UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Preliminary Proxy Statement
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Gulf Resources, Inc.
(Name of Registrant as Specified in Its
Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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GULF RESOURCES, INC.
Level 11, Vegetable Building, Industrial
Park of the East City,
Shouguang City, Shandong Province 262700
The People’s Republic of China
___________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on December 18, 2019
___________________________
TO THE STOCKHOLDERS OF Gulf Resources, Inc.:
The Annual Meeting
of the stockholders of Gulf Resources, Inc., a Nevada corporation (“Company”), will be held on December 18, 2019, at
10:00 a.m. (local time), at the company’s headquarters located at Level 11, Vegetable Building, Industrial Park of the East
City, Shouguang City, Shandong Province 262700, the People’s Republic of China, for the following purposes:
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1.
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To elect seven directors, consisting of Ming Yang, Xiaobin Liu, Naihui Miao, Shengwei Ma, Yang Zou, Shi Tong Jiang and Tengfei Zhang, to hold office for a one-year term or until their successors are elected and qualified;
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To ratify the appointment of Morison Cogen LLP, independent public accountants, as the auditor of the Company for the fiscal year 2019; and
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To approve a reverse split of the Company’s common stock, par value $0.0005 (the “Common Stock”) on the basis of one (1) share for every two (2) to eight (8) outstanding shares of Common Stock, subject to the discretion of the Board of Directors, so that two (2) to eight (8) outstanding shares of Common Stock before the reverse stock split shall represent one (1) share of Common Stock after the reverse stock split; and
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To approve the Company’s 2019 Omnibus Equity Incentive Plan;
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To transact any other business as may properly be presented at the Annual Meeting or any adjournment thereof.
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Stockholders of record
of the Company’s Common Stock at the close of business on October 18, 2019 are entitled to notice of, and to vote at, the
Annual Meeting or any adjournment or postponement thereof.
Your attention is directed
to the Proxy Statement accompanying this Notice for a more complete statement of matters to be considered at the Annual Meeting.
All stockholders
are cordially invited to attend the meeting. Whether or not you expect to attend, you are respectfully requested by
the Board of Directors to sign, date and return the enclosed proxy promptly, or follow the instructions contained in the Notice
of Availability of Proxy Materials to vote on the Internet. Stockholders who execute proxies retain the right to revoke
them at any time prior to the voting thereof. If you received this proxy statement in the mail, a return envelope is
enclosed for your convenience.
YOUR VOTE IS IMPORTANT.
YOU ARE REQUESTED TO CAREFULLY READ THE PROXY STATEMENT. PLEASE VOTE ON THE INTERNET. IF THIS PROXY STATEMENT WAS MAILED TO YOU,
COMPLETE, DATE, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. YOU MAY ALSO ATTEND THE MEETING TO VOTE IN PERSON.
By Order of the Board of Directors,
/s/ Ming Yang
Ming Yang
Chairman of the Board of Directors
Dated: November 1, 2019
GULF RESOURCES, INC.
Level 11, Vegetable Building, Industrial
Park of the East City,
Shouguang City, Shandong Province 262700
The People’s Republic of China
___________________________
PROXY STATEMENT
for
Annual Meeting of Stockholders
to be held on December 18, 2019
___________________________
INTRODUCTION
Your proxy is solicited
by the Board of Directors of Gulf Resources, Inc., a Nevada corporation (the “Company,” “we,”
“us” or “our”), for use at the Annual Meeting of Stockholders to be held on December
18, 2019, at 10:00 a.m. (local time) Beijing Standard Time (9:00 p.m. Eastern Standard Time, December 17, 2019) (the “Annual
Meeting”), at the company’s headquarters located at Level 11, Vegetable Building, Industrial Park of the East City,
Shouguang City, Shandong Province 262700, the People’s Republic of China, for the following purposes:
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1.
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To elect seven directors, consisting of Ming Yang, Xiaobin Liu, Naihui Miao, Shengwei Ma, Yang Zou, Shi Tong Jiang and Tengfei Zhang, to hold office for a one-year term or until their successors are elected and qualified;
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2.
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To ratify the appointment of Morison Cogen LLP, independent public accountants, as the auditor of the Company for the fiscal year 2019; and
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To approve a reverse split of the Company’s common stock, par value $0.0005 (the “Common Stock”) on the basis of one (1) share for every two (2) to eight (8) outstanding shares of Common Stock, subject to the discretion of the Board of Directors, so that two (2) to eight (8) outstanding shares of Common Stock before the reverse stock split shall represent one (1) share of Common Stock after the reverse stock split; and
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To approve Company’s 2019 Omnibus Equity Incentive Plan;
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To transact any other business as may properly be presented at the Annual Meeting or any adjournment thereof.
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The Board of Directors
set October 18, 2019 as the record date (the “Record Date”) to determine those holders of common stock of the
Company (the “Common Stock”), who are entitled to notice of, and to vote at, the Annual Meeting. A list of the
stockholders entitled to vote at the meeting may be examined at the Company’s office at Level 11, Vegetable Building, Industrial
Park of the East City, Shouguang City, Shandong Province 262700, the People’s Republic of China.
On or about November
4, 2019, the Company shall mail to all stockholders of record, as of the Record Date, a Notice of Availability of Proxy Materials
(the “Notice”). Please carefully review the Notice for information on how to access the Notice of Annual Meeting,
Proxy Statement, proxy card and Annual Report on www.proxyvote.com, in addition to instructions on how you may request to
receive a paper or email copy of these documents. There is no charge to you for requesting a paper copy of these documents.
GENERAL INFORMATION ABOUT VOTING
Who can vote?
You can vote your shares
of Common Stock if our records show that you owned the shares on the Record Date. As of the close of business on the Record Date,
a total of 47,583,072 shares of Common Stock are entitled to vote at the Annual Meeting. Each share of Common Stock
is entitled to one vote on matters presented at the Annual Meeting.
How do I vote by proxy?
If you have received
a printed copy of these materials by mail, you may simply complete, sign and return your proxy card in the mail. If
you did not receive a printed copy of these materials by mail and are accessing them on the Internet, you may simply follow the
instructions below to submit your proxy on the Internet.
What if I received a Notice of Availability of proxy materials?
In accordance with
rules and regulations adopted by the Securities and Exchange Commission (the “SEC”), instead of mailing a printed
copy of our proxy materials to each stockholder of record, we may now furnish proxy materials to our stockholders on the Internet.
If you received a Notice by mail, you will not receive a printed copy of the proxy materials. Instead, the Notice will instruct
you as to how you may access and review all of the important information contained in the proxy materials. The Notice also instructs
you as to how you may submit your proxy on the Internet. If you received a Notice by mail and would like to receive a printed copy
of our proxy materials, including a proxy card, you should follow the instructions for requesting such materials included in the
Notice.
If I am a stockholder of record, how do I cast my vote?
If you are a stockholder
of record, you may vote in person at the Annual Meeting. We will give you a ballot when you arrive.
If you do not wish
to vote in person or you will not be attending the Annual Meeting, you may vote by proxy. If you received a printed copy of these
proxy materials by mail, you may vote by proxy using the enclosed proxy card, complete, sign and date your proxy card and return
it promptly in the envelope provided.
If you received a Notice
by mail, you may vote by proxy over the Internet by going to www.proxyvote.com to complete an electronic proxy card.
If you vote by proxy,
your vote must be received by 5:00 p.m. U.S. Eastern Standard Time on December 17, 2019 to be counted.
We provide Internet
proxy voting to allow you to vote your shares on-line, with procedures designed to ensure the authenticity and correctness of your
proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage
charges from Internet access providers and telephone companies.
What if other matters come up at the Annual Meeting?
The matters described
in this proxy statement are the only matters we know of that will be voted on at the Annual Meeting. If other matters
are properly presented at the meeting, the proxy holders will vote your shares as they see fit.
Can I change my vote after I return my proxy card?
Yes. You can revoke
your proxy at any time before it is exercised at the Annual Meeting in any of three ways:
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by submitting written notice revoking your proxy card to the Secretary of the Company;
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by submitting another proxy via the Internet or by mail that is later dated and, if by mail, that is properly signed; or
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by voting in person at the Annual Meeting.
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Can I vote in person at the Annual Meeting rather than by
completing the proxy card?
Although we encourage
you to complete and return the proxy card or vote by proxy on the Internet to ensure that your vote is counted, you can attend
the Annual Meeting and vote your shares in person.
How are votes counted?
We will hold the Annual
Meeting if holders representing a majority of the shares of Common Stock issued and outstanding and entitled to vote in person
or by proxy either sign and return their proxy cards, submit their proxy on the Internet, or attend the meeting. If
you sign and return your proxy card, or submit your proxy on the Internet, your shares will be counted to determine whether we
have a quorum even if you abstain or fail to vote on any of the proposals listed on the proxy card.
The election of directors
under Proposal 1 will be by the affirmative vote of a plurality of the shares of Common Stock, represented in person or by proxy
at the Annual Meeting.
Proposal 2 shall be
approved upon the vote of a majority of shares present in person or represented by proxy at the meeting. An abstention with respect
to Proposal 2 will have the effect of a vote “AGAINST” such proposal.
Proposal 3 shall
be approved upon the affirmative vote of the majority of shares of Common Stock issued and outstanding on the record date. Abstentions
and broker non-votes with respect to Proposal 3 will have the effect of a vote “AGAINST” such proposal.
Proposal 4 shall be
approved upon the vote of a majority of shares present in person or represented by proxy at the meeting. Abstention and broker
non-votes with respect to Proposal 4 will have the effect of a vote “AGAINST” such proposal.
Who pays for this proxy solicitation?
We do. In
addition to sending you these materials and posting them on the Internet, some of our employees may contact you by telephone, by
mail, by fax, by email, or in person. None of these employees will receive any extra compensation for doing this. We
may reimburse brokerage firms and other custodians for their reasonable out-of-pocket costs in forwarding these proxy materials
to stockholders.
Why are we seeking stockholder approval for these proposals?
Proposal No. 1: The
Nevada Revised Statutes, as amended and the NASDAQ Stock Market require corporations to hold elections for directors each year.
Proposal No. 2:
The Company appointed Morison Cogen LLP to serve as the Company’s independent auditors for the 2019 fiscal year. The
Company elects to have its stockholders ratify such appointment.
Proposal No. 3.
The Nevada Revised Statutes require corporations to obtain shareholder approval to amend its articles of incorporation to effect
the split.
Proposal No. 4.
The Nevada Revised Statutes and the NASDAQ Stock Market require corporations to obtain shareholder approval to adopt or materially
amend equity incentive plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table
sets forth certain information regarding beneficial ownership of Common Stock, as of the Record Date of the meeting, by each of
Company’s directors and executive officers; all executive officers and directors as a group, and each person known to Company
to own beneficially more than 5% of Company’s Common Stock. Except as otherwise noted, the persons identified have sole voting
and investment powers with respect to their shares. As of October 18, 2019, there were 47,583,072 shares of the Company’s
Common Stock outstanding.
Name of Beneficial Owner (1)
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Number of Shares
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Percent of Class
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Ming Yang (Chairman)
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14,053,102
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(2)
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29.5
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%
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Xiaobin Liu (CEO)
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190,575
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(3)
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*
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Min Li (CFO)
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190,575
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(3)
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*
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Naihui Miao (COO)
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190,575
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(3)
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*
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Yang Zou (Director)
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17,695
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(4)
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*
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Shi Tong Jiang (Director)
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12,500
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(4)
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Tengfei Zhang (Director)
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17,695
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(4)
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*
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All Directors and Executive Officers as a Group (seven persons)
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14,672,717
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30.8
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%
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Chen Weijie
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6,068,011
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(5)
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12.8
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%
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Wenxiang Yu
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5,079,721
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(6)
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10.7
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%
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Shandong Haoyuan Industry Group Ltd.
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4,124,733
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(6)
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8.7
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%
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________________
* Less than
1%.
(1) The address of each director and executive
officer is c/o Gulf Resources, Inc., Level 11, Vegetable Building, Industrial Park of the East City, Shouguang City , Shandong
Province, 262700, the People’s Republic of China.
(2) Consists of 3,173,848 shares owned
by Ming Yang, 5,079,721 shares owned by Ms. Wenxiang Yu, the wife of Mr. Yang, 1,674,800 shares owned by Mr. Zhi Yang, Mr.
Yang’s son, and 4,124,733 shares owned by Shandong Haoyuan Industry Group Ltd. (“SHIG”), of which
Mr. Yang is the controlling shareholder, chief executive officer and a director. Mr. Yang disclaims beneficial ownership
of the shares owned by his wife and SHIG.
(3) Consists of 100,000 shares issuable
upon exercise of options held by each beneficial owner.
(4) Consists of 12,500 shares issuable upon exercise of options
held by such beneficial owner.
(5) Based on Schedule 13D filed on August 12, 2015. Mr. Chen’s
address is North Weigao Road, Luocheng Sub-district Office, Shouguang, Shandong Province 262700, the People’s Republic of
China.
(6) The address of the shareholder is c/o Gulf Resources, Inc.,
Level 11, Vegetable Building, Industrial Park of the East City, Shouguang City , Shandong Province, 262700, the People’s
Republic of China.
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees of the Board of Directors
The Board of Directors
has nominated seven (7) persons identified below for election as directors, to serve until the next annual meeting and their successors
have been elected and qualified. If any nominee becomes unavailable for election, which is not expected, the persons
named in the accompanying proxy intend to vote for any substitute whom the Board of Directors nominates.
Name
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Age
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Other positions with Company; other directorships held in last five years
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Has served as Company director since
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Ming Yang
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51
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Chairman of the Board of Director
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December 2006
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Xiaobin Liu
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50
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Chief Executive Officer and Director
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March 2009
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Naihui Miao
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50
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Secretary, Chief Operating Officer and Director
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January 2006
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Yang Zou (1)(3)
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47
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Independent Director
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March 2011
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Shengwei Ma(4)
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51
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Independent Director Nominee
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N/A
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Shitong Jiang (1) (2)(3)
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50
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Independent Director
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April 2008
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Tengfei Zhang (2)(3)
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51
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Independent Director
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June 2011
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(1) Serves as a member of the Audit Committee.
(2) Serves as a member of the Compensation Committee.
(3) Serves as a member of the Nominating and Corporate Governance
Committee.
(4) Mr. Ma will serve as a member of the Audit Committee and
the Compensation Committee upon election.
Ming Yang, Chairman of the Board
of Director – Mr. Yang has served as Chairman of Shouguang Vegetable Industry Group Holding Company since 2013. In addition,
he has served as Chairman of Shouguang City Yuxin Chemical Company Limited since July 2000. Since May 2005, Mr. Yang has served
as Chairman of Shouguang City Haoyuan Chemical Company Limited, Shouguang City He Mao Yuan Bromize Company Limited, and Shouguang
City Qing River Real Estate Construction Company. He was nominated as director of Qinghe Oil Field Office in 1993, where
he managed operations. In 1997 he was appointed Chairman and General Manager of Shouguang Qinghe Shiye LLC and during the next
three years its profits doubled. He took the position of general manager of Shouguang City Yu Xin Chemical Industry Co., Ltd. in
2000. During his stay, he focused on quality management and technology progress, which led to a 100 percent success rate of all
products. He also helped the company successfully pass the ISO certification and become a private high-tech enterprise. In 2005
he was appointed to the position of Chairman, where he has helped the company to become a leading producer of bromine and crude
salt in China. In 2006 he became the Chairman of Gulf Resources, Inc. Mr. Yang has been the representative of Shandong
Shouguang congress since 1995 and in 1998 he was awarded as Honorary Entrepreneur in Weifang City.
Xiaobin Liu, Chief Executive
Officer and Director – Mr. Liu was appointed as Chief Executive Officer and Director on March 10, 2009. Mr. Liu joined
the Company as Vice President in December 2007. He has served as Chairman of Chengdu Philosopher's Stone Culture Media Co. LTD
since August 2018. He served as Chairman of China Shouguang Vegetable Industry Group (Cayman) Inc. from 2011 to 2017. He currently
serves as a director of China Shouguang Vegetable Industry Group (Cayman) Inc. Before he joined the Company, Mr. Liu served as
project manager of Shenzhen Guangshen Accounting Firm from January 2007 to November 2007; the department manager of Hainan Zhongou
Accounting Firm from January 2003 to December 2006; the CFO (equivalent of Vice President) of Dasheng Real Estate Development Company,
which is the subsidiary of Saige Dasheng Co., Ltd from May 2002 to November 2002; the CFO of Shenzhen Securities Department of
Hainan Saige International Trust Investment Company from May 2000 to August 2004; and the financial manager of Hainan Wanquanyuan
Hot Spring Tourism Development Co., Ltd from 1995 to 2000. During this time, he also was the CFO of Qionghai City Guantang Hotspring
Leisure Center, the CFO of Qionghai City Wanquanhe Agricultural Development Co., Ltd, the CFO of Qionghai Wanquanhe Hotspring Tourist
Development Property Management Co., Ltd, and the CFO of Qionghai Guantangyuzhuang Resort Co., Ltd. Prior to that, Mr. Liu worked
in the financial department of Hainan Jinyuan Industrial Co., Ltd, which is a subsidiary of Chinese Black Metal Limited Company
Northwest Branch from 1992 to 1995, and the financial department of Shanxi Aircraft Manufacturing Company from 1988 to 1992. Mr.
