Unassociated Document


     

    
      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.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “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.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       “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).

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “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.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      “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).

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “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.

              


      

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (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;

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (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

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      (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:

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      
 

      (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.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      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

          
            

          

        

        
          
          

        

      

       

      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

          
            

          

        

        
          
          

        

      

       

      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

          
            

          

        

        
          
          

        

      

      
         

        
          
            
              
                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

                    
                      

                    

                  

                  
                    
                    

                  

                

                


                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

                    
                      

                    

                  

                  
                    
                    

                  

                

                


                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

                    
                      

                    

                  

                  
                    
                    

                  

                

                


                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

                    
                      

                    

                  

                  
                    
                    

                  

                

                


                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

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                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

                    
                      

                    

                  

                  
                    
                    

                  

                

                


                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]

                 

                
                  
                    
                    

                  

                  
                    41

                    
                      

                    

                  

                  
                    
                    

                  

                

                


                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

                    
                      

                    

                  

                  
                    
                    

                  

                

                


                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]

                 

                
                  
                    
                    

                  

                  
                    43

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                
                  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]

                  


                  
                    
                      
                      

                    

                    
                      44

                      
                        

                      

                    

                    
                      
                      

                    

                  

                

                 

                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]

                 

                
                  
                    
                    

                  

                  
                    45

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                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

          
            

          

        

        
          
          

        

      

       

      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

          
            

          

        

        
          
          

        

      

       

      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).

              


      

       

      
        

        

      

       

      
        
          
          

        

        
          48

          
            

          

        

        
          
          

        

      

       

      
        	
                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

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                (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

          
            

          

        

        
          
          

        

      

       

      *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

          
            

          

        

        
          
          

        

      

       

      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]

       

      
        
          
          

        

        
          52

          
            

          

        

        
          
          

        

      

       

      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)

              


      

       

       

      
        
          
          

        

        
          53

          
            

          

        

        
          
          

        

      

      
        
          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.

           

          
            
              
              

            

            
              -1-

              
                

              

            

            
              
              

            

          

           

          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.

           

          
            
              
              

            

            
              -2-

              
                

              

            

            
              
              

            

          

           

          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.

           

          
            
              
              

            

            
              -3-

              
                

              

            

            
              
              

            

          

           

          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;

           

          
            
              
              

            

            
              -4-

              
                

              

            

            
              
              

            

          

          
 

          (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.

           

          
            
              
              

            

            
              -5-

              
                

              

            

            
              
              

            

          

           

          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,

           

          
            
              
              

            

            
              -6-

              
                

              

            

            
              
              

            

          

           

          EXHIBIT
A

          


          Certificate of
Incorporation

           

          
            
              
              

            

            
              -7-

              
                

              

            

            
              
              

            

          

           

          EXHIBIT
B

          


          GOOD STANDING
CERTIFICATE

           

          
            
              
              

            

            
              -8-

              
                

              

            

            
              
              

            

          

           

          EXHIBIT
C

          


          GULF
RESOURCES, INC.

          


          OFFICER’S
CERTIFICATE

           

          
            
              
              

            

            
              -9-

              
                

              

            

            
              
              

            

          

           

          EXHIBIT
D

          


          Board Resolutions
Authorizing Transaction

           

          
            
              
              

            

            
              -10-

              
                

              

            

            
              
              

            

          

           

          EXHIBIT
E

          


          By-laws

           

          
            
              
              

            

            
              -11-

              
                

              

            

            
              
              

            

          

           

        

        
          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.

           

          
            
              
              

            

            
              -1-

              
                

              

            

            
              
              

            

          

           

          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;

           

          
            
              
              

            

            
              -2-

              
                

              

            

            
              
              

            

          

           

          (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,

           

          
            
              
              

            

            
              -3-

              
                

              

            

            
              
              

            

          

           

          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
[  ].

           

          
            
              
              

            

            
              -4-

              
                

              

            

            
              
              

            

          

          
 

          (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;

           

          
            
              
              

            

            
              -5-

              
                

              

            

            
              
              

            

          

          
 

          (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;

           

          
            
              
              

            

            
              -6-

              
                

              

            

            
              
              

            

          

          
 

          (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;

           

          
            
              
              

            

            
              -7-

              
                

              

            

            
              
              

            

          

          
 

          (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.

           

          
            
              
              

            

            
              -8-

              
                

              

            

            
              
              

            

          

          
 

          (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,

          
             

            
              
                
                

              

              
                -9-

                
                  

                

              

              
                
                

              

            

             

            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;

                    


            

             

            
              
                
                

              

              
                -1-

                
                  

                

              

              
                
                

              

            

             

            
              	
                       
      

                    	
                      (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 [ ].

             

            
              
                
                

              

              
                -2-

                
                  

                

              

              
                
                

              

            

             

            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.

                    


            

             

            
              
                
                

              

              
                -3-

                
                  

                

              

              
                
                

              

            

             

            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,

             

            
              
                
                

              

              
                -4-

                
                  

                

              

              
                
                

              

            

             

            
              
                
                  
                    
                      
                        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;

                                


                        

                         

                        
                          
                            
                            

                          

                          
                            -1-

                            
                              

                            

                          

                          
                            
                            

                          

                        

                         

                        
                          	
                                  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

                                


                        

                         

                        
                          
                            
                            

                          

                          
                            -2-

                            
                              

                            

                          

                          
                            
                            

                          

                        

                         

                        
                          	
                                  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,

                         

                        
                          
                            
                            

                          

                          
                            -3-

                            
                              

                            

                          

                          
                            
                            

                          

                        

                         

                        Schedule
1

                         

                         

                        
                          
                            
                            

                          

                          
                            -4-