws of the PRC and its business license is in full force and effect with the
following approvals and certificates:
A.          Certificate of Approval,
B.           Business License,
 
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C.           Tax Registration Certificate, and
D.           Organization Code Certificate,

100% of the equity interests of SCHC are owned by the Company through its direct
wholly-owned subsidiary Upper Class Group Limited, a company incorporated under
the laws of British Virgin Islands and indirect wholly-owned subsidiary Hong
Kong Jiaxing, a company incorporated under the laws of Hong Kong, and such
equity interests are free and clear of all liens, encumbrances, equities or
claims; the articles of association the business license and other constituent
documents of SCHC comply with the requirements of applicable laws of the PRC and
are in full force and effect; SCHC has full power and authority (corporate and
other) and all consents, approvals, authorizations, orders, registrations,
clearances and qualifications of or with any governmental agency having
jurisdiction over it or any of its properties required for the ownership or
lease of property by it and the conduct of its business in accordance with its
registered business scope and has the legal right and authority to own, use,
lease and operate its assets and to conduct its business in the manner presently
conducted and as described in [  ];  the current total investment and registered
capital of SCHC is [ ].

(ii) SYCI has been duly organized and is a natural person invested or [holding
limited liability company] established on [ ] under the laws of the PRC and its
business license is in full force and effect; [100]% of the equity interests of
SYCI are controlled by the Company through SCHC  and to the best of such
counsel’s knowledge after due inquiry, such equity interests are free and clear
of all liens, encumbrances equities or claims; the articles of association, the
business license and other constituent documents of SCYI comply with the
requirements of applicable laws of the PRC and are in full force and effect;
SCYI has full power and authority (corporate and other) and all consents,
approvals, authorizations, orders, registrations, clearances and qualifications
of or with any governmental agency having jurisdiction over SCYI or any of its
properties required for the ownership or lease of property by us and the conduct
of its business and has the legal right and authority to own, use, lease and
operate its assets and to conduct its business in the manner presently conducted
and as described in the business license; the registered capital is [  ].
 
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(iii) The PRC Companies above have obtained all approvals, authorizations,
consents and orders and have made all filings and registrations, which are
required under PRC laws and regulations for the ownership interest by the
Company in the respective PRC Companies; and there are no outstanding risks,
warrants, or options to acquire, or instruments convertible into or exchangeable
for, nor any agreement or other obligations to issue or other rights to convert
any obligation into, any equity interest in one of the PRC Companies.

(iv) Each of the PRC Companies had legal and valid title to all of its
properties and assets, free and clear of all liens, charges, encumbrances,
equities, claims, defects, options and restrictions; each lease agreement to
which it is a party is duly executed and legally binding; its lease/hold
interests are fully protected by the terms of the lease agreements, which are
valid, binding and enforceable in accordance with their respective terms under
PRC law; and, to the best of such counsel’s knowledge after due inquiry, none of
the Company and the PRC Companies owns, operates, manages or has any other right
or interest in any other material real property of any kind, except as described
in the Transaction Documents;

(v) The corporate structure of the Company (including the shareholdings and
shareholding structure of each of the PRC Companies) is in compliance with PRC
law and legal, valid and enforceable under the current PRC legal regime. None of
the PRC Companies have been challenged by any PRC governmental agency, and there
are no legal, arbitration, governmental or other proceedings (including, without
limitation, governmental investigation or inquiries) pending, before or
threatened or contemplated by any PRC governmental agency in respect of such
corporate structure of the Company, and nothing has come to such counsel’s
attention after due inquiry that causes such counsel to believe that after the
consummation of the Transaction, the corporate structure of the Company
(including the shareholdings and shareholding structure of each of the PRC
Companies) would be challenged by any PRC governmental agency and the
descriptions thereof in the Transaction Documents are accurate, complete and
fair;
 