Liu earned a master degree from the Economic and Management School at Hong Kong City University.
Naihui Miao, Secretary, Chief Operating
Officer and Director – Mr. Miao has served as Vice President of Shouguang City Haoyuan Chemical Company Limited
since January 2006. Since January 2006, Mr. Miao has served as Director, Secretary and Vice President of Gulf Resources,
Inc. and he is in charge of sales, human resource and business management. From 2005 to 2006, Mr. Miao served as Vice
President of Shouguang City Yuxin Chemical Company Limited as the deputy general manager. From 1991 to 2005, Mr. Miao
served as a Manager and then Vice President of Shouguang City Commercial Trading Center Company Limited. He was the
director of Shouguang Business Trade Center since 1986. He has served as Supervisor of Chengdu Philosopher's Stone Culture Media
Co. LTD since August 2018.
Yang Zou, Independent Director
– Mr. Zou was appointed a director on March 2, 2011. Mr. Zou served as Vice Director of Beijing Zhongtianhuamao Accounting
Firm (General Partnership) from July 1, 2017 to August 2018. He is a Certified Public Accountant of China and holds
the certificate of Certified Internal Auditor. From March 2003 to September 2009, Mr. Zou was chief financial officer
of Bohua Ziguang Zhiye Co., Ltd. From July 2001 to January 2003, Mr. Zou was the audit department manager of financial
center of Beijing Hengji Weiye Electronic Products Co., Ltd., where he was in charge of internal audit, financial budget management,
and coordination with external audit. From July 1999 to June 2001, Mr. Zou was manager of finance and audit department of Zhonglian
Online Information Development Co., Ltd. From September 1993 to June 1999, Mr. Zou had served as assistant auditor, auditor, and
head of project audit of Hainan Zhongou Certified Public Accountants Co., Ltd. From July 1991 to August 1993, Mr. Zou was an accountant
of department of finance of Hunan Department Store Co., Ltd. Mr. Zou graduated from Beijing University with bachelor’s
degree in finance.
Shitong Jiang, Independent Director
– Mr. Jiang was appointed a director on April 23, 2008. Mr. Jiang is Chief of the Shouguang City Audit Bureau,
Shandong Province, has been with the Audit bureau since 1990. During his career at the Shouguang City Audit Bureau he has held
multiple positions including, Auditing Officer and Audit Section Deputy Chief. The Shouguang City Audit Bureau is responsible for
the independent audit supervision of the affairs of the government. From 1987 to 1990 Mr. Jiang attended Shandong Financial Institution.
Tengfei Zhang, Independent Director
– Mr. Zhang was appointed a director on June 30, 2011. Mr. Zhang has served as Director of Shenzhen Kaili Industrial
Co., Ltd. since January 1, 2017. Prior to this position, he was the Chairman of the Board of Supervisors of Shenzhen Kaili
Industrial Co., Ltd. He is a Certified Public Accountant in China. From July 2000 to December 2004 , Mr. Zhang was Supervisor
of Shenzhen Kaili Industrial Co., Ltd. and Director of Finance of Changsha Kaili Real Estate Development Co., Ltd. From January
to June 2000, he was Manager of Financial Department of Shenzhen Kaili Industrial Co., Ltd. Mr. Zhang graduated from
Economics and Management Department of Hunan Business School with a college degree in 1989.
Shengwei Ma, Independent Director
Nominee – Mr. Ma has served as Department Manager of Shouguang City Urban Construction and Investment Group since March
2012. Mr. Ma holds a Senior Accountant Certificate. Mr. Ma graduated from Central Broadcasting and Television University
with bachelor’s degree in accounting in 2004.
Family Relationships
There are no family relationships among
our executive officers, directors and significant employees.
Involvement in Certain Legal Proceedings
To the best of our
knowledge, there have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or
decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person
of our Company during the past ten years.
Board Operations
The positions of principal
executive officer and Chairman of the Board of Company are held by different persons. The Chairman of the Board chairs
Board and stockholder meetings and participates in preparing their agendas. The Chairman of the Board also serves as
a focal point for communication between management and the Board between Board meetings, although there is no restriction on communication
between directors and management. The Company believes that these arrangements afford the directors sufficient resources
to supervise management effectively, without being overly engaged in day-to-day operations.
The Board plays an
active role, as well as the independent committees, in overseeing the management of the Company’s risks. The Board regularly
reviews reports from members of senior management and committees on areas of material risk to the Company, including operational,
financial, legal, strategic and regulatory risks.
The Board of Directors
held 4 meetings during 2018. During 2018, no director attended fewer than 75% of the meetings of the Board of Directors and Board
committees of which the director was a member.
Director Qualifications
The Company seeks directors
with established strong professional reputations and experience in areas relevant to the strategy and operations of our businesses.
The Company also seeks directors who possess the qualities of integrity and candor, who have strong analytical skills and who are
willing to engage management and each other in a constructive and collaborative fashion, in addition to the ability and commitment
to devote time and energy to service on the Board and its committees. We believe that all of our directors and director nominee
meet the foregoing qualifications.
The Nominating and
Corporate Governance Committee and the Board believe that the leadership skills and other experience of the Board members, as described
below, provide the Company with a range of perspectives and judgment necessary to guide our strategies and monitor their execution.
Ming Yang is the founder of the
company and has been in the chemical industry for more than ten years. Mr. Yang has contributed to the Board’s strong leadership
and vision for the development of the Company.
Xiaobin Liu was appointed as Chief
Executive Officer and Director on March 10, 2009. Mr. Liu has years of experience in capital markets, financial and business management,
and strategic planning and development.
Naihui Miao has served as Vice President
of Shouguang City Haoyuan Chemical Company Limited since January 2006. Since January 2006, Mr. Miao has served as Director,
Secretary and Vice President of the Company. He is in charge of sales, human resource and business management. Mr. Miao has years
of experience in the chemical industry, business operations and management, and strategic planning and development.
Yang Zou was appointed as a Director
on March 2, 2011. Mr. Zou has served as the Vice Director of Beijing Zhongtianhuamao Accounting Firm (General Partnership) since
July 1, 2016. He is a Certified Public Accountant and holds the certificate of Certified Internal Auditor. Mr.
Zou has extensive experience in auditing and accounting related matters.
Nan Li was appointed as a Director
on November 8, 2010 and resigned as a Director on April 22, 2019. Mr. Li currently serves as Financial Controller at Global Pharm
Holdings Group, Inc., an OTC Bulletin Board listed company. He holds an Intermediate Accountant Certificate and is a
Certified Public Accountant. Mr. Li has extensive experience in financial, auditing and management related matters with
publicly listed companies.
Shitong Jiang was appointed as a
Director on April 23, 2008. Mr. Jiang is Chief of the Shouguang City Audit Bureau, Shandong Province. He has been with
the audit bureau since 1990. Mr. Jiang has many years of auditing and management experience with PRC government departments.
Tengfei Zhang was appointed as a
Director on June 30, 2011. Mr. Zhang has served as Director of Shenzhen Kaili Industrial Co., Ltd. He is a Certified Public Accountant.
Mr. Zhang has many years of experience in management, finance, business strategy and audit related matters.
Shengwei Ma was nominated as a Director
for election on September 16, 2019. Mr. Ma holds a Senior Accountant Certificate. Mr. Ma has extensive experience in financial,
accounting and management related matters with PRC government departments.
Code of Ethics
The Board has adopted
a code of ethics applicable to Company’s directors, officers, and employees. The code of ethics is available at
Company’s website, www.gulfresourcesinc.com.
Board Committees
The Board of Directors has standing audit,
compensation, and nominating committees, comprised solely of independent directors. Each committee has a charter, which
is available at Company’s website,www.gulfresourcesinc.com.
Audit Committee
The Audit Committee
is responsible for reviewing the results and scope of the audit, and other services provided by our independent auditors, and reviewing
and evaluating our system of internal controls. Mr. Li is the Audit Committee Financial Expert and Mr. Jiang is the chair
of the Audit Committee. Our Audit Committee met 4 times during 2018. Our Board of Directors has determined that Messrs. Jiang,
Zou, Li* and Ma are “independent directors” within the meaning of Rule 10A-3 under the Exchange Act, as determined
based upon the criteria for “independence” set forth in the rules of the NASDAQ Stock Market.
Audit Committee Report
With respect to the
audit of Company’s financial statements for the year ended December 31, 2018, the Audit Committee has:
|
·
|
reviewed and discussed the audited financial statements with management;
|
|
·
|
discussed with Company’s independent accountants the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board; and
|
|
·
|
received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Audit Committee concerning independence and has discussed with the independent accountant the independent accountant's independence.
|
Based on these reviews
and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in
the Company's annual report on Form 10-K for the year ended December 31, 2018.
Shitong Jiang, Chair
Yang Zou
Nan Li*
*Mr. Li resigned as a Director on April 22, 2019.
Compensation Committee
The Compensation Committee
is responsible for (a) reviewing and providing recommendations to the Board of Directors on matters relating to employee compensation
and benefit plans, and (b) assisting the Board in determining the compensation of the Chief Executive Officer and making recommendations
to the Board with respect to the compensation of the Chief Financial Officer, other executive officers of the Company and independent
directors. Each of Tengfei Zhang and Shitong Jiang are members of the Compensation Committee. The Compensation Committee operates
under a written charter. Mr. Zhang is the Chairman of Compensation Committee. The Compensation Committee met 1 time in 2018.
Nominating and Corporate Governance Committee
Our Board of Directors
established a Nominating and Corporate Governance Committee in June 2009. The purpose of the Nominating and Corporate Governance
Committee is to assist our Board of Directors in identifying qualified individuals to become board members, in determining the
composition of the Board of Directors and in monitoring the process to assess board effectiveness. Each of Tengfei Zhang, Shitong
Jiang and Yang Zou are members of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee
operates under a written charter. Mr. Jiang is the Chairman of Nominating and Corporate Governance Committee.
The Nominating and
Corporate Governance Committee met 1 time in 2018. The Nominating and Corporate Governance Committee will consider director candidates
recommended by security holders. Potential nominees to the Board of Directors are required to have such experience in business
or financial matters as would make such nominee an asset to the Board of Directors and may, under certain circumstances, be required
to be “independent”, as such term is defined under Rule 5605 of the listing standards of NASDAQ and applicable SEC
regulations. Security holders wishing to submit the name of a person as a potential nominee to the Board of Directors must send
the name, address, and a brief (no more than 500 words) biographical description of such potential nominee to the Nominating and
Corporate Governance Committee at the following address: Nominating and Corporate Governance Committee of the Board of Directors,
c/o Gulf Resources, Inc., Level 11, Vegetable Building, Industrial Park of the East City, Shouguang City , Shandong Province, the
People’s Republic of China. Potential director nominees will be evaluated by personal interview, such interview to be conducted
by one or more members of the Nominating and Corporate Governance Committee, and/or any other method the Nominating and Corporate
Governance Committee deems appropriate, which may, but needs not, include a questionnaire. The Nominating and Corporate Governance
Committee may solicit or receive information concerning potential nominees from any source it deems appropriate. The Nominating
and Corporate Governance Committee need not engage in an evaluation process unless (i) there is a vacancy on the Board of Directors,
(ii) a director is not standing for re-election, or (iii) the Nominating and Corporate Governance Committee does not intend to
recommend the nomination of a sitting director for re-election. Although it has not done so in the past, the Nominating and Corporate
Governance Committee may retain search firms to assist in identifying suitable director candidates.
The Board does not
have a formal policy on Board candidate qualifications. The Board may consider those factors it deems appropriate in
evaluating director nominees made either by the Board or stockholders, including judgment, skill, strength of character, experience
with businesses and organizations comparable in size or scope to the Company, experience and skill relative to other Board members,
and specialized knowledge or experience. Depending upon the current needs of the Board, certain factors may be weighed
more or less heavily. In considering candidates for the Board, the directors evaluate the entirety of each candidate’s
credentials and do not have any specific minimum qualifications that must be met. “Diversity,” as such, is not a criterion
that the Committee considers. The directors will consider candidates from any reasonable source, including current Board
members, stockholders, professional search firms or other persons. The directors will not evaluate candidates differently
based on who has made the recommendation.
Stockholder Communications
Stockholders can mail
communications to the Board of Directors, c/o Secretary, Gulf Resources, Inc., Level 11, Vegetable Building, Industrial Park of
the East City, Shouguang City, Shandong Province, the People’s Republic of China 262700, who will forward the correspondence
to each addressee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the
Securities Exchange Act of 1934 requires Company’s directors and executive officers and any beneficial owner of more than
10% of any class of Company equity security to file reports of ownership and changes in ownership with the Securities and Exchange
Commission and furnish copies of the reports to Company. Based solely on the Company’s review of copies of such
forms and written representations by Company’s executive officers and directors received by it, Company believes that during
2018, all such reports were filed timely.
Executive Compensation
Compensation Discussion and Analysis
This compensation discussion describes the
overall compensation practices at the Company and specifically describes the compensation for the following named executive officers
(“Named Executive Officers”):
|
·
|
Xiaobin Liu, Chief Executive Officer
|
|
·
|
Min Li, Chief Financial Officer
|
|
·
|
Naihui Miao, Chief Operating Officer
|
The Board of Directors appointed the Compensation
Committee of our Board of Directors to evaluate and determine the compensation programs of the Company’s Named Executive
Officers, including the Chief Executive Officer and the Chief Financial Officer.
Compensation Philosophy and Objectives
Our primary goal with respect to our compensation
programs has been to attract and retain the most talented and dedicated employees in key positions in order to compete effectively
in the market place, successfully execute our growth strategies, and create lasting shareholder value. The Compensation Committee
evaluates both individual and Company performance when determining the compensation of our executives. The Compensation Committee
believes that a significant portion of our executive’s total compensation should be at-risk compensation that is linked to
stock-based incentives to align their interests with those of shareholders.
Additionally, the Compensation Committee
has determined that an executive officer who is a Chinese national and is based in China will be entitled to a locally competitive
package and an executive officer who is an expatriate or who is based in the U.S. will be paid a salary commensurate with those
paid to the executives in the U.S. The Compensation Committee evaluates the appropriateness of the compensation programs annually
and may make adjustments after taking account the subjective evaluation described previously.
We apply our compensation policies consistently
for determining compensation of our Chief Executive Officer as we do with the other executives. The Compensation Committee assesses
the performance of our Chief Executive Officer annually and determines the base salary and incentive compensation of our chief
executive officer.
Our Chief Executive Officer is primarily
responsible for the assessment of our other executive officers’ performance. Ultimately, it is the Compensation Committee’s
evaluation of the chief executive officer’s assessment along with competitive market data that determines each executive’s
total compensation.
Elements of Our Executive Compensation
Programs
Base Salary. All full time executives
are paid a base salary. Base salaries for our named executives are set based on their professional qualifications and experiences,
education background, scope of their responsibilities, taking into account competitive market compensation levels paid by other
similar sized companies for similar positions and reasonableness and fairness when compared to other similar positions of responsibility
within the Company. Base salaries are reviewed annually by the Compensation Committee, and may be adjusted annually as needed.
Annual Bonuses. The Company does
not pay guaranteed annual bonuses to our executives or to employees at any level because we emphasize pay-for-performance. The
Compensation Committee determines cash bonuses towards the end of each fiscal year to award our executive officers including our
Chief Executive Officer and Chief Financial Officer based upon a subjective assessment of the Company’s overall performance
and the contributions of the executive officers during the relevant period.