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(vi) Each of the PRC Companies has all necessary licenses, consents,
authorizations, approvals, orders, certificates and permits of and from, and has
made all declarations and filings with, all governmental agencies to own, lease,
license and use its properties, assets and conduct its business in the manner
described in the Transaction Documents and such licenses, consents,
authorizations, approvals, order, certificates or permits contain no materially
burdensome restrictions or conditions not described in the Transaction
Documents; except as described in the Transaction Documents, none of the PRC
Companies has any reason to believe that any regulatory body is considering
modifying, suspending or revoking any such licenses, consents, authorizations,
approvals, orders, certificates or permits, and each of the PRC Companies is in
compliance with the provisions of all such licenses, consents, authorizations,
approvals, orders, certifications or permits in all material respects;

(vii) Neither the Company nor any of the PRC companies is (A) in breach of or in
default under any laws, regulations, rules, orders, decrees, guidelines or
notices of the PRC, (B) in breach of or in default under any approval, consent,
waiver, authorization, exemption, permission, endorsement or license granted by
any governmental agency in the PRC, (C) in violation of their respective
constituent documents, business licenses or permits, or (D) in default in the
performance or observance of any material obligation, agreement,  covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which it is a party of by which it or
any its properties may be bound.

(viii) Each of the PRC Companies has a valid right to use any intellectual
property that is currently used or as currently contemplated to be used;

(ix) None of the PRC Companies is infringing, misappropriating or violating any
intellectual property right of any third party in the PRC, and no Intellectual
Property is subject to any outstanding decree, order, injunction, judgment or
ruling restricting the use of such  Intellectual Property in the PRC that would
impair the validity or enforceability of such Intellectual Property;

(x) No security interests or other liens have been created with respect to any
of the Intellectual Property;
 
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(xi) There are no legal, arbitration or governmental proceedings or regulatory
or administrative inquiries or investigations pending to which to which the
Company or any of the PRC Companies is a party or of which any property of the
Company or any of the PRC Companies is the subject which, if determined
adversely to the Company or any of the PRC Companies would individually or in
the aggregate have a material adverse effect on the current or future
consolidated financial position, shareholders’ equity, earnings, results of
operation or prospects of the Company or any of the PRC Companies or which would
reasonably be expected to materially and adversely affect the properties or
assets thereof or the consummation of the Transaction or the performance by the
Company of its obligations there under; and, to the best of such counsel’s
knowledge after due inquiry, no such proceedings, inquiries or investigations
are threatened or contemplated by any governmental agency or threatened by
others;

(xii) None of the PRC Companies is in violation of its articles of association,
business license or any other constituent documents or in default in the
performance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it or any of
its properties may be bound

(xiii) None of the PRC Companies has taken any action nor have any steps been
taken or legal or administrative proceedings been commenced or threatened for
the winding up, dissolution or liquidation or for the suspension, withdrawal,
revocation or cancellation of any of their respective business license or
articles of association as applicable;

(xiv) No pending or threatened labor problem or dispute with the employees of
any of the PRC Companies exist;

(xv) All returns, reports or filing which ought to have been made by or in
respect of each of the PRC Companies for taxation purposes as required by the
law of the PRC have been made and all such returns are correct and on a proper
basis in all material respects and are not the subject of any dispute with the
relevant tax, revenue or other appropriate authorities; all taxes and other
assessments of a similar nature (whether imposed directly or through
withholding) including any interest, additions to tax or penalties applicable
thereto due to claimed to be due from such authorities have been paid in full;
and none of the PRC Companies has received notice of any tax deficiency;
 
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(xvi) Upon the issuance of this opinion, the PRC Companies did not have any
pending or threatened litigation, asserted claims and assessments, and have no
litigation to the best of such counsel’s knowledge up to date of issuance of
this opinion;