Equity Incentive Compensation. A
key element of our pay-for-performance philosophy is our reliance on performance-based equity awards through the Company’s
stock option plan. This program aligns executives’ and shareholders’ interests by providing executives an ownership
stake in the Company. Our Compensation Committee has the authority to award equity incentive compensation, i.e. stock options,
to our executive officers in such amounts and on such terms as the Compensation Committee determines in its sole discretion. The
Compensation Committee reviews each executive’s individual performance and his or her contribution to our strategic goals
and determines the amount of stock options to be awarded towards the end of the fiscal year. The Compensation Committee grants
equity incentive compensation at times when there are not material non-public information to avoid timing issues and the appearance
that such awards are made based on any such information. The exercise price is the closing market price on the date of the grant.
Other Compensation. We provide our
executives with certain other benefits, including reimbursement of business and entertainment expenses, health insurance, vacation
and sick leave plan. The Compensation Committee in its discretion may revise, amend or add to the officer’s executive benefits
as it deems necessary. We believe that these benefits are typically provided to senior executives of similar companies in China
and in the U.S.
The following table sets forth information
regarding compensation of the named executive officers for each of the two fiscal years in the period ended December 31, 2018.
FISCAL
2018 COMPENSATION TABLE
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus($)
|
Stock
Awards($)
|
Option
Awards$(1)
|
Non-Equity
Incentive Plan Compensation ($)
|
Nonqualified
Deferred Compensation Earnings ($)
|
All
Other Compensation ($)
|
Total
($)
|
Xiaobin Liu
|
2017
|
107,327
|
—
|
—
|
63,933
|
—
|
—
|
—
|
171,260
|
CEO
|
2018
|
109,029
|
—
|
—
|
118,233
|
—
|
—
|
—
|
227,262
|
Min Li
|
2017
|
107,327
|
—
|
—
|
63,933
|
—
|
—
|
—
|
171,260
|
CFO
|
2018
|
109,029
|
—
|
—
|
118,233
|
—
|
—
|
—
|
227,262
|
Naihui Miao
|
2017
|
107,327
|
—
|
—
|
63,933
|
—
|
—
|
—
|
171,260
|
COO
|
2018
|
109,029
|
—
|
—
|
118,233
|
—
|
—
|
—
|
227,262
|
(1) Represents the dollar amount recognized
for financial statement reporting purposes in accordance with Financial Accounting Standards Board Accounting Standards Codification
(FASB ASC) 718 – “Compensation - Stock Compensation.”
Except as disclosed
below under the caption “Directors Compensation,” we have not paid or accrued any fees to any of our executive directors
for serving as a member of our Board of Directors. We do not have any retirement, pension, profit sharing or insurance or medical
reimbursement plans covering our officers and directors. Our executive officers are reimbursed by us for any out-of-pocket expenses
incurred in connection with activities conducted on our behalf. There is no limit on the amount of these out-of-pocket expenses
and there will be no review of the reasonableness of such expenses by anyone other than our Board of Directors, which includes
persons who may seek reimbursement, or a court of competent jurisdiction if such reimbursement is challenged.
Grants of Plan-Based Awards
The Company granted options to purchase
400,000 shares of our Common Stock to each of our named executive officers, under Company’s Amended and Restated 2007 Equity
Incentive Plan, during fiscal 2018.
FISCAL
2018 GRANTS OF PLAN-BASED AWARDS
|
|
|
|
|
Estimated
Future Payouts
Under Non-Equity
Incentive Plan Awards
|
|
Estimated
Future Payouts
Under Equity Incentive
Plan Awards
|
|
All Other Stock Awards:
Number of Shares of
|
|
Option Awards: Number
of Securities
|
|
Exercise or Base Price
of
|
|
Grant Date
Fair Value of Stock
|
Name
|
|
Grant
Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Stocks
or Units
|
|
Underlying
Options
|
|
Option
Award($)
|
|
and
Options ($)
|
Xiaobin
Liu,
CEO
|
|
December
03,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
0.713
|
|
118,233
|
|
Min Li,
CFO
|
|
December
03,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
0.713
|
|
118,233
|
|
Naihui
Miao,
COO
|
|
December
03,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
0.713
|
|
118,233
|
|
Narrative Discussion
The following employment
agreements were entered into by the Company and the named executive officers:
Xiaobin Liu
The employment agreement
for Xiaobin Liu to serve as Chief Executive Officer of the Company was renewed on June 1, 2019 with a term of three years. Xiaobin
Liu is also a member of the Board of Directors. Pursuant to the agreement, Mr. Liu is entitled to receive annual compensation equal
to approximately $107,327, subject to changes in the foreign exchange rate and market conditions.
Min Li
The employment agreement
for Min Li to serve as Chief Financial Officer of the Company was renewed on January 1, 2019 with a term of one year. Pursuant
to the agreement, Mr. Li is entitled to receive annual compensation equal to approximately $107,327, subject to changes in the
foreign exchange rate and market conditions.
Naihui Miao
The employment agreement
for Naihui Miao to serve as Chief Operating Officer of the Company was renewed on June 1, 2019 with a term of three years. Mr.
Miao is also a member of the Board of Directors. Pursuant to the agreement, Mr. Miao is entitled to receive annual compensation
equal to approximately $107,327 subject to changes in the foreign exchange rate and market conditions.
In addition, each of
our named executive officers is entitled to participate in any and all benefit plans from time to time, in effect for employees,
along with vacation, sick and holiday pay in accordance with policies established and in effect from time to time.
Assuming the employment
of the Company’s named executive officers was to be terminated without cause or for good reason or in the event of change
in control, as of December 31, 2018, the following individuals would have been entitled to payments in the amounts set forth opposite
to their name in the below table:
Name
|
|
Cash Payment
|
Xiaboin Liu
|
|
$0
|
Min Li
|
|
$0
|
Naihui Miao
|
|
$0
|
Outstanding Equity Awards at Fiscal Year-End
The following
table sets forth, for each named executive officer, information regarding unexercised stock options, unvested stock awards, and
equity incentive plan awards outstanding as of December 31, 2018.
OUTSTANDING
EQUITY AWARDS AT 2018 FISCAL YEAR END
|
OPTION
AWARDS
|
|
STOCK
AWARDS
|
Name
|
|
Number
of Securities Underlying Unexercised Options (#) Exercisable
|
|
Number
of Securities Underlying Unexercised Options (#) Unexercisable
|
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
|
|
Option
Exercise Price ($)
|
|
Option
Expiration Date
|
|
Number
of Shares or Units of Stock That Have Not Vested (#)
|
|
Market
Value of Shares or Units of Stock That Have Not Vested ($)
|
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
|
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
|
Xiaobin
Liu, CEO
|
|
|
100,000
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
1.454
|
|
|
August
22, 2021
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
400,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
0.713
|
|
|
December
2, 2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Min
Li, CFO
|
|
|
100,000
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
1.454
|
|
|
August
22, 2021
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
400,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
0.713
|
|
|
December
2, 2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Naihui
Miao, COO
|
|
|
100,000
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
1.454
|
|
|
August
22, 2021
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
400,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
0.713
|
|
|
December
2, 2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(1) Represents an option to purchase shares
of Common Stock granted on August 23, 2017, which vested and became exercisable beginning on August 23, 2017.
(2) Represents an option to purchase shares of Common Stock
granted on December 3, 2018, which vested and became exercisable immediately. And these options have been exercised.
Option Exercises and Stock Vested
The following table
sets forth aggregate information with respect to each named executive officer regarding the exercise of stock options, stock appreciation
rights, and similar instruments and the vesting of restricted stock, restricted stock units and similar instruments, for fiscal
2018.
FISCAL 2018 OPTION EXERCISES AND STOCK VESTED
|
|
|
|
OPTION AWARDS
|
|
|
|
STOCK AWARDS
|
|
Name
|
|
|
Number of Shares Acquired on Exercise (#)
|
|
|
|
Value Realized on Exercise ($)
|
|
|
|
Number of Shares Acquired on Vesting (#)
|
|
|
|
Value Realized on Vesting ($)
|
|
Xiaobin Liu, CEO
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Min Li, CFO
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Naihui Miao, COO
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Pension Benefits Table
The Company does not
provide to any of its named executive officers any plans that provide for payments or other benefits at, following, or in connection
with retirement.
Nonqualified Defined Contribution and Other Nonqualified
Deferred Compensation Plans Table
None of our named executive
officers had any non-qualified defined contribution or other plan that provides for the deferral of compensation, for fiscal 2018.
Compensation of Directors
The following table
sets forth information regarding compensation of each director, excluding our executive directors, Xiaobin Liu and Naihui Miao,
who do not receive compensation in their capacity as executive directors, for fiscal 2018.
FISCAL 2018 DIRECTOR COMPENSATION
|
Name
|
|
Fees Earned or Paid in Cash ($)
|
|
Stock Awards
($)
|
|
Option Awards
$(l)
|
|
Non-Equity Incentive Plan Compensation
($)
|
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)
|
|
All Other Compensation
($)
|
|
Total ($)
|
Ming Yang
|
|
35,253
|
|
-
|
|
-
|
|
|
|
-
|
|
-
|
|
35,253
|
Nan Li (2)
|
|
-
|
|
-
|
|
3,203
|
|
-
|
|
-
|
|
-
|
|
3,203
|
Shitong Jiang
|
|
-
|
|
-
|
|
3,203
|
|
-
|
|
-
|
|
-
|
|
3,203
|
Yang Zou
|
|
-
|
|
-
|
|
3,203
|
|
-
|
|
-
|
|
-
|
|
3,203
|
Tengfei Zhang
|
|
-
|
|
-
|
|
3,203
|
|
-
|
|
-
|
|
-
|
|
3,203
|
(1) Represents the dollar amount recognized
for financial statement reporting purposes in accordance with FASB ASC 718 – “Compensation – Stock Compensation.”
(2) Nan Li resigned as an independent director of the Company
and as member of the Company’s Audit Committee and Compensation Committee on April 22, 2019.
Pursuant to the terms of their director
agreements, each of our independent directors, Shitong Jiang, Yang Zou and Tengfei Zhang, receive options to purchase 12,500
shares of our Common Stock on an annual basis with exercise prices not less than the closing market price of our Common Stock on
the dates of grant. The grant of future options is contingent upon the director’s continued service with the Company. We
do not pay any cash compensation to the independent directors.
Compensation Committee Interlocks and Insider Participation
We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this
item.
Certain Relationships and Related Transactions
During the fiscal year
2018 and 2017, the Company borrowed $355,212 and $450,000, and fully repaid later during the same period, from Jiaxing Lighting
Appliance Company Limited (Jiaxing Lighting”), in which Mr. Ming Yang, a shareholder and the Chairman of the Company, has
a 100% equity interest. The amounts due to Jiaxing Lighting were unsecured, interest free and repayable on demand.
Our policy is that
a contract or transaction either between the Company and a director, or between a director and another company in which he is financially
interested is not necessarily void or void-able if the relationship or related party transactions are approved or ratified by the
Audit Committee.
Director Independence
The Board of Directors
has determined that Yang Zou, Shitong Jiang, Tengfei Zhang and Shengwei Ma are independent under Rule 5605(a)(2) of the NASDAQ
Listing Rules. In addition, under applicable rules and regulations, and as determined by the Board, all of the members of the Audit,
Compensation, and Nominating and Corporate Governance Committees are “independent” directors.
Directors are elected
by a plurality of votes cast.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE ELECTION OF THE BOARD OF DIRECTORS’ NOMINEES.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
ACCOUNTANTS
The Audit Committee
has appointed Morison Cogen LLP (“MC”) as independent accountants for fiscal 2019. Representatives
of MC are expected to be present at the Annual Meeting to respond to appropriate questions and will have an opportunity to make
a statement, if they so desire.
Services and Fees of Independent Accountants
The aggregate fees billed to the Company
by MC for the last two fiscal years were as follows:
Fees
|
|
2018
|
|
2017
|
Audit Fees
|
|
$
|
208,000
|
|
|
$
|
265,000
|
|
Audit Related Fees
|
|
$
|
0
|
|
|
$
|
0
|
|
Tax Fees
|
|
$
|
9,000
|
|
|
$
|
7,000
|
|
All Other Fees
|
|
$
|
0
|
|
|
$
|
0
|
|
Total
|
|
$
|
217,000
|
|
|
$
|
272,000
|
|
Audit Fees
This category consists
of fees for the audit of our annual financial statements, review of the financial statements included in our quarterly reports
on Form 10-Q and services that are normally provided by the independent registered public accountants in connection with statutory
and regulatory filings or engagements for those fiscal years.
Audit-Related Fees
This category consists
of services by our independent auditors that are reasonably related to the performance of the audit or review of our financial
statements and are not reported above under Audit Fees. This category includes accounting consultations on transaction and proposed
transaction related matters.
Tax Fees
The tax fee of $7,000
and $9,000 relate to tax compliance services rendered in the year ended December 31,2017 and 2018, respectively.
All Other Fees
There are no other
fees to disclose.
Pre-Approval of Services
The Audit Committee
appoints the independent accountant each year and pre-approves the audit services. The Audit Committee chair is authorized
to pre-approve specified non-audit services for fees not exceeding specified amounts, if he promptly advises the other Audit Committee
members of such approval.
A majority of votes
present in person or by proxy is required to ratify appointment of the independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT ACCOUNTANTS.
PROPOSAL 3
APPROVAL TO EFFECT A REVERSE SPLIT OF
THE COMPANY’S COMMON STOCK
Purpose of the Reverse
Split
The Company’s
Board of Directors has determined that it is in our best interest to effect a reverse split of our Common Stock of one (1) share
for a to-be-determined number of shares within a spectrum of two (2) to eight (8) shares, so that, subject to the discretion of
the Board of Directors, every two (2) to eight (8) outstanding shares of Common Stock before the stock split shall represent one
(1) share of Common Stock after the stock split with all fractional shares rounded up to the next whole share (the “Reverse
Split”). The Company’s shareholders are voting to give the Board of Directors discretion in ultimately selecting what
the reverse stock split ratio will be. The Board of Directors believes that our Common Stock is undervalued and that the Reverse
Split will allow the Company’s Common Stock to trade in a more realistic price range.
Additionally, the Board
believes that the Reverse Split could help maintain the Company’s listing on The NASDAQ Global Select Market. On August 20,
2019, the Company received a letter from NASDAQ notifying the Company that, based on the previous thirty (30) consecutive business
days, the Company’s listed security no longer met the minimum $1.0 bid price per share requirement. Therefore, in accordance
with NASDAQ listing rules, the Company was provided 180 calendar days, or until February 17, 2020, to regain compliance.
Given the receipt of
such a deficiency letter from NASDAQ, the Board believes it is in the best interests of the Company and its shareholders to effect
the Reverse Split to increase the market price of the Company’s Common Stock so that the Company is able to regain compliance
with NASDAQ listing rules.
Certain Risks Associated
With the Reverse Split
While the Board believes
that the Company’s Common Stock would trade at higher prices after the consummation of the Reverse Split, there can be no
assurance that the increase in the trading price will occur, or, if it does occur, that it will equal or exceed two (2) to eight
(8) times the market price of the Common Stock prior to the Reverse Split. In some cases, the total market value of a company following
a reverse stock split is lower, and may be substantially lower, than the total market value before the reverse stock split. In
addition, the fewer number of shares that will be available to trade could possibly cause the trading market of the Common Stock
to become less liquid, which could have an adverse effect on the price of the Common Stock. We cannot provide any assurance that
the Company’s Common Stock will meet The NASDAQ Global Select Market continued listing requirements following the Reverse
Split. The market price of the Common Stock is based on our performance and other factors, some of which may be unrelated to the
number of our shares outstanding.
In addition, there
can be no assurance that the Reverse Split will result in a per share price that will attract brokers and investors who do not
trade in lower priced stock.
Principal Effects of
the Reverse Split
Subject to the discretion
of the Board of Directors, on the effective date of the Reverse Split, each two (2) to eight (8) shares of our Common Stock issued
and outstanding immediately prior to the Reverse Split effective date (the “Old Shares”) will automatically and without
any action on the part of the shareholders be converted into one (1) share of our Common Stock (the “New Shares”).
In the following discussion, we provide examples of the effects of a one-for-four reverse stock split.
Corporate Matters.
The Reverse Split would have the following effects based upon the number of shares of Common Stock outstanding as of November
1, 2019:
|
•
|
in the case of a one-for-four reverse stock split, every four (4) of our Old Shares owned by a shareholder would be exchanged for one (1) New Share; and
|
|
•
|
the number of shares of our Common Stock outstanding will be reduced from 47,583,072 shares to approximately 11,895,768 shares.
|
The Reverse Split will
be effected simultaneously for all of our outstanding Common Stock and the exchange ratio will be the same for all of our outstanding
Common Stock. The Reverse Split will affect all of our shareholders uniformly and will not affect any shareholder’s percentage
ownership interests in the Company, except to the extent that the Reverse Split results in any of our shareholders owning a fractional
share. As described below, shareholders and holders of options and warrants holding fractional shares will have their shares rounded
up to the nearest whole number. Common Stock issued pursuant to the Reverse Split will remain fully paid and non-assessable.
Fractional Shares.
No scrip or fractional share certificates will be issued in connection with the Reverse Split. Shareholders who otherwise would
be entitled to receive fractional shares because they hold a number of Old Shares not evenly divisible by the one (1) for four
(4) reverse stock split ratio, will be entitled, upon surrender of certificate(s) representing these shares, to a number of shares
of New Shares rounded up to the nearest whole number. The ownership of a fractional interest will not give the shareholder any
voting, dividend or other rights except to have his or her fractional interest rounded up to the nearest whole number when the
New Shares are issued.
Options and Warrants.
All outstanding options, warrants, notes, debentures and other securities convertible to Common Stock will be adjusted as a result
of the Reverse Split, as required by the terms of these securities. In particular, the conversion ratio for each instrument will
be reduced, and the exercise price, if applicable, will be increased, in accordance with the terms of each instrument and based
on the one-for-four ratio.
Authorized Shares.
The Company is presently authorized under its Articles of Incorporation to issue 80,000,000 shares of Common Stock. Upon effectiveness
of the Reverse Split, the number of authorized shares of Common Stock would remain the same, although the number of shares of Common
Stock issued and outstanding will decrease. Because the number of issued and outstanding shares of Common Stock will decrease,
the number of shares of Common Stock remaining available for issuance will increase. The issuance in the future of additional shares
of our Common Stock may have the effect of diluting the earnings per share and book value per share, as well as the stock ownership
and voting rights of the currently outstanding shares of our Common Stock. The effective increase in the number of authorized but
unissued and unreserved shares of the Company’s Common Stock may be construed as having an anti-takeover effect as further
discussed below. Authorized but unissued shares will be available for issuance, and we may issue such shares in future financings
or otherwise. If we issue additional shares, the ownership interest of holders of our Common Stock would be diluted. Also, the
issued shares may have rights, preferences or privileges senior to those of our Common Stock. The Company does not currently have
any plans, proposal or arrangement to issue any of its authorized but unissued shares of Common Stock.
Accounting Matters.
The Reverse Split will not affect the par value of our Common Stock. As a result, on the effective date of the Reverse Split, the
stated capital on our balance sheet attributable to our Common Stock will be reduced in proportion to the Reverse Split ratio (that
is, in a one-for-four reverse stock split, the stated capital attributable to our Common Stock will be reduced to 1/4 of its existing
amount) and the additional paid-in capital account shall be credited with the amount by which the stated capital is reduced. The
per share net income or loss and net book value of our Common Stock will also be increased because there will be fewer shares of
our Common Stock outstanding.
Potential Anti-Takeover
Effect. Although the increased proportion of unissued authorized shares to issued shares could, under certain circumstances,
have an anti-takeover effect (for example, by permitting issuances that would dilute the stock ownership of a person seeking to
effect a change in the composition of our Board or contemplating a tender offer or other transaction for the combination of the
Company with another company), the Reverse Split was not proposed in response to any effort of which we are aware to accumulate
our shares of Common Stock or obtain control of us, nor is it part of a plan by management to recommend a series of similar actions
having an anti-takeover effect to our Board of Directors and shareholders. Other than the Reverse Split, our Board of Directors
does not currently contemplate recommending the adoption of any other corporate action that could be construed to affect the ability
of third parties to take over or change control of the Company.
The number of shares
held by each individual shareholder will be reduced if the Reverse Split is implemented. This will increase the number of shareholders
who hold less than a “round lot,” or 100 shares. Typically, the transaction costs to shareholders selling “odd
lots” are higher on a per share basis. Consequently, the Reverse Split could increase the transaction costs to existing shareholders
in the event they wish to sell all or a portion of their shares.
The Company is subject
to the periodic reporting and other requirements of the Exchange Act. If the proposed Reverse Split is implemented, our Common
Stock will continue to be reported on The NASDAQ Global Select Market under the symbol “GURE” (although NASDAQ will
add the letter “D” to the end of the trading symbol for a period of twenty (20) trading days to indicate that the Reverse
Split has occurred). We will continue to be subject to the periodic reporting requirements of the Exchange Act.
Procedure for Effecting
a Reverse Split
The Reverse Split will
be accomplished by amending the Company’s Articles of Incorporation to effect the split. The Reverse Split will become effective
at such future date as determined by the Board of Directors, as evidenced by the filing of an amendment to the Company’s
Articles of Incorporation with the Secretary of State of the State of Nevada (which we refer to as the “Effective Time”)
following the affirmative vote of the Company’s shareholders at the Annual Meeting. Beginning at the Effective Time, each
certificate representing Old Shares will be deemed for all corporate purposes to evidence ownership of New Shares.
SHAREHOLDERS SHOULD
NOT DESTROY ANY STOCK CERTIFICATE(S)
AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Material U.S. Federal Income Tax Consequences
of the Reverse Split
The following discussion
is a general summary of the material U.S. federal income tax consequences of the Reverse Split to a current shareholder of the
Company that is a “United States person,” as defined in the Internal Revenue Code of 1986, as amended (the “Code”)
(sometimes referred to herein as a “U.S. shareholder”), and who holds stock of the Company as a “capital asset,”
as defined in Section 1221 of the Code. This discussion does not purport to be a complete analysis of all of the potential tax
effects of the Reverse Split. Tax considerations applicable to a particular shareholder will depend on that shareholder’s
individual circumstances. The discussion does not address the tax consequences that may be relevant to particular categories of
shareholders subject to special treatment under certain U.S. federal income tax laws (such as dealers in securities or currencies,
banks, insurance companies, tax-exempt organizations, financial institutions, broker-dealers, regulated investment companies, real
estate investment companies, real estate mortgage investment conduits and foreign individuals and entities). The discussion also
does not address any tax consequences arising under U.S. federal non-income tax laws, such as gift or estate tax laws, or the laws
of any state, local or foreign jurisdiction. In addition, the discussion does not consider the tax treatment of partnerships or
other pass-through entities or persons who hold stock of the Company through such entities.
The following discussion
is based upon the Code, U.S. Treasury Department regulations promulgated thereunder, published rulings of the Internal Revenue
Service (the “IRS”) and judicial decisions now in effect, all of which are subject to change or to varying interpretation
at any time. Any such changes or varying interpretations may also be applied retroactively. The following discussion has no binding
effect on the IRS or the courts.
No gain or loss should
be recognized by a U.S. shareholder upon such shareholder’s deemed exchange of Old Shares for New Shares pursuant to the
Reverse Split. The aggregate tax basis of the New Shares received in the Reverse Split should be the same as such shareholder’s
aggregate tax basis in the Old Shares being exchanged, and the holding period of the New Shares should include the holding period
of such shareholder in the Old Shares.
Because of the complexity
of the tax laws and because the tax consequences to the Company or to any particular shareholder may be affected by matters not
discussed herein, shareholders are urged to consult their own tax advisors as to the specific tax consequences to them in connection
with the Reverse Split, including tax reporting requirements, the applicability and effect of foreign, U.S. federal, state and
local and other applicable tax laws and the effect of any proposed changes in the tax laws.
Dissenters’ Rights of Appraisal
We are a Nevada corporation
and are governed by the Nevada Revised Statutes. Holders of the Company’s Common Stock will not have appraisal or dissenter’s
rights under Nevada law in connection with the Reverse Split.
Interest of Certain Persons in Matters to
be Acted Upon
No director, executive
officer, associate of any director or executive officer or any other person has any substantial interest, direct or indirect, by
security holdings or otherwise, in the Reverse Split that is not shared by all other shareholders of ours.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE REVERSE SPLIT.
PROPOSAL 4
ADOPTION OF THE COMPANY’S 2019
OMNIBUS EQUITY INCENTIVE PLAN
The Company is seeking approval of the stockholders to adopt
the Company’s 2019 Omnibus Equity Incentive Plan (the “2019 Plan”). The purpose of the 2019 Plan is to assist
the Company to attract, retain and provide incentives to employees and directors of, and consultants and advisers to, the Company
and its subsidiaries. If the 2019 Plan is approved, awards under the 2019 Plan will be limited in the aggregate to 10,341,989 shares
of our common stock, inclusive of the awards that were previously issued and outstanding under the Company’s 2007 Equity
Incentive Plan, as amended (the “2007 Plan”). Upon adoption of this 2019 Plan, the 2007 Plan shall be frozen, no new
awards shall be granted thereunder, and outstanding awards thereunder shall continue to be governed by the terms and condition
of the 2007 Plan and applicable award agreement.
Equity Compensation Plan Information
Pursuant to the 2007 Plan, the aggregate
number shares of the Company’s common stock available for grant of stock options and issuance is 4,341,989 shares. On October
5, 2015, the annual meeting of the Company’s stockholders approved to increase the aggregate number of shares reserved and
available for grant and issuance under the 2007 Plan to 10,341,989 shares. As of the date of this proxy statement, the number of
shares of the Company’s common stock available for issuance under the 2007 Plan is 4,895,989 shares.
The total number shares of common stock
under the 2007 Plan, including shares originally authorized by equity holders and shares remaining for future issuance as of December
31, 2018, is as follows:
Plan category
|
|
Number of securities to be issued upon
exercise of outstanding options, warrants and rights
(a)
|
|
Weighted-average exercise price of outstanding
options, warrants and rights
(b)
|
|
Number of securities remaining available
for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
|
Equity compensation plans approved by security holders
|
|
2,518,000
|
|
0.97
|
|
5,005,489
|
Equity compensation plans not approved by security holders
|
|
-
|
|
-
|
|
-
|
Total
|
|
2,518,000
|
|
-
|
|
5,005,489
|
General
The following summary of the 2019 Plan is
qualified in its entirety by reference to the complete text of the 2019 Plan, a copy of which is attached to this proxy statement
as Appendix A. Capitalized terms used and not otherwise defined in this section discussing the adoption of the 2019
Plan shall have the meanings given to them in the 2019 Plan.
Our Board of Directors has adopted and approved
the 2019 Plan, subject to the effectiveness of stockholder approval. Upon shareholders’ approval, the 2019 Plan will become
effective on December 18, 2019 and is a comprehensive incentive compensation plan under which we can grant equity-based and other
incentive awards to officers, employees and directors of, and consultants and advisers to, the Company. The purpose of the 2019
Plan is to help us attract, motivate and retain such persons and thereby enhance shareholder value.
Administration.
Upon effectiveness, the 2019 Plan will be
administered by a Committee of the Board of Directors (the “Plan Committee”) consisting of two or more persons who
will each be (i) “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act, and (ii) “independent”
for purposes of any applicable listing requirements. If a member of the Plan Committee is eligible to receive an award under the
2019 Plan, such Plan Committee member shall have no authority hereunder with respect to his or her own award. Among other things,
the Plan Committee has complete discretion, subject to the terms of the 2019 Plan, to determine the employees, directors and consultants
to be granted awards under the 2019 Plan, the type of awards to be granted, the number of shares subject to each award, the exercise
price under each option and the base price for each stock appreciation right (“SAR”), the term of each award, the vesting
schedule for an award, whether to accelerate vesting, the value of the shares underlying the award, and the required withholdings,
if any. The Plan Committee is also authorized to construe the award agreements, and may prescribe rules relating to the 2019 Plan.
Except to the extent (i) approved in advance by holders of a majority of the shares of the Company entitled to vote generally
in the election of directors, or (ii) as a result of any Change of Control or any adjustment as provided in the 2019 Plan, the
Plan Committee shall not have the power or authority to reduce, whether through amendment or otherwise, the exercise price under
any outstanding Option or Stock Appreciation Right, or to grant any new Award or make any payment of cash in substitution for or
upon the cancellation of Options and/or Stock Appreciation Rights previously granted.
Grant of Awards; Shares Available for Awards.
The 2019 Plan provides for the grant of
awards which are incentive stock options (“ISOs”), non-qualified stock options (“NQSOs”), unrestricted
stock, restricted stock, restricted stock units, performance stock, performance units, SARs, tandem stock appreciation rights or
any combination of the foregoing, to key management employees, directors, and consultants of the Company or any of its subsidiaries
(each a “participant”). We have reserved a total of 10,341,989 shares for issuance as or under awards to be made under
the 2019 Plan inclusive of the awards previously issued and outstanding under the Company’s 2007 Plan. To the extent that
an award lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for any reason, or the rights of its
holder terminate, any shares subject to such award shall again be available for the grant of a new award. The 2019 Plan shall continue
in effect, unless sooner terminated, until the tenth (10th) anniversary of the date on which it is adopted by the Board of Directors
(except as to awards outstanding on that date). The Board of Directors in its discretion may terminate the 2019 Plan at any time
with respect to any shares for which awards have not theretofore been granted; provided, however, that the 2019 Plan’s termination
shall not materially and adversely impair the rights of a holder, without the consent of the holder, with respect to any award
previously granted. The number of shares for which awards which are options or SARs may be granted to a participant under the 2019
Plan during any calendar year is limited to 1,000,000.
Options.
The term of each stock option shall be as
specified in the option agreement; provided, however, that except for stock options which are ISOs, granted to an employee who
owns or is deemed to own (by reason of the attribution rules applicable under Code Section 424(d)) more than 10% of the total combined
voting power of all classes of shares of the Company or of any parent corporation or subsidiary corporation thereof (both as defined
in Section 424 of the Code), within the meaning of Section 422(b)(6) of the Code (a “ten percent shareholder”), no
option shall be exercisable after the expiration of ten (10) years from the date of its grant (five (5) years for an employee who
is a ten percent shareholder).
The price at which a share may be purchased
upon exercise of a stock option shall be determined by the Plan Committee; provided, however, that such option price (i) shall
not be less than the fair market value of a share on the date such stock option is granted, and (ii) shall be subject to adjustment
as provided in the 2019 Plan. The Plan Committee or the Board of Directors shall determine the time or times at which, or the circumstances
under which, a stock option may be exercised in whole or in part, the time or times at which options shall cease to be or become
exercisable following termination of the stock option holder’s employment or upon other conditions, the methods by which
such exercise price may be paid or deemed to be paid, the form of such payment, and the methods by or forms in which shares will
be delivered or deemed to be delivered to participants who exercise stock options.
Options which are ISOs shall comply in all
respects with Section 422 of the Code. In the case of an ISO granted to a ten percent shareholder, the per share exercise price
under such ISO (to the extent required by the Code at the time of grant) shall be no less than 110% of the fair market value of
a share on the date such ISO is granted. ISOs may only be granted to employees of the Company. In addition, the aggregate fair
market value of the shares subject to an ISO (determined at the time of grant) which are exercisable for the first time by an employee
during any calendar year under all plans of the Company which provide for the grant of ISOs may not exceed $100,000. Any Option
which specifies that it is not intended to qualify as an ISO or any Option that fails to meet the ISO requirements at any point
in time will automatically be treated as a NQSO under the terms of the 2019 Plan.
Unrestricted Stock Awards.
Pursuant to the terms of the applicable
unrestricted stock award agreement, an unrestricted stock award is the award or sale of shares to employees, directors or consultants,
which are not subject to transfer restrictions in consideration for past services rendered to the Company or for other valid consideration.
Restricted Stock Awards.
A restricted stock award is a grant or sale
of shares of Common Stock to the holder, subject to such restrictions on transferability, risk of forfeiture and other restrictions,
if any, as the Plan Committee or the Board of Directors may impose, which restrictions may lapse separately or in combination at
such times, under such circumstances (including based on achievement of performance goals and/or future service requirements),
in such installments or otherwise, as the Plan Committee or the Board of Directors may determine at the date of grant or purchase
or thereafter. If provided for under the restricted stock award agreement, a participant who is granted or has purchased restricted
stock shall have all of the rights of a shareholder, including the right to vote the restricted stock and the right to receive
dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Plan Committee or the Board of Directors
or in the award agreement). During the restricted period applicable to the restricted stock, subject to certain exceptions, the
restricted stock may not be sold, transferred, pledged, exchanged, hypothecated, or otherwise disposed of by the participant.
Restricted Stock Unit Awards.