(xvii) The incorporation of Upper Class Group Limited, a company incorporated
under the laws of British Virgin Islands (“UCGL”), and Hong Kong Jiaxing, a Hong
Kong corporation, is subject to Notice 75 and Circular 106.  On October 21,
2005, the State Administration of Foreign Exchange (“SAFE”) issued the Notice of
State Administration of Foreign Exchange of Relevant Issues Concerning Foreign
Exchange Administration for Domestic Residents to Engage in Financing and
Inbound Investment via Overseas Special Purpose Companies (Notice 75), which
became effective as of November 1, 2005.  Notice 75 requires the owners of any
Chinese companies to obtain SAFE’s approval before establishing any offshore
holding company structure for foreign financing as well as subsequent
acquisition matters in China.  On May 31, 2007, SAFE issued an official notice
known as “Circular 106”, to implement Notice 75.  All the shareholders of UCGL
and Hong Kong Jiaxing who were PRC residents at the time of UCGL and Hong Kong
Jiaxing’s incorporation have respectively completed the registration and
modification of foreign exchange for overseas investment with [   ] Branch of
SAFE for their holding shares directly or indirectly in UCGL according to the
provisions of Notice 75 and Circular 106.

(xviii)  The transfer of all of the shares held by UCGL to Hong Kong Jiaxing on
[date] is in compliance with the PRC Laws, and legal, valid and enforceable
under current PRC legal regime.   UCGL and each of the shareholders of UCGL had
the full power and capacity to enter into and perform its obligations under the
terms of the transfer and has taken all necessary action to authorize the
execution, delivery and performance of all documents necessary to consummate the
transfer.
 
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(xviii) The legal ownership structure of the Company within the territory of the
PRC among the PRC Companies is in compliance with the PRC Laws, and legal, valid
and enforceable under current PRC legal regime.  Such legal ownership structure
is not subject to the Provisions on Merger and Acquisition of Domestic
Enterprises by Foreign Investors effective from September 8th, 2006 (the “M&A
Rules”), since [  ].

(xix) As a matter of PRC law, no holder of the Shares will be subject to any
personal liability, or be subject to a requirement to be licensed or otherwise
qualified to do business to be deemed domiciled or resident in the PRC, by
virtue only of holding the Shares.  There are no limitations under PRC law on
the rights of holders of the Shares to hold, vote, or transfer their securities
nor any statutory pre-emptive rights or transfer restrictions applicable to the
Shares;

This opinion expressed above is based on our interpretation of applicable PRC
laws and regulations which in our experience are applicable.  We note, however,
that the laws and the regulations in China have been subject to substantial and
frequent revision in recent years.  We cannot assure that any future
interpretations of PRC laws and regulations by relevant authorities,
administrative pronouncements or court decisions or future positions taken by
these authorities would not adversely impact or affect the opinions set forth in
this letter.

Our above opinion is also subject to the qualification that it is confined to
and given on the basis of the published and publicly available laws and
regulations of the PRC (excluding the laws of Hong Kong for the purpose of this
opinion) effective as of the date hereof.

This opinion has been prepared solely for your use of reference and may not be
quoted in whole or in part or otherwise referred to in any documents or
disclosed to any third Party, or filed with or furnished to any governmental
agency, or other party without the express prior written consent of this firm

Yours Sincerely,
 
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Exhibit D
 
Re: HONG KONG JIAXING ("the Company")
 
We are a firm of lawyers qualified to practise and practising in the Hong Kong
SAR, Peoples Republic of China and have been engaged by the Company (through its
PRC lawyers, [ ]) to give an opinion on the Company in relation to the legal
status of the Company.
 
For the purpose of giving this opinion, we have examined the following documents
("the Documents"): -
 
 
(a)
Copy Certificate of Incorporation of the Company dated [ ] obtained from the
Companies Registry in Hong Kong SAR on [ ], 2009;

 
 
(b)
A copy of the Company's latest Business Registration Certificate provided from [
]  valid for the period from [ ] to [ ];

 
 
(c)
A copy of the Company's Memorandum & Articles of Association obtained from the
Companies Registry in Hong Kong SAR on [ ], 2009;

 
 
(d)
The public search records of the Company available for inspection and obtained
from the Companies Registry of the Hong Kong SAR on [ ], 2009;

 
 
(e)
The result of an online litigation search of past or present action in all
courts and tribunals in Hong Kong SAR relating to the Company conducted on [ ];
and

 
 
(f)
The result of an online Compulsory Wind-up search at the Official Receiver's
Office, Hong Kong on [ ].