A restricted stock unit award provides for
a grant of shares of Common Stock or a cash payment to be made to the holder upon the satisfaction of predetermined individual
service-related vesting requirements, based on the number of units awarded to the holder. The Plan Committee shall set forth in
the applicable restricted stock unit award agreement the individual service-based vesting requirements which the holder would be
required to satisfy before the holder would become entitled to payment and the number of units awarded to the holder. At the time
of such award, the Plan Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions. The holder
of a restricted stock unit shall be entitled to receive a cash payment equal to the fair market value of a share, as determined
in the sole discretion of the 2019 Plan Committee and as set forth in the restricted stock unit award agreement, for each restricted
stock unit subject to such restricted stock unit award, if and to the extent the holder satisfies the applicable vesting requirements.
Such payment or distribution shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next following
the end of the calendar year in which the restricted stock unit first becomes vested, unless otherwise structured to comply with
Code Section 409A.
Performance Stock Awards.
A performance stock award provides for the
distribution of shares (or cash equal to the fair market value of shares) to the holder upon the satisfaction of predetermined
individual and/or Company goals or objectives. The Plan Committee shall set forth in the applicable performance stock award agreement
the performance goals and objectives (and the period of time to which such goals and objectives shall apply) which the holder and/or
Company would be required to satisfy before the holder would become entitled to the receipt of shares (or cash equal to the fair
market value of shares) pursuant to such holder’s performance stock award and the number of shares of shares subject to such
performance stock award. The vesting restrictions under any performance stock award shall constitute a “substantial risk
of forfeiture” under Section 409A of the Code and, if such goals and objectives are achieved, the distribution of such shares
shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next following the end of our fiscal
year to which such goals and objectives relate, unless otherwise structured to comply with Code Section 409A. At the time of such
award, the Plan Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions. The holder of
a performance stock award shall have no rights as a shareholder until such time, if any, as the holder actually receives shares
pursuant to the performance stock award.
Performance Unit Awards.
A performance unit award provides for a
cash payment to be made to the holder upon the satisfaction of predetermined individual and/or Company (or affiliate) performance
goals or objectives based on selected performance criteria, based on the number of units awarded to the holder. The Plan Committee
shall set forth in the applicable performance unit award agreement the performance goals and objectives (and the period of time
to which such goals and objectives shall apply) which the holder and/or Company would be required to satisfy before the holder
would become entitled to payment, the number of units awarded to the holder and the dollar value assigned to each such unit. At
the time of such award, the Plan Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions.
The holder of a performance unit shall be entitled to receive a cash payment equal to the dollar value assigned to such unit under
the applicable performance unit award agreement if the holder and/or the Company satisfies (or partially satisfies, if applicable
under the applicable performance unit award agreement) the performance goals and objectives set forth in such performance unit
award agreement. If achieved, such payment shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar
month next following the end of the Company’s fiscal year to which such performance goals and objectives relate, unless otherwise
structured to comply with Code Section 409A.
Stock Appreciation Rights.
A SAR provides the participant to whom it
is granted the right to receive, upon its exercise, cash or shares of Common Stock equal to the excess of (A) the fair market value
of the number of shares subject to the SAR on the date of exercise, over (B) the product of the number of shares subject to the
SAR multiplied by the base value for the SAR, as determined by the Plan Committee or the Board of Directors. The Plan Committee
shall set forth in the applicable SAR award agreement the terms and conditions of the SAR, including the base value for the SAR
(which shall not be less than the fair market value of a share on the date of grant), the number of shares subject to the SAR and
the period during which the SAR may be exercised and any other special rules and/or requirements which the Plan Committee imposes
on the SAR. No SAR shall be exercisable after the expiration of ten (10) years from the date of grant. A tandem SAR is a SAR granted
in connection with a related option, the exercise of some or all of which results in termination of the entitlement to purchase
some or all of the shares under the related option. If the Plan Committee grants a SAR which is intended to be a tandem SAR, the
tandem SAR shall be granted at the same time as the related option and additional restrictions apply.
Recapitalization or Reorganization.
Subject to certain restrictions, the 2019
Plan provides for the adjustment of shares underlying awards previously granted if, and whenever, prior to the expiration or distribution
to the holder of shares underlying an award theretofore granted, the Company shall effect a subdivision or consolidation of our
Common Stock or the payment of a stock dividend on Common Stock without receipt of consideration by the Company. If the Company
recapitalizes or otherwise changes its capital structure, thereafter upon any exercise or satisfaction, as applicable, of a previously
granted award, the holder shall be entitled to receive (or entitled to purchase, if applicable) under such award, in lieu of the
number of shares then covered by such award, the number and class of shares and securities to which the holder would have been
entitled pursuant to the terms of the recapitalization if, immediately prior to such recapitalization, the holder had been the
holder of record of the number of shares then covered by such award. The 2019 Plan also provides for the adjustment of shares underlying
awards previously granted in the event of changes to the outstanding shares by reason of an extraordinary cash dividend, reorganization,
merger, consolidation, combination, split-up, spin-off, exchange or other relevant change in capitalization occurring after the
date of the grant of any award, subject to certain restrictions.
Amendment and Termination.
The 2019 Plan shall continue in effect,
unless sooner terminated pursuant to its terms, until the tenth (10th) anniversary of the date on which it became effective (except
as to awards outstanding on that date). The Board of Directors may terminate the 2019 Plan at any time with respect to any shares
for which awards have not theretofore been granted; provided, however, that the 2019 Plan’s termination shall not materially
and adversely impair the rights of a holder with respect to any award theretofore granted without the consent of the holder. The
Board of Directors shall have the right to alter or amend the 2019 Plan or any part thereof from time to time; provided, however,
that without the approval by a majority of the votes cast at a meeting of our shareholders at which a quorum representing a majority
of our shares entitled to vote generally in the election of directors is present in person or by proxy, no amendment or modification
of the 2019 Plan may (i) materially increase the benefits accruing to holders, (ii) except as otherwise expressly provided in the
2019 Plan, materially increase the number of shares subject to the 2019 Plan or the individual award agreements, (iii) materially
modify the requirements for participation, or (iv) amend, modify or suspend certain re-pricing prohibitions or amendment and termination
provisions as specified therein. In addition, no change in any award theretofore granted may be made which would materially and
adversely impair the rights of a holder with respect to such award without the consent of the holder (unless such change is required
to cause the 2019 Plan and/or award to be exempt from or comply with Section 409A of the Code).
As of the effective date of the 2019 Plan,
no awards will have been granted under the 2019 Plan.
Certain U.S. Federal Income Tax Consequences of the 2019
Plan
The following is a general summary of certain
U.S. federal income tax consequences under current tax law to the Company (to the extent it is subject to U.S. federal income taxation
on its net income) and to participants in the 2019 Plan who are individual citizens or residents of the United States for federal
income tax purposes (“U.S. Participants”) of stock options which are ISOs, or stock options which are NQSOs, unrestricted
stock, restricted stock, restricted stock units, performance stock, performance units and SARs. This summary does not purport to
cover all of the special rules that may apply, including special rules relating to limitations on our ability to deduct certain
compensation, special rules relating to deferred compensation, golden parachutes, U.S. Participants subject to Section 16(b) of
the Exchange Act or the exercise of a stock option with previously-acquired Common Stock. This summary assumes that U.S. Participants
will hold their Common Stock as capital assets within the meaning of Section 1221 of the Code . In addition, this summary does
not address the foreign, state or local or other tax consequences, or any U.S. federal non-income tax consequences, inherent in
the acquisition, ownership, vesting, exercise, termination or disposition of an award under the 2019 Plan, or shares issued pursuant
thereto. Participants are urged to consult with their own tax advisors concerning the tax consequences to them of an award under
the 2019 Plan or shares issued thereunder pursuant to the 2019 Plan.
A U.S. Participant generally does not recognize
taxable income upon the grant of a NQSO if structured to be exempt from or comply with Code Section 409A. Upon the exercise of
a NQSO, the U.S. Participant generally recognizes ordinary compensation income in an amount equal to the excess, if any, of the
fair market value of the shares acquired on the date of exercise over the exercise price thereof, and the Company generally will
be entitled to a deduction for such amount at that time. If the U.S. Participant later sells shares acquired pursuant to the exercise
of a NQSO, the U.S. Participant recognizes a long-term or short-term capital gain or loss, depending on the period for which the
shares were held. A long-term capital gain is generally subject to more favorable tax treatment than ordinary income or a short-term
capital gain. The deductibility of capital losses is subject to certain limitations.
A U.S. Participant generally does not recognize
taxable income upon the grant or, except for purposes of the U.S. alternative minimum tax (“AMT”) the exercise, of
an ISO. For purposes of the AMT, which is payable to the extent it exceeds the U.S. Participant’s regular income tax, upon
the exercise of an ISO, the excess of the fair market value of the shares subject to the ISO over the exercise price is a preference
item for AMT purposes. If the U.S. Participant disposes of the shares acquired pursuant to the exercise of an ISO more than two
years after the date of grant and more than one year after the transfer of the shares to the U.S. Participant, the U.S. Participant
generally recognizes a long-term capital gain or loss, and the Company will not be entitled to a deduction. However, if the U.S.
Participant disposes of such shares prior to the end of either of the required holding periods, the U.S. Participant will have
ordinary compensation income equal to the excess (if any) of the fair market value of such shares on the date of exercise (or,
if less, the amount realized on the disposition of such shares) over the exercise price paid for such shares, and the Company generally
will be entitled to deduct such amount.
A U.S. Participant generally does not recognize
income upon the grant of a SAR. The U.S. Participant recognizes ordinary compensation income upon exercise of the SAR equal to
the increase in the value of the underlying shares, and the Company generally will be entitled to a deduction for such amount.
A U.S. Participant generally does not recognize
income on the receipt of a performance stock award, performance unit award, restricted stock unit award or unrestricted stock award
until a cash payment or a distribution of shares is received thereunder. At such time, the U.S. Participant recognizes ordinary
compensation income equal to the excess, if any, of the fair market value of the shares or the amount of cash received over any
amount paid therefor, and the Company generally will be entitled to deduct such amount at such time.
A U.S. Participant who receives a restricted
stock award generally recognizes ordinary compensation income equal to the excess, if any, of the fair market value of such shares
at the time the restriction lapses over any amount paid for the shares. Alternatively, the U.S. Participant may make an election
under Section 83(b) of the Code to be taxed on the fair market value of such shares at the time of grant. The Company generally
will be entitled to a deduction at the same time and in the same amount as the income that is required to be included by the U.S.
Participant.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE “FOR” THE GULF RESOURCES INC. 2019 OMNIBUS EQUITY INCENTIVE PLAN
OTHER INFORMATION
Important Notice Regarding Availability of Proxy Materials
Under rules adopted
by the SEC, the Company is making this Proxy Statement and the Company’s Annual Report available on the Internet instead
of mailing a printed copy of these materials to each shareholder. Shareholders who received a Notice of Internet Availability of
Proxy Materials (the “Notice”) by mail will not receive a printed copy of these materials other than as described
below. Instead, the Notice contains instructions as to how shareholders may access and review all of the important information
contained in the materials on the Internet, including how shareholders may submit proxies by telephone or over the Internet.
Stockholders' Proposals for Next Annual Meeting
A stockholder of record
may present a proposal for action at the next annual meeting provided that we receive the proposal at our executive office no later
than July 11, 2020. We anticipate that the 2020 Annual Meeting will be held in the fourth fiscal quarter of 2020. The proponent
may submit a maximum of one (1) proposal of not more than five hundred (500) words for inclusion in our proxy materials for a meeting
of security holders. At the Annual Meeting, management proxies will have discretionary authority, under Rule 14a-4 of the Securities
Exchange Act of 1934, to vote on stockholder proposals that are not submitted for inclusion in our proxy statement unless received
by us before July 11, 2020.
Other Business
The Board of Directors
knows of no business other than that set forth above to be transacted at the meeting, but if other matters requiring a vote of
the stockholders arise, the persons designated as proxies will vote the shares of Common Stock represented by the proxies in accordance
with their judgment on such matters. If a stockholder specifies a different choice on the proxy, his or her shares of Common Stock
will be voted in accordance with the specification so made.
Where You Can Find More Information
We file annual and
quarterly reports, proxy statements and other information with the SEC. Stockholders may read and copy any reports,
statements or other information that we file at the SEC. Our public filings are also available from commercial
document retrieval services and at the Internet Web site maintained by the SEC at www.sec.gov. The Company’s
Annual Report on Form 10-K, as amended, is available on our website at www.gulfresourcesinc.cn.
STOCKHOLDERS SHOULD
RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT TO VOTE THEIR SHARES AT THE ANNUAL MEETING. NO ONE HAS
BEEN AUTHORIZED TO PROVIDE ANY INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY
STATEMENT IS DATED NOVEMBER 1, 2019. STOCKHOLDERS SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, UNLESS OTHERWISE DISCLOSED.
IT IS IMPORTANT
THAT PROXIES BE RETURNED PROMPTLY. WE URGE YOU TO FILL IN, SIGN AND RETURN THE FORM OF PROXY IN THE PREPAID ENVELOPE PROVIDED,
NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
By Order of the Board of Directors,
/s/ Ming Yang
Ming Yang
Chairman of the Board of Directors
Dated: November 1, 2019
Appendix A
GULF RESOURCES, INC.
2019 OMNIBUS EQUITY INCENTIVE PLAN
GULF RESOURCES, INC.
2019 OMNIBUS EQUITY INCENTIVE PLAN
Article
I
PURPOSE
The purpose of this
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan (the “Plan”) is to benefit Gulf Resources, Inc., a Nevada
corporation (the “Company”) and its stockholders, by assisting the Company and its subsidiaries to attract,
retain and provide incentives to key management employees, directors, and consultants of the Company and its Affiliates, and to
align the interests of such service providers with those of the Company’s stockholders. Accordingly, the Plan provides for
the granting of Non-qualified Stock Options, Incentive Stock Options, Restricted Stock Awards, Restricted Stock Unit Awards, Stock
Appreciation Rights, Performance Stock Awards, Performance Unit Awards, Unrestricted Stock Awards, Distribution Equivalent Rights
or any combination of the foregoing.
Article
II
DEFINITIONS
The following definitions
shall be applicable throughout the Plan unless the context otherwise requires:
2.1
“Affiliate” shall mean any corporation which, with respect to the Company, is a “subsidiary
corporation” within the meaning of Section 424(f) of the Code or other entity in which the Company has a controlling interest
in such entity or another entity which is part of a chain of entities in which the Company or each entity has a controlling interest
in another entity in the unbroken chain of entities ending with the applicable entity.
2.2
“Award” shall mean, individually or collectively, any Option, Restricted Stock Award, Restricted
Stock Unit Award, Performance Stock Award, Performance Unit Award, Stock Appreciation Right, Distribution Equivalent Right or Unrestricted
Stock Award.
2.3
“Award Agreement” shall mean a written agreement between the Company and the Holder with respect
to an Award, setting forth the terms and conditions of the Award, as amended.
2.4
“Board” shall mean the Board of Directors of the Company.
2.5
“Base Value” shall have the meaning given to such term in Section 14.2.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
2.6
“Cause” shall mean (i) if the Holder is a party to an employment or service agreement with
the Company or an Affiliate which agreement defines “Cause” (or a similar term), “Cause” shall have
the same meaning as provided for in such agreement, or (ii) for a Holder who is not a party to such an agreement, “Cause”
shall mean termination by the Company or an Affiliate of the employment (or other service relationship) of the Holder by reason
of the Holder’s (A) intentional failure to perform reasonably assigned duties, (B) dishonesty or willful misconduct in the
performance of the Holder’s duties, (C) involvement in a transaction which is materially adverse to the Company or an Affiliate,
(D) breach of fiduciary duty involving personal profit, (E) willful violation of any law, rule, regulation or court order (other
than misdemeanor traffic violations and misdemeanors not involving misuse or misappropriation of money or property), (F) commission
of an act of fraud or intentional misappropriation or conversion of any asset or opportunity of the Company or an Affiliate, or
(G) material breach of any provision of the Plan or the Holder’s Award Agreement or any other written agreement between the
Holder and the Company or an Affiliate, in each case as determined in good faith by the Board, the determination of which shall
be final, conclusive and binding on all parties.
2.7
“Change of Control” shall mean: (i) for a Holder who is a party to an employment or consulting
agreement with the Company or an Affiliate which agreement defines “Change of Control” (or a similar term), “Change
of Control” shall have the same meaning as provided for in such agreement, or (ii) for a Holder who is not a party to
such an agreement, “Change of Control” shall mean the satisfaction of any one or more of the following conditions
(and the “Change of Control” shall be deemed to have occurred as of the first day that any one or more of the following
conditions shall have been satisfied):
(a)
Any person (as such term is used in paragraphs 13(d) and 14(d)(2) of the Exchange Act, hereinafter in this definition,
“Person”), other than the Company or an Affiliate or an employee benefit plan of the Company or an Affiliate,
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities;
(b)
The closing of a merger, consolidation or other business combination (a “Business Combination”)
other than a Business Combination in which holders of the Shares immediately prior to the Business Combination have substantially
the same proportionate ownership of the common stock or ordinary shares, as applicable, of the surviving corporation immediately
after the Business Combination as immediately before;
(c)
The closing of an agreement for the sale or disposition of all or substantially all of the Company’s assets
to any entity that is not an Affiliate;
(d)
The approval by the holders of shares of Shares of a plan of complete liquidation of the Company, other than a merger
of the Company into any subsidiary or a liquidation as a result of which persons who were stockholders of the Company immediately
prior to such liquidation have substantially the same proportionate ownership of shares of common stock or ordinary shares, as
applicable, of the surviving corporation immediately after such liquidation as immediately before; or
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
(e)
Within any twenty-four (24) month period, the Incumbent Directors shall cease to constitute at least a majority of
the Board or the board of directors of any successor to the Company; provided, however, that any director elected
to the Board, or nominated for election, by a majority of the Incumbent Directors then still in office, shall be deemed to be an
Incumbent Director for purposes of this paragraph (e), but excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of either an actual or threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, entity or “group”
other than the Board (including, but not limited to, any such assumption that results from paragraphs (a), (b), (c), or (d) of
this definition).
2.8
“Code” shall mean the United States of America Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to any section and any
regulation under such section.
2.9
“Committee” shall mean a committee comprised of two (2) or more members of the Board who are selected
by the Board as provided in Section 4.1.
2.10
“Company” shall have the meaning given to such term in the introductory paragraph, including
any successor thereto.
2.11
“Consultant” shall mean any non-Employee (individual or entity) advisor to the Company or an Affiliate
who or which has contracted directly with the Company or an Affiliate to render bona fide consulting or advisory services thereto.
2.12
“Director” shall mean a member of the Board or a member of the board of directors of an Affiliate,
in either case, who is not an Employee.
2.13
“Distribution Equivalent Right” shall mean an Award granted under Article XIII of the Plan which
entitles the Holder to receive bookkeeping credits, cash payments and/or Share distributions equal in amount to the distributions
that would have been made to the Holder had the Holder held a specified number of Shares during the period the Holder held the
Distribution Equivalent Right.
2.14
“Distribution Equivalent Right Award Agreement” shall mean a written agreement between the Company
and a Holder with respect to a Distribution Equivalent Right Award.
2.15
“Effective Date” shall mean December 18, 2019.
2.16
“Employee” shall mean any employee, including any officer, of the Company or an Affiliate.
2.17
“Exchange Act” shall mean the United States of America Securities Exchange Act of 1934, as amended.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
2.18
“Fair Market Value” shall mean, as of any specified date, the closing sales price of the Shares
for such date (or, in the event that the Shares are not traded on such date, on the immediately preceding trading date) on the
NASDAQ Stock Market (“NASDAQ”), as reported by NASDAQ, or such other domestic or foreign national securities exchange
on which the Shares may be listed. If the Shares are not listed on NASDAQ or on a national securities exchange, but are quoted
on the OTC Bulletin Board or by the National Quotation Bureau, the Fair Market Value of the Shares shall be the mean of the highest
bid and lowest asked prices per Share for such date. If the Shares are not quoted or listed as set forth above, Fair Market Value
shall be determined by the Board in good faith by any fair and reasonable means (which means may be set forth with greater specificity
in the applicable Award Agreement). The Fair Market Value of property other than Shares shall be determined by the Board in good
faith by any fair and reasonable means consistent with the requirements of applicable law.
2.19
“Family Member” of an individual shall mean any child, stepchild, grandchild, parent, stepparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, any person sharing the Holder’s household (other than a tenant or employee of the Holder),
a trust in which such persons have more than fifty percent (50%) of the beneficial interest, a foundation in which such persons
(or the Holder) control the management of assets, and any other entity in which such persons (or the Holder) own more than fifty
percent (50%) of the voting interests.
2.20
“Holder” shall mean an Employee, Director or Consultant who has been granted an Award or any such
individual’s beneficiary, estate or representative, who has acquired such Award in accordance with the terms of the Plan,
as applicable.
2.21
“Incentive Stock Option” shall mean an Option which is intended by the Committee to constitute
an “incentive stock option” and conforms to the applicable provisions of Section 422 of the Code.
2.22
“Incumbent Director” shall mean, with respect to any period of time specified under the Plan for
purposes of determining whether or not a Change of Control has occurred, the individuals who were members of the Board at the beginning
of such period.
2.23
“Non-qualified Stock Option” shall mean an Option which is not an Incentive Stock Option or which
is designated as an Incentive Stock Option but does not meet the applicable requirements of Section 422 of the Code.
2.24
“Option” shall mean an Award granted under Article VII of the Plan of an option to purchase Shares
and shall include both Incentive Stock Options and Non-qualified Stock Options.
2.25
“Option Agreement” shall mean a written agreement between the Company and a Holder with respect
to an Option.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
2.26
“Performance Criteria” shall mean the criteria selected by the Committee for purposes of establishing
the Performance Goal(s) for a Holder for a Performance Period.
2.27
“Performance Goals” shall mean, for a Performance Period, the written goal or goals established
by the Committee for the Performance Period based upon the Performance Criteria, which may be related to the performance of the
Holder, the Company or an Affiliate.
2.28
“Performance Period” shall mean one or more periods of time, which may be of varying and overlapping
durations, selected by the Committee, over which the attainment of the Performance Goals shall be measured for purposes of determining
a Holder’s right to, and the payment of, a Performance Stock Award or a Performance Unit Award.
2.29
“Performance Stock Award” or “Performance Stock” shall mean an Award granted
under Article XII of the Plan under which, upon the satisfaction of predetermined Performance Goals, Shares are paid to the Holder.
2.30
“Performance Stock Agreement” shall mean a written agreement between the Company and a Holder
with respect to a Performance Stock Award.
2.31
“Performance Unit” shall mean a Unit awarded to a Holder pursuant to a Performance Unit Award.
2.32
“Performance Unit Award” shall mean an Award granted under Article XI of the Plan under which,
upon the satisfaction of predetermined Performance Goals, a cash payment shall be made to the Holder, based on the number of Units
awarded to the Holder.
2.33
“Performance Unit Agreement” shall mean a written agreement between the Company and a Holder with
respect to a Performance Unit Award.
2.34
“Plan” shall mean this Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan, as amended from
time to time, together with each of the Award Agreements utilized hereunder.
2.35
“Restricted Stock Award” and “Restricted Stock” shall mean an Award granted
under Article VIII of the Plan of Shares, the transferability of which by the Holder is subject to Restrictions.
2.36
“Restricted Stock Agreement” shall mean a written agreement between the Company and a Holder with
respect to a Restricted Stock Award.
2.37
“Restricted Stock Unit Award” and “RSUs” shall refer to an Award granted under
Article X of the Plan under which, upon the satisfaction of predetermined individual service-related vesting requirements, a cash
payment shall be made to the Holder, based on the number of Units awarded to the Holder.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
2.38
“Restricted Stock Unit Agreement” shall mean a written agreement between the Company and a Holder
with respect to a Restricted Stock Award.
2.39
“Restriction Period” shall mean the period of time for which Shares subject to a Restricted Stock
Award shall be subject to Restrictions, as set forth in the applicable Restricted Stock Agreement.
2.40
“Restrictions” shall mean the forfeiture, transfer and/or other restrictions applicable to Shares
awarded to an Employee, Director or Consultant under the Plan pursuant to a Restricted Stock Award and set forth in a Restricted
Stock Agreement.
2.41
“Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under
the Exchange Act, as such may be amended from time to time, and any successor rule, regulation or statute fulfilling the same or
a substantially similar function.
2.42
“Shares” or “Stock” shall mean the common stock of the Company, par value $0.001
per share.
2.43
“Stock Appreciation Right” or “SAR” shall mean an Award granted under Article
XIV of the Plan of a right, granted alone or in connection with a related Option, to receive a payment equal to the increase in
value of a specified number of Shares between the date of Award and the date of exercise.
2.44
“Stock Appreciation Right Agreement” shall mean a written agreement between the Company and a
Holder with respect to a Stock Appreciation Right.
2.45
“Tandem Stock Appreciation Right” shall mean a Stock Appreciation Right granted in connection
with a related Option, the exercise of some or all of which results in termination of the entitlement to purchase some or all of
the Shares under the related Option, all as set forth in Article XIV.
2.46
“Ten Percent Stockholder” shall mean an Employee who, at the time an Option is granted to him
or her, owns shares possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Company
or of any parent corporation or subsidiary corporation thereof (both as defined in Section 424 of the Code), within the meaning
of Section 422(b)(6) of the Code.
2.47
“Termination of Service” shall mean a termination of a Holder’s employment with, or status
as a Director or Consultant of, the Company or an Affiliate, as applicable, for any reason, including, without limitation, Total
and Permanent Disability or death, except as provided in Section 6.4. In the event Termination of Service shall constitute a payment
event with respect to any Award subject to Code Section 409A, Termination of Service shall only be deemed to occur upon a “separation
from service” as such term is defined under Code Section 409A and applicable authorities.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
2.48
“Total and Permanent Disability” of an individual shall mean the inability of such individual
to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12)
months, within the meaning of Section 22(e)(3) of the Code.
2.49
“Unit” shall mean a bookkeeping unit, which represents such monetary amount as shall be designated
by the Committee in each Performance Unit Agreement, or represents one Share for purposes of each Restricted Stock Unit Award.
2.50
“Unrestricted Stock Award” shall mean an Award granted under Article IX of the Plan of Shares
which are not subject to Restrictions.
2.51
“Unrestricted Stock Agreement” shall mean a written agreement between the Company and a Holder
with respect to an Unrestricted Stock Award.
Article
III
EFFECTIVE DATE OF PLAN
The Plan shall be effective
as of the Effective Date, provided that the Plan is approved by the stockholders of the Company within twelve (12) months of such
date.
Article
IV
ADMINISTRATION
4.1
Composition of Committee. The Plan shall be administered by the Committee, which shall be appointed by the
Board. If necessary, in the Board’s discretion, to comply with Rule 16b-3 under the Exchange Act or relevant securities exchange
or inter-dealer quotation service, the Committee shall consist solely of two (2) or more Directors who are each (i) “non-employee
directors” within the meaning of Rule 16b-3 and (ii) “independent” for purposes of any applicable listing requirements.
If a member of the Committee shall be eligible to receive an Award under the Plan, such Committee member shall have no authority
hereunder with respect to his or her own Award.
4.2
Powers. Subject to the other provisions of the Plan, the Committee shall have the sole authority, in its discretion,
to make all determinations under the Plan, including but not limited to (i) determining which Employees, Directors or Consultants
shall receive an Award, (ii) the time or times when an Award shall be made (the date of grant of an Award shall be the date on
which the Award is awarded by the Committee), (iii) what type of Award shall be granted, (iv) the term of an Award, (v) the date
or dates on which an Award vests, (vi) the form of any payment to be made pursuant to an Award, (vii) the terms and conditions
of an Award (including the forfeiture of the Award, and/or any financial gain, if the Holder of the Award violates any applicable
restrictive covenant thereof), (viii) the Restrictions under a Restricted Stock Award, (ix) the number of Shares which may be issued
under an Award, (x) Performance Goals applicable to any Award and certification of the achievement of such goals, and (xi) the
waiver of any Restrictions or Performance Goals, subject in all cases to compliance with applicable laws. In making such determinations
the Committee may take into account the nature of the services rendered by the respective Employees, Directors and Consultants,
their present and potential contribution to the Company’s (or the Affiliate’s) success and such other factors as the
Committee in its discretion may deem relevant.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
4.3
Additional Powers. The Committee shall have such additional powers as are delegated to it under the other
provisions of the Plan. Subject to the express provisions of the Plan, the Committee is authorized to construe the Plan and the
respective Award Agreements executed hereunder, to prescribe such rules and regulations relating to the Plan as it may deem advisable
to carry out the intent of the Plan, to determine the terms, restrictions and provisions of each Award and to make all other determinations
necessary or advisable for administering the Plan. The Committee may correct any defect or supply any omission or reconcile any
inconsistency in any Award Agreement in the manner and to the extent the Committee shall deem necessary, appropriate or expedient
to carry it into effect. The determinations of the Committee on the matters referred to in this Article IV shall be conclusive
and binding on the Company and all Holders.
4.4
Committee Action. Subject to compliance with all applicable laws, action by the Committee shall require the
consent of a majority of the members of the Committee, expressed either orally at a meeting of the Committee or in writing in the
absence of a meeting. No member of the Committee shall have any liability for any good faith action, inaction or determination
in connection with the Plan.
Article
V
SHARES SUBJECT TO PLAN AND LIMITATIONS THEREON
5.1
Authorized Shares and Award Limits. The Committee may from time to time grant Awards to one or more Employees,
Directors and/or Consultants determined by it to be eligible for participation in the Plan in accordance with the provisions of
Article VI. Subject to Article XV, the aggregate number of Shares that may be issued under the Plan shall not exceed 10,341,989
Shares inclusive of awards previously issued and outstanding under the Gulf Resources, Inc. Equity Incentive Stock Plan (the “2007
Plan”). Upon adoption of this Plan, the 2007 Plan shall be frozen, no new awards shall be granted thereunder, and outstanding
awards thereunder shall continue to be governed by the terms and condition of the 2007 Plan and applicable award agreement. Shares
shall be deemed to have been issued under the Plan solely to the extent actually issued and delivered pursuant to an Award. To
the extent that an Award lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for any reason, or
the rights of its Holder terminate, any Shares subject to such Award shall again be available for the grant of a new Award. Notwithstanding
any provision in the Plan to the contrary, the maximum number of Shares that may be subject to Awards of Options under Article
VII and/or Stock Appreciation Rights under Article XIV, in either or both cases granted to any one person during any calendar year,
shall be One Million (1,000,000) Shares (subject to adjustment in the same manner as provided in Article XV with respect to Shares
subject to Awards then outstanding).
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
5.2
Types of Shares. The Shares to be issued pursuant to the grant or exercise of an Award may consist of authorized
but unissued Shares, Shares purchased on the open market or Shares previously issued and outstanding and reacquired by the Company.
Article
VI
ELIGIBILITY AND TERMINATION OF SERVICE
6.1
Eligibility. Awards made under the Plan may be granted solely to individuals or entities who, at the time
of grant, are Employees, Directors or Consultants. An Award may be granted on more than one occasion to the same Employee, Director
or Consultant, and, subject to the limitations set forth in the Plan, such Award may include, a Non-qualified Stock Option, a Restricted
Stock Award, a Restricted Stock Unit Award, an Unrestricted Stock Award, a Distribution Equivalent Right Award, a Performance Stock
Award, a Performance Unit Award, a Stock Appreciation Right, a Tandem Stock Appreciation Right, or any combination thereof, and
solely for Employees, an Incentive Stock Option.
6.2
Termination of Service. Except to the extent inconsistent with the terms of the applicable Award Agreement
and/or the provisions of Section 6.3 or 6.4, the following terms and conditions shall apply with respect to a Holder’s Termination
of Service with the Company or an Affiliate, as applicable:
(a)
The Holder’s rights, if any, to exercise any then exercisable Options and/or Stock Appreciation Rights shall
terminate:
(i)
If such termination is for a reason other than the Holder’s Total and Permanent Disability or death, ninety
(90) days after the date of such Termination of Service;
(ii)
If such termination is on account of the Holder’s Total and Permanent Disability, one (1) year after the date
of such Termination of Service; or
(iii)
If such termination is on account of the Holder’s death, one (1) year after the date of the Holder’s
death.