 
We have reviewed a copy of the Memorandum and Articles of Association of the
Company, and such other documents and made such enquiries as to questions of law
as we have deemed necessary in order to render the opinion set forth below.
 
A company search conducted in the Companies Registry of Hong Kong SAR is limited
in respect to the information it produces. Further, a company search does not
determine conclusively whether or not an order has been made or a resolution has
been passed for the winding up of a company or for the appointment of a
liquidator or other person to control the assets of a company, as notice of such
matters might not be filed immediately and, once filed, might not appear
immediately on a company's public file. Moreover, a company search carried out
in Hong Kong is unlikely to reveal any information as to any such procedure
initiated by the Company in any other jurisdiction.
 
For the purpose of this opinion we have assumed: -
 
 
(a)
the genuineness of all signatures and seals, the conformity to originals of all
documents supplied to us purporting to be copies of originals and the
authenticity of the originals of such documents;

 
 
(b)
the absence of any other or collateral arrangements which modify or supersede
the effect of the Documents;

 
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(c)
the due compliance with all matters (Including, without limitation, the
obtaining of necessary consents, licences and approvals, and the making of
necessary fillings and registrations) required under any laws other than the
laws of Hong Kong SAR and compliance with the provisions of such laws as are
applicable to the Documents;

 
 
(d)
that such of the Documents as contain resolutions of directors and members,
respectively, or extracts of minutes of meetings of the directors accurately and
genuinely represent proceedings of meetings of the directors, of which adequate
notice was either given or waived, and any necessary quorum present throughout;

 
 
(e)
the accuracy and completeness of all factual representations (if any) made in
the Documents;

 
 
(f)
the outcome of the online litigation search accurately reflects the status of
the Company as it stands in the Cause Books of all courts and tribunal in Hong
Kong SAR;

 
 
(g)
the outcome of the online Compulsory Winding-up search reflects the status of
the Company on it stands in the records of the Official Receiver's Office, Hong
Kong;

 
 
(h)
that the information disclosed by the company searches referred to above is
accurate and complete as at the time of this opinion and conforms to records
maintained by the Company and that, in the case of the company search, the
search did not fail to disclose any information which had been filed with or
delivered to the Companies Registry but had not been processed at the time when
the search was conducted; and

 
 
(i)
that there has been no change in the information contained in the latest Annual
Return of the Company made up to [ ] and filed in the Companies Registry on [ ].

 
We have made no investigation on and expressed no opinion in relation to the
laws of any country or territory other than Hong Kong SAR. This opinion is
limited to and is given on the basis of the current law and practice in the Hong
Kong SAR and is to be construed in accordance with, and is governed by, the laws
of Hong Kong SAR.
 
Based upon and subject to the foregoing and further subject to the
qualifications set forth below, we are of the opinion that as at the date
hereof: -
 
Status
 
1.
The Company is duly incorporated and validly existing in good standing under the
Laws of the Hong Kong Special Administrative Region, Peoples' Republic of China.

 
The Company's Memorandum and Articles of Association allow the Company to issue
a maximum of [ ] shares with a nominal value of HK[ ] each. As at the date of
the latest Companies Registry search, it reveals that all [ ] shares (paid-up)
have been issued to date and they are all registered under the ownership of
Upper Class Group Limited, a company organized under the laws of the British
Virgin Islands. The Company's [ ] Director(s) is/are [ ] and its Corporate
Secretary has, with effect from [ ], been changed to [ ]. The address of the
Company's registered office is [ ].
 
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Powers & Authorities
 
2.
The [ ] issued shares of the Company with a total nominal value of HK$[ ] issued
to Upper Class Group Limited have been fully-paid-up. The absence of any shares
mortgage, charge or other document of a charging nature registered in the
Companies Registry at the time of our Companies Registry search appears to point
to the deduction that the said shares are held free from liens, charges and
pre-emptive rights.

 
3.
The Company has been registered for business in Hong Kong and carries a current
renewed Business Registration Certificate valid between [ ] and [ ] legitimizing
its conducting of business in the Hong Kong SAR during the period in question.

 
4.
The Company has the requisite corporate power and authority to own, lease and
operate its properties and assets and to conduct its business in Hong Kong in
accordance with its Memorandum and Articles of Association.

 
Search Results
 
5. 
No court proceedings pending against the Company (whether with the Company
asPlaintiff or Defendant) are indicated by our searches of the Hong Kong
Courtsreferred to in this opinion.

 
6. 
On the basis of our searches of the Hong Kong SAR Companies Registry and theHong
Kong SAR courts referred to in this opinion, respectively, no currently
validorder or resolution for winding up or dissolution of the Company and no
currentnotice of appointment of a receiver, liquidator or similar officer over
the Company or any of its assets appears on the records maintained in respect of
the Company at the Companies Registry.

 
The opinion expressed herein is subject to the following qualifications: -
 
We express no opinion as to the accuracy and completeness of any warranties or
representations made in the Documents other than those specifically addressed in
this opinion.
 
In this opinion: -
 
 
(a)
"Law" includes any law, statute, regulation, instrument or other subordinate
legislation or other legislative or quasi-legislative rule or measure or any
order or decree of any governmental, judicial or public or other body or
authority.

 
 
(b)
"Person" means any individual, partnership, joint venture, company, trust,
association (incorporated or not) or any governmental, judicial public or other
body or authority.

 
 
(c)
"Registrar of Companies" means the Registrar of Companies of Hong Kong SAR.

 
 
(d)
"Companies Registry" means the Companies Registry of the Hong Kong SAR.

 
 
(e)
Where the context so admits words importing the singular include the plural and
those in the masculine gender include the feminine and neuter gender and vice
versa in each case.

 
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This opinion (which is strictly limited to the matters stated herein and is not
to be read as extending by implication to any other matters not specifically
referred to herein) may be replied upon only by the addressees herein and may
not be relied upon by any other Persons or for any other purpose, nor may it be
quoted or referred to in any public documents, nor may it or copies of it be
shown to or filed with any governmental agency or any other person without our
express written consent. In addition, this opinion is limited strictly to
matters stated herein and is not to be read as extending by implication to any
other matter not specifically referred to herein.
 
 
Yours faithfully,
 
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Exhibit E
 
To the Addressees set out in Schedule 1
(the “Investors”)
 
 
[           ] December 2009
 
Dear Sir,
 
Upper Class Group Limited (the "Company")
 
We have acted as counsel as to British Virgin Islands law to the Company in
connection with our opinions stated herein.
 
1
DOCUMENTS REVIEWED

 
We have reviewed originals, copies, drafts or conformed copies of the following
documents:
 
1.1
the public records of the Company on file and available for public inspection at
the Registry of Corporate Affairs in the British Virgin Islands (the "Registry
of Corporate Affairs") on [   ] including:

 
 
1.1.1
the Company's Certificate of Incorporation;

 
 
1.1.2
the Company's Memorandum and Articles of Association (the "Memorandum and
Articles of Association ");

 
 
1.1.3
the records of proceedings on file with and available for inspection on [   ] at
the British Virgin Islands High Court Registry (the "High Court Registry");

 
1.2
A registered agent's certificate dated [   ], issued by [        ], the
Company's registered agent, (a copy of which is attached as Annexure A) (the
"Registered Agent's Certificate"); and

 
2
ASSUMPTIONS

 
In giving this opinion we have assumed (without further verification) the
completeness and accuracy of the Director's Certificate and the Registered
Agent's Certificate.  We have also relied upon the following assumptions, which
we have not independently verified:
 