Upon such applicable date the Holder (and
such Holder’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in or with
respect to any such Options and Stock Appreciation Rights. Notwithstanding the foregoing, the Committee, in its sole discretion,
may provide for a different time period in the Award Agreement, or may extend the time period, following a Termination of Service,
during which the Holder has the right to exercise any vested Non-qualified Stock Option or Stock Appreciation Right, which time
period may not extend beyond the expiration date of the Award term.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
(b)
In the event of a Holder’s Termination of Service for any reason prior to the actual or deemed satisfaction
and/or lapse of the Restrictions, vesting requirements, terms and conditions applicable to a Restricted Stock Award and/or Restricted
Stock Unit Award, such Restricted Stock and/or RSUs shall immediately be canceled, and the Holder (and such Holder’s estate,
designated beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any such Restricted
Stock and/or RSUs. Notwithstanding the immediately preceding sentence, the Committee, in its sole discretion, may determine, prior
to or within thirty (30) days after the date of such Termination of Service that all or a portion of any such Holder’s Restricted
Stock and/or RSUs shall not be so canceled and forfeited.
6.3
Special Termination Rule. Except to the extent inconsistent with the terms of the applicable Award Agreement,
and notwithstanding anything to the contrary contained in this Article VI, if a Holder’s employment with, or status as a
Director of, the Company or an Affiliate shall terminate, and if, within ninety (90) days of such termination, such Holder shall
become a Consultant, such Holder’s rights with respect to any Award or portion thereof granted thereto prior to the date
of such termination may be preserved, if and to the extent determined by the Committee in its sole discretion, as if such Holder
had been a Consultant for the entire period during which such Award or portion thereof had been outstanding. Should the Committee
effect such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if his
or her employment or Director status had terminated until such time as his or her Consultant status shall terminate, in which case
his or her Award, as it may have been reduced in connection with the Holder’s becoming a Consultant, shall be treated pursuant
to the provisions of Section 6.2, provided, however, that any such Award which is intended to be an Incentive Stock Option shall,
upon the Holder’s no longer being an Employee, automatically convert to a Non-qualified Stock Option. Should a Holder’s
status as a Consultant terminate, and if, within ninety (90) days of such termination, such Holder shall become an Employee or
a Director, such Holder’s rights with respect to any Award or portion thereof granted thereto prior to the date of such termination
may be preserved, if and to the extent determined by the Committee in its sole discretion, as if such Holder had been an Employee
or a Director, as applicable, for the entire period during which such Award or portion thereof had been outstanding, and, should
the Committee effect such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated
as if his or her Consultant status had terminated until such time as his or her employment with the Company or an Affiliate, or
his or her Director status, as applicable, shall terminate, in which case his or her Award shall be treated pursuant to the provisions
of Section 6.2.
6.4
Termination of Service for Cause. Notwithstanding anything in this Article VI or elsewhere in the Plan
to the contrary, and unless a Holder’s Award Agreement specifically provides otherwise, in the event of a Holder’s
Termination of Service for Cause, all of such Holder’s then outstanding Awards shall expire immediately and be forfeited
in their entirety upon such Termination of Service.
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Article
VII
OPTIONS
7.1
Option Period. The term of each Option shall be as specified in the Option Agreement; provided, however,
that except as set forth in Section 7.3, no Option shall be exercisable after the expiration of ten (10) years from the date of
its grant.
7.2
Limitations on Exercise of Option. An Option shall be exercisable in whole or in such installments and at
such times as specified in the Option Agreement.
7.3
Special Limitations on Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined
at the time the respective Incentive Stock Option is granted) of Shares with respect to which Incentive Stock Options are exercisable
for the first time by an individual during any calendar year under all plans of the Company and any parent corporation or subsidiary
corporation thereof (both as defined in Section 424 of the Code) which provide for the grant of Incentive Stock Options exceeds
One Hundred Thousand Dollars ($100,000) (or such other individual limit as may be in effect under the Code on the date of grant),
the portion of such Incentive Stock Options that exceeds such threshold shall be treated as Non-qualified Stock Options. The Committee
shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative pronouncements,
which of a Holder’s Options, which were intended by the Committee to be Incentive Stock Options when granted to the Holder,
will not constitute Incentive Stock Options because of such limitation, and shall notify the Holder of such determination as soon
as practicable after such determination. No Incentive Stock Option shall be granted to an Employee if, at the time the Incentive
Stock Option is granted, such Employee is a Ten Percent Stockholder, unless (i) at the time such Incentive Stock Option is granted
the Option price is at least one hundred ten percent (110%) of the Fair Market Value of the Shares subject to the Incentive Stock
Option, and (ii) such Incentive Stock Option by its terms is not exercisable after the expiration of five (5) years from the date
of grant. No Incentive Stock Option shall be granted more than ten (10) years from the earlier of the Effective Date or date on
which the Plan is approved by the Company’s stockholders. The designation by the Committee of an Option as an Incentive Stock
Option shall not guarantee the Holder that the Option will satisfy the applicable requirements for “incentive stock option”
status under Section 422 of the Code.
7.4
Option Agreement. Each Option shall be evidenced by an Option Agreement in such form and containing such provisions
not inconsistent with the other provisions of the Plan as the Committee from time to time shall approve, including, but not limited
to, provisions intended to qualify an Option as an Incentive Stock Option. An Option Agreement may provide for the payment of the
Option price, in whole or in part, by the delivery of a number of Shares (plus cash if necessary) that have been owned by the Holder
for at least six (6) months and having a Fair Market Value equal to such Option price, or such other forms or methods as the Committee
may determine from time to time, in each case, subject to such rules and regulations as may be adopted by the Committee. Each Option
Agreement shall, solely to the extent inconsistent with the provisions of Sections 6.2, 6.3, and 6.4, as applicable, specify the
effect of Termination of Service on the exercisability of the Option. Moreover, without limiting the generality of the foregoing,
a Non-qualified Stock Option Agreement may provide for a “cashless exercise” of the Option, in whole or in part, by
(a) establishing procedures whereby the Holder, by a properly-executed written notice, directs (i) an immediate market
sale or margin loan as to all or a part of Shares to which he is entitled to receive upon exercise of the Option, pursuant to an
extension of credit by the Company to the Holder of the Option price, (ii) the delivery of the Shares from the Company directly
to a brokerage firm and (iii) the delivery of the Option price from sale or margin loan proceeds from the brokerage firm directly
to the Company, or (b) reducing the number of Shares to be issued upon exercise of the Option by the number of such Shares
having an aggregate Fair Market Value equal to the Option price (or portion thereof to be so paid) as of the date of the Option’s
exercise. An Option Agreement may also include provisions relating to: (i) subject to the provisions hereof, accelerated vesting
of Options, including but not limited to, upon the occurrence of a Change of Control, (ii) tax matters (including provisions covering
any applicable Employee wage withholding requirements and requiring additional “gross-up” payments to Holders to meet
any excise taxes or other additional income tax liability imposed as a result of a payment made upon a Change of Control resulting
from the operation of the Plan or of such Option Agreement) and (iii) any other matters not inconsistent with the terms and provisions
of the Plan that the Committee shall in its sole discretion determine. The terms and conditions of the respective Option Agreements
need not be identical.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
7.5
Option Price and Payment. The price at which an Share may be purchased upon exercise of an Option shall be
determined by the Committee; provided, however, that such Option price (i) shall not be less than the Fair Market
Value of an Share on the date such Option is granted (or 110% of Fair Market Value for an Incentive Stock Option held by Ten Percent
Stockholder, as provided in Section 7.3), and (ii) shall be subject to adjustment as provided in Article XV. The Option or
portion thereof may be exercised by delivery of an irrevocable notice of exercise to the Company. The Option price for the Option
or portion thereof shall be paid in full in the manner prescribed by the Committee as set forth in the Plan and the applicable
Option Agreement, which manner, with the consent of the Committee, may include the withholding of Shares otherwise issuable in
connection with the exercise of the Option. Separate share certificates shall be issued by the Company for those Shares acquired
pursuant to the exercise of an Incentive Stock Option and for those Shares acquired pursuant to the exercise of a Non-qualified
Stock Option.
7.6
Stockholder Rights and Privileges. The Holder of an Option shall be entitled to all the privileges and rights
of a stockholder of the Company solely with respect to such Shares as have been purchased under the Option and for which share
certificates have been registered in the Holder’s name.
7.7
Options and Rights in Substitution for Stock or Options Granted by Other Corporations. Options may be granted
under the Plan from time to time in substitution for stock options held by individuals employed by entities who become Employees,
Directors or Consultants as a result of a merger or consolidation of the employing entity with the Company or any Affiliate, or
the acquisition by the Company or an Affiliate of the assets of the employing entity, or the acquisition by the Company or an Affiliate
of stock or shares of the employing entity with the result that such employing entity becomes an Affiliate.
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7.8
Prohibition Against Re-Pricing. Except to the extent (i) approved in advance by holders of a majority
of the shares of the Company entitled to vote generally in the election of directors, or (ii) as a result of any Change of
Control or any adjustment as provided in Article XV, the Committee shall not have the power or authority to reduce, whether
through amendment or otherwise, the exercise price under any outstanding Option or Stock Appreciation Right, or to grant any new
Award or make any payment of cash in substitution for or upon the cancellation of Options and/or Stock Appreciation Rights previously
granted.
Article
VIII
RESTRICTED STOCK AWARDS
8.1
Award. A Restricted Stock Award shall constitute an Award of Shares to the Holder as of the date of the Award
which are subject to a “substantial risk of forfeiture” as defined under Section 83 of the Code during the specified
Restriction Period. At the time a Restricted Stock Award is made, the Committee shall establish the Restriction Period applicable
to such Award. Each Restricted Stock Award may have a different Restriction Period, in the discretion of the Committee. The Restriction
Period applicable to a particular Restricted Stock Award shall not be changed except as permitted by Section 8.2.
8.2
Terms and Conditions. At the time any Award is made under this Article VIII, the Company and the Holder shall
enter into a Restricted Stock Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee
may determine to be appropriate. The Company shall cause the Shares to be issued in the name of Holder, either by book-entry registration
or issuance of one or more stock certificates evidencing the Shares, which Shares or certificates shall be held by the Company
or the stock transfer agent or brokerage service selected by the Company to provide services for the Plan. The Shares shall be
restricted from transfer and shall be subject to an appropriate stop-transfer order, and if any certificate is issued, such certificate
shall bear an appropriate legend referring to the restrictions applicable to the Shares. After any Shares vest, the Company shall
deliver the vested Shares, in book-entry or certificated form in the Company’s sole discretion, registered in the name of
Holder or his or her legal representatives, beneficiaries or heirs, as the case may be, less any Shares withheld to pay withholding
taxes. If provided for under the Restricted Stock Agreement, the Holder shall have the right to vote Shares subject thereto and
to enjoy all other stockholder rights, including the entitlement to receive dividends on the Shares during the Restriction Period.
At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions
relating to Restricted Stock Awards, including, but not limited to, rules pertaining to the effect of Termination of Service prior
to expiration of the Restriction Period. Such additional terms, conditions or restrictions shall, to the extent inconsistent with
the provisions of Sections 6.2, 6.3 and 6.4, as applicable, be set forth in a Restricted Stock Agreement made in conjunction with
the Award. Such Restricted Stock Agreement may also include provisions relating to: (i) subject to the provisions hereof,
accelerated vesting of Awards, including but not limited to accelerated vesting upon the occurrence of a Change of Control, (ii) tax
matters (including provisions covering any applicable Employee wage withholding requirements and requiring additional “gross-up”
payments to Holders to meet any excise taxes or other additional income tax liability imposed as a result of a payment made in
connection with a Change of Control resulting from the operation of the Plan or of such Restricted Stock Agreement) and (iii) any
other matters not inconsistent with the terms and provisions of the Plan that the Committee shall in its sole discretion determine.
The terms and conditions of the respective Restricted Stock Agreements need not be identical. All Shares delivered to a Holder
as part of a Restricted Stock Award shall be delivered and reported by the Company or the Affiliate, as applicable, to the Holder
at the time of vesting.
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8.3
Payment for Restricted Stock. The Committee shall determine the amount and form of any payment from a Holder
for Shares received pursuant to a Restricted Stock Award, if any, provided that in the absence of such a determination, a Holder
shall not be required to make any payment for Shares received pursuant to a Restricted Stock Award, except to the extent otherwise
required by law.
Article
IX
UNRESTRICTED STOCK AWARDS
9.1
Award. Shares may be awarded (or sold) to Employees, Directors or Consultants under the Plan which are not
subject to Restrictions of any kind, in consideration for past services rendered thereby to the Company or an Affiliate or for
other valid consideration.
9.2
Terms and Conditions. At the time any Award is made under this Article IX, the Company and the Holder shall
enter into an Unrestricted Stock Agreement setting forth each of the matters contemplated hereby and such other matters as the
Committee may determine to be appropriate.
9.3
Payment for Unrestricted Stock. The Committee shall determine the amount and form of any payment from a Holder
for Shares received pursuant to an Unrestricted Stock Award, if any, provided that in the absence of such a determination, a Holder
shall not be required to make any payment for Shares received pursuant to an Unrestricted Stock Award, except to the extent otherwise
required by law.
Article
X
RESTRICTED STOCK UNIT AWARDS
10.1
Award. A Restricted Stock Unit Award shall constitute a promise to grant Shares (or cash equal to the Fair
Market Value of Shares) to the Holder at the end of a specified Restriction Period. At the time a Restricted Stock Unit Award is
made, the Committee shall establish the Restriction Period applicable to such Award. Each Restricted Stock Unit Award may have
a different Restriction Period, in the discretion of the Committee. A Restricted Stock Unit shall not constitute an equity interest
in the Company and shall not entitle the Holder to voting rights, dividends or any other rights associated with ownership of Shares
prior to the time the Holder shall receive a distribution of Shares pursuant to Section 10.3.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
10.2
Terms and Conditions. At the time any Award is made under this Article X, the Company and the Holder shall
enter into a Restricted Stock Unit Agreement setting forth each of the matters contemplated thereby and such other matters as the
Committee may determine to be appropriate. The Restricted Stock Unit Agreement shall set forth the individual service-based vesting
requirement which the Holder would be required to satisfy before the Holder would become entitled to distribution pursuant to Section
10.3 and the number of Units awarded to the Holder. Such conditions shall be sufficient to constitute a “substantial risk
of forfeiture” as such term is defined under Section 409A of the Code. At the time of such Award, the Committee may, in its
sole discretion, prescribe additional terms and conditions or restrictions relating to Restricted Stock Unit Awards in the Restricted
Stock Unit Agreement, including, but not limited to, rules pertaining to the effect of Termination of Service prior to expiration
of the applicable vesting period. The terms and conditions of the respective Restricted Stock Unit Agreements need not be identical.
10.3
Distributions of Shares. The Holder of a Restricted Stock Unit shall be entitled to receive a cash payment
equal to the Fair Market Value of an Share, or one Share, as determined in the sole discretion of the Committee and as set forth
in the Restricted Stock Unit Agreement, for each Restricted Stock Unit subject to such Restricted Stock Unit Award, if the Holder
satisfies the applicable vesting requirement. Such distribution shall be made no later than by the fifteenth (15th)
day of the third (3rd) calendar month next following the end of the calendar year in which the Restricted Stock Unit
first becomes vested (i.e., no longer subject to a “substantial risk of forfeiture”).
Article
XI
PERFORMANCE UNIT AWARDS
11.1
Award. A Performance Unit Award shall constitute an Award under which, upon the satisfaction of predetermined
individual and/or Company (and/or Affiliate) Performance Goals based on selected Performance Criteria, a cash payment shall be
made to the Holder, based on the number of Units awarded to the Holder. At the time a Performance Unit Award is made, the Committee
shall establish the Performance Period and applicable Performance Goals. Each Performance Unit Award may have different Performance
Goals, in the discretion of the Committee. A Performance Unit Award shall not constitute an equity interest in the Company and
shall not entitle the Holder to voting rights, dividends or any other rights associated with ownership of Shares.
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11.2
Terms and Conditions. At the time any Award is made under this Article XI, the Company and the Holder shall
enter into a Performance Unit Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee
may determine to be appropriate. The Committee shall set forth in the applicable Performance Unit Agreement the Performance Period,
Performance Criteria and Performance Goals which the Holder and/or the Company would be required to satisfy before the Holder would
become entitled to payment pursuant to Section 11.3, the number of Units awarded to the Holder and the dollar value or formula
assigned to each such Unit. Such payment shall be subject to a “substantial risk of forfeiture” under Section 409A
of the Code. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or
restrictions relating to Performance Unit Awards, including, but not limited to, rules pertaining to the effect of Termination
of Service prior to expiration of the applicable performance period. The terms and conditions of the respective Performance Unit
Agreements need not be identical.