2.1
copy documents, conformed copies or drafts of documents provided to us are true
and complete copies of, or in the final forms of, the originals;

 
2.2
all signatures, initials and seals are genuine;

 
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2.3
the accuracy and completeness of all factual representations expressed or
implied by the documents we have examined;

 
2.4
that all public records of the Company which we have examined are accurate and
that the information disclosed by the searches which we conducted against the
Company at the Registry of Corporate Affairs and the High Court Registry is true
and complete and that such information has not since then been altered and that
such searches did not fail to disclose any information which had been delivered
for registration but did not appear on the public records at the date of our
searches;

 
2.5
there is nothing under any law (other than the law of the British Virgin
Islands) which would or might affect the opinions hereinafter
appearing.  Specifically, we have made no independent investigation of the laws
of New York; and

 
2.6
the Company is not a sovereign entity of any state and is not a subsidiary,
direct or indirect, of any sovereign entity or state.

 
3
OPINIONS

 
Based upon, and subject to, the foregoing assumptions and the qualifications set
out below, and having regard to such legal considerations as we deem relevant,
we are of the opinion that:
 
3.1
The Company is a limited liability company duly incorporated under the British
Virgin Islands BVI Business Companies Act, 2004 (as amended) (the "Act"), in
good standing at the Registry of Corporate Affairs and validly existing under
the laws of the British Virgin Islands, and possesses the capacity to sue and be
sued in its own name.

 
3.2
The Company has full power and authority under its Memorandum and Articles of
Association to enter into, execute and perform its obligations under existing
agreements, own, lease and operate its properties and assets, and conduct its
business in the British Virgin Islands.

 
3.3
The Company's Memorandum and Articles of Association allow the Company to issue
a maximum of [ ] shares with a nominal value of [ ] each. As at the date of the
latest Companies Registry search, all [ ] shares (paid-up) have been issued to
date. The Company's [ ] Director(s) is/are [ ] and its Corporate Secretary has,
with effect from [ ], been changed to [ ].

 
3.4
Based solely upon our review of the Registered Agent's Certificate, the current
shareholders of the Company are as follows:

 
Shareholder Name
   
Number of shares

 
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3.5
Based solely on our inspection of the High Court Registry from the date of
incorporation of the Company there were no actions or petitions pending against
the Company in the High Court of the British Virgin Islands as at close of
business in the British Virgin Islands on [   ].

 
3.6
On the basis of our searches conducted at the Registry of Corporate Affairs and
at the High Court Registry on [   ], no currently valid order or resolution for
the winding-up of the Company and no current notice of appointment of a receiver
over the Company, or any of its assets, appears on the records maintained in
respect of the Company.

 
3.7
Our search at the Registry of Corporate Affairs on [   ] did not reveal the
existence of a Register of Mortgages, Charges and Other Encumbrances.

 
3.8
Service of process in the British Virgin Islands on the Company may be effected
by leaving at the registered office of the Company the relevant document to be
served.  The registered office of the Company is [      ].

 
3.9
The Company is subject to the jurisdiction of the courts of the British Virgin
Islands and is not entitled to claim any immunity from suit or execution of any
judgment on the grounds of sovereignty or otherwise.

 
4
QUALIFICATIONS

 
The opinions expressed above are subject to the following qualifications:
 
4.1
To maintain the Company in good standing under the laws of the British Virgin
Islands, annual filing fees must be paid to the Registry of Corporate Affairs.

 
4.2
This opinion is given only as to, and based on, circumstances and matters of
fact existing and known to us on the date of this opinion.  This opinion only
relates to the laws of the British Virgin Islands that are in force on the date
of this opinion.

 
This opinion may be relied upon by the addressees only.  It may not be relied
upon by any other person except with our prior written consent.
 

Yours faithfully,
 
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Schedule 1
 
 
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