11.3
Payments. The Holder of a Performance Unit shall be entitled to receive a cash payment equal to the dollar
value assigned to such Unit under the applicable Performance Unit Agreement if the Holder and/or the Company satisfy (or partially
satisfy, if applicable under the applicable Performance Unit Agreement) the Performance Goals set forth in such Performance Unit
Agreement. All payments shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar
month next following the end of the Company’s fiscal year to which such performance goals and objectives relate.
Article
XII
PERFORMANCE STOCK AWARDS
12.1
Award. A Performance Stock Award shall constitute a promise to grant Shares (or cash equal to the Fair Market
Value of Shares) to the Holder at the end of a specified Performance Period subject to achievement of specified Performance Goals.
At the time a Performance Stock Award is made, the Committee shall establish the Performance Period and applicable Performance
Goals based on selected Performance Criteria. Each Performance Stock Award may have different Performance Goals, in the discretion
of the Committee. A Performance Stock Award shall not constitute an equity interest in the Company and shall not entitle the Holder
to voting rights, dividends or any other rights associated with ownership of Shares unless and until the Holder shall receive a
distribution of Shares pursuant to Section 11.3.
12.2
Terms and Conditions. At the time any Award is made under this Article XII, the Company and the Holder shall
enter into a Performance Stock Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee
may determine to be appropriate. The Committee shall set forth in the applicable Performance Stock Agreement the Performance Period,
selected Performance Criteria and Performance Goals which the Holder and/or the Company would be required to satisfy before the
Holder would become entitled to the receipt of Shares pursuant to such Holder’s Performance Stock Award and the number of
Shares subject to such Performance Stock Award. Such distribution shall be subject to a “substantial risk of forfeiture”
under Section 409A of the Code. If such Performance Goals are achieved, the distribution of Shares (or the payment of cash, as
determined in the sole discretion of the Committee), shall be made no later than by the fifteenth (15th) day of the
third (3rd) calendar month next following the end of the Company’s fiscal year to which such goals and objectives
relate. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions
relating to Performance Stock Awards, including, but not limited to, rules pertaining to the effect of the Holder’s Termination
of Service prior to the expiration of the applicable performance period. The terms and conditions of the respective Performance
Stock Agreements need not be identical.
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12.3
Distributions of Shares. The Holder of a Performance Stock Award shall be entitled to receive a cash payment
equal to the Fair Market Value of a Share, or one Share, as determined in the sole discretion of the Committee, for each Performance
Stock Award subject to such Performance Stock Agreement, if the Holder satisfies the applicable vesting requirement. Such distribution
shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next following
the end of the Company’s fiscal year to which such performance goals and objectives relate.
Article
XIII
DISTRIBUTION EQUIVALENT RIGHTS
13.1
Award. A Distribution Equivalent Right shall entitle the Holder to receive bookkeeping credits, cash payments
and/or Share distributions equal in amount to the distributions that would have been made to the Holder had the Holder held a specified
number of Shares during the specified period of the Award.
13.2
Terms and Conditions. At the time any Award is made under this Article XIII, the Company and the Holder shall
enter into a Distribution Equivalent Rights Award Agreement setting forth each of the matters contemplated thereby and such other
matters as the Committee may determine to be appropriate. The Committee shall set forth in the applicable Distribution Equivalent
Rights Award Agreement the terms and conditions, if any, including whether the Holder is to receive credits currently in cash,
is to have such credits reinvested (at Fair Market Value determined as of the date of reinvestment) in additional Shares or is
to be entitled to choose among such alternatives. Such receipt shall be subject to a “substantial risk of forfeiture”
under Section 409A of the Code and, if such Award becomes vested, the distribution of such cash or Shares shall be made no later
than by the fifteenth (15th) day of the third (3rd) calendar month next following the end of the Company’s
fiscal year in which the Holder’s interest in the Award vests. Distribution Equivalent Rights Awards may be settled in cash
or in Shares, as set forth in the applicable Distribution Equivalent Rights Award Agreement. A Distribution Equivalent Rights Award
may, but need not be, awarded in tandem with another Award (other than an Option or a SAR), whereby, if so awarded, such Distribution
Equivalent Rights Award shall expire, terminate or be forfeited by the Holder, as applicable, under the same conditions as under
such other Award.
13.3
Interest Equivalents. The Distribution Equivalent Rights Award Agreement for a Distribution Equivalent Rights
Award may provide for the crediting of interest on a Distribution Rights Award to be settled in cash at a future date (but in no
event later than by the fifteenth (15th) day of the third (3rd) calendar month next following the end of
the Company’s fiscal year in which such interest is credited and vested), at a rate set forth in the applicable Distribution
Equivalent Rights Award Agreement, on the amount of cash payable thereunder.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
Article
XIV
STOCK APPRECIATION RIGHTS
14.1
Award. A Stock Appreciation Right shall constitute a right, granted alone or in connection with a related
Option, to receive a payment equal to the increase in value of a specified number of Shares between the date of Award and the date
of exercise.
14.2
Terms and Conditions. At the time any Award is made under this Article XIV, the Company and the Holder shall
enter into a Stock Appreciation Right Agreement setting forth each of the matters contemplated thereby and such other matters as
the Committee may determine to be appropriate. The Committee shall set forth in the applicable Stock Appreciation Right Agreement
the terms and conditions of the Stock Appreciation Right, including (i) the base value (the “Base Value”) for
the Stock Appreciation Right, which shall be not less than the Fair Market Value of an Share on the date of grant of the Stock
Appreciation Right, (ii) the number of Shares subject to the Stock Appreciation Right, (iii) the period during which the Stock
Appreciation Right may be exercised; provided, however, that no Stock Appreciation Right shall be exercisable after
the expiration of ten (10) years from the date of its grant, and (iv) any other special rules and/or requirements which the Committee
imposes upon the Stock Appreciation Right. Upon the exercise of some or all of the portion of a Stock Appreciation Right, the Holder
shall receive a payment from the Company, in cash or in the form of Shares having an equivalent Fair Market Value or in a combination
of both, as determined in the sole discretion of the Committee, equal to the product of:
(a)
The excess of (i) the Fair Market Value of an Share on the date of exercise, over (ii) the Base Value, multiplied
by,
(b)
The number of Shares with respect to which the Stock Appreciation Right is exercised.
14.3
Tandem Stock Appreciation Rights. If the Committee grants a Stock Appreciation Right which is intended to
be a Tandem Stock Appreciation Right, the Tandem Stock Appreciation Right shall be granted at the same time as the related Option,
and the following special rules shall apply:
(a)
The Base Value shall be equal to or greater than the per Share exercise price under the related Option;
(b)
The Tandem Stock Appreciation Right may be exercised for all or part of the Shares which are subject to the related
Option, but solely upon the surrender by the Holder of the Holder’s right to exercise the equivalent portion of the related
Option (and when a Share is purchased under the related Option, an equivalent portion of the related Tandem Stock Appreciation
Right shall be canceled);
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(c)
The Tandem Stock Appreciation Right shall expire no later than the date of the expiration of the related Option;
(d)
The value of the payment with respect to the Tandem Stock Appreciation Right may be no more than one hundred percent
(100%) of the difference between the per Share exercise price under the related Option and the Fair Market Value of the Shares
subject to the related Option at the time the Tandem Stock Appreciation Right is exercised, multiplied by the number of the Shares
with respect to which the Tandem Stock Appreciation Right is exercised; and
(e)
The Tandem Stock Appreciation Right may be exercised solely when the Fair Market Value of the Shares subject to the
related Option exceeds the per Share exercise price under the related Option.
Article
XV
RECAPITALIZATION OR REORGANIZATION
15.1
Adjustments to Shares. The shares with respect to which Awards may be granted under the Plan are Shares as
presently constituted; provided, however, that if, and whenever, prior to the expiration or distribution to the Holder
of Shares underlying an Award theretofore granted, the Company shall effect a subdivision or consolidation of the Shares or the
payment of an Share dividend on Shares without receipt of consideration by the Company, the number of Shares with respect to which
such Award may thereafter be exercised or satisfied, as applicable, (i) in the event of an increase in the number of outstanding
Shares, shall be proportionately increased, and the purchase price per Share shall be proportionately reduced, and (ii) in
the event of a reduction in the number of outstanding Shares, shall be proportionately reduced, and the purchase price per Share
shall be proportionately increased. Notwithstanding the foregoing or any other provision of this Article XV, any adjustment made
with respect to an Award (x) which is an Incentive Stock Option, shall comply with the requirements of Section 424(a) of the Code,
and in no event shall any adjustment be made which would render any Incentive Stock Option granted under the Plan to be other than
an “incentive stock option” for purposes of Section 422 of the Code, and (y) which is a Non-qualified Stock Option,
shall comply with the requirements of Section 409A of the Code, and in no event shall any adjustment be made which would render
any Non-qualified Stock Option granted under the Plan to become subject to Section 409A of the Code.
15.2
Recapitalization. If the Company recapitalizes or otherwise changes its capital structure, thereafter upon
any exercise or satisfaction, as applicable, of a previously granted Award, the Holder shall be entitled to receive (or entitled
to purchase, if applicable) under such Award, in lieu of the number of Shares then covered by such Award, the number and class
of shares and securities to which the Holder would have been entitled pursuant to the terms of the recapitalization if, immediately
prior to such recapitalization, the Holder had been the holder of record of the number of Shares then covered by such Award.
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15.3
Other Events15.4
. In the event of changes to the outstanding Shares by reason of an extraordinary cash dividend, reorganization,
merger, consolidation, combination, split-up, spin-off, exchange or other relevant change in capitalization occurring after the
date of the grant of any Award and not otherwise provided for under this Article XV, any outstanding Awards and any Award Agreements
evidencing such Awards shall be adjusted by the Board in its discretion in such manner as the Board shall deem equitable or appropriate
taking into consideration the applicable accounting and tax consequences, as to the number and price of Shares or other consideration
subject to such Awards. In the event of any adjustment pursuant to Sections 15.1, 15.2 or this Section 15.3, the aggregate number
of Shares available under the Plan pursuant to Section 5.1 may be appropriately adjusted by the Board, the determination of which
shall be conclusive. In addition, the Committee may make provision for a cash payment to a Holder or a person who has an outstanding
Award. In addition, the Committee may make provision for a cash payment to a Holder or a person who has an outstanding Award.
15.5
Change of Control. The Committee may, in its sole discretion, at the time an Award is made or at any time
prior to, coincident with or after the time of a Change of Control, cause any Award either (i) to be canceled in consideration
of a payment in cash or other consideration in amount per share equal to the excess, if any, of the price or implied price per
Share in the Change of Control over the per Share exercise, base or purchase price of such Award, which may be paid immediately
or over the vesting schedule of the Award; (ii) to be assumed, or new rights substituted therefore, by the surviving corporation
or a parent or subsidiary of such surviving corporation following such Change of Control; (iii) accelerate any time periods, or
waive any other conditions, relating to the vesting, exercise, payment or distribution of an Award so that any Award to a Holder
whose employment has been terminated as a result of a Change of Control may be vested, exercised, paid or distributed in full on
or before a date fixed by the Committee; (iv) to be purchased from a Holder whose employment has been terminated as a result of
a Change of Control, upon the Holder’s request, for an amount of cash equal to the amount that could have been obtained upon
the exercise, payment or distribution of such rights had such Award been currently exercisable or payable; or (v) terminate any
then outstanding Award or make any other adjustment to the Awards then outstanding as the Committee deems necessary or appropriate
to reflect such transaction or change. The number of Shares subject to any Award shall be rounded to the nearest whole number.
15.6
Powers Not Affected. The existence of the Plan and the Awards granted hereunder shall not affect in any way
the right or power of the Board or of the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization
or other change of the Company’s capital structure or business, any merger or consolidation of the Company, any issue of
debt or equity securities ahead of or affecting Shares or the rights thereof, the dissolution or liquidation of the Company or
any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.
15.7
No Adjustment for Certain Awards. Except as hereinabove expressly provided, the issuance by the Company of
shares of any class or securities convertible into shares of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefor or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, and in any case whether or not for fair value, shall not affect previously granted Awards,
and no adjustment by reason thereof shall be made with respect to the number of Shares subject to Awards theretofore granted or
the purchase price per Share, if applicable.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
Article
XVI
AMENDMENT AND TERMINATION OF PLAN
The Plan shall continue
in effect, unless sooner terminated pursuant to this Article XVI, until the tenth (10th) anniversary of the date on
which it is adopted by the Board (except as to Awards outstanding on that date). The Board in its discretion may terminate the
Plan at any time with respect to any shares for which Awards have not theretofore been granted; provided, however,
that the Plan’s termination shall not materially and adversely impair the rights of a Holder with respect to any Award theretofore
granted without the consent of the Holder. The Board shall have the right to alter or amend the Plan or any part hereof from time
to time; provided, however, that without the approval by a majority of the votes cast at a meeting of stockholders
at which a quorum representing a majority of the shares of the Company entitled to vote generally in the election of directors
is present in person or by proxy, no amendment or modification of the Plan may (i) materially increase the benefits accruing
to Holders, (ii) except as otherwise expressly provided in Article XV, materially increase the number of Shares subject to
the Plan or the individual Award Agreements specified in Article V, (iii) materially modify the requirements for participation
in the Plan, or (iv) amend, modify or suspend Section 7.7 (re-pricing prohibitions) or this Article XVI. In addition, no change
in any Award theretofore granted may be made which would materially and adversely impair the rights of a Holder with respect to
such Award without the consent of the Holder (unless such change is required in order to exempt the Plan or any Award from Section
409A of the Code).
Article
XVII
MISCELLANEOUS
17.1
No Right to Award. Neither the adoption of the Plan by the Company nor any action of the Board or the Committee
shall be deemed to give an Employee, Director or Consultant any right to an Award except as may be evidenced by an Award Agreement
duly executed on behalf of the Company, and then solely to the extent and on the terms and conditions expressly set forth therein.
17.2
No Rights Conferred. Nothing contained in the Plan shall (i) confer upon any Employee any right with
respect to continuation of employment with the Company or any Affiliate, (ii) interfere in any way with any right of the Company
or any Affiliate to terminate the employment of an Employee at any time, (iii) confer upon any Director any right with respect
to continuation of such Director’s membership on the Board, (iv) interfere in any way with any right of the Company
or an Affiliate to terminate a Director’s membership on the Board at any time, (v) confer upon any Consultant any right
with respect to continuation of his or her consulting engagement with the Company or any Affiliate, or (vi) interfere in any
way with any right of the Company or an Affiliate to terminate a Consultant’s consulting engagement with the Company or an
Affiliate at any time.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
17.3
Other Laws; No Fractional Shares; Withholding. The Company shall not be obligated by virtue of any provision
of the Plan to recognize the exercise of any Award or to otherwise sell or issue Shares in violation of any laws, rules or regulations,
and any postponement of the exercise or settlement of any Award under this provision shall not extend the term of such Award. Neither
the Company nor its directors or officers shall have any obligation or liability to a Holder with respect to any Award (or Shares
issuable thereunder) (i) that shall lapse because of such postponement, or (ii) for any failure to comply with the requirements
of any applicable law, rules or regulations, including but not limited to any failure to comply with the requirements of Section
409A of this Code. No fractional Shares shall be delivered, nor shall any cash in lieu of fractional Shares be paid. The Company
shall have the right to deduct in cash (whether under this Plan or otherwise) in connection with all Awards any taxes required
by law to be withheld and to require any payments required to enable it to satisfy its withholding obligations. In the case of
any Award satisfied in the form of Shares, no Shares shall be issued unless and until arrangements satisfactory to the Company
shall have been made to satisfy any tax withholding obligations applicable with respect to such Award. Subject to such terms and
conditions as the Committee may impose, the Company shall have the right to retain, or the Committee may, subject to such terms
and conditions as it may establish from time to time, permit Holders to elect to tender, Shares (including Shares issuable in respect
of an Award) to satisfy, in whole or in part, the amount required to be withheld.
17.4
No Restriction on Corporate Action. Nothing contained in the Plan shall be construed to prevent the Company
or any Affiliate from taking any corporate action which is deemed by the Company or such Affiliate to be appropriate or in its
best interest, whether or not such action would have an adverse effect on the Plan or any Award made under the Plan. No Employee,
Director, Consultant, beneficiary or other person shall have any claim against the Company or any Affiliate as a result of any
such action.
17.5
Restrictions on Transfer. No Award under the Plan or any Award Agreement and no rights or interests herein
or therein, shall or may be assigned, transferred, sold, exchanged, encumbered, pledged or otherwise hypothecated or disposed of
by a Holder except (i) by will or by the laws of descent and distribution, or (ii) where permitted under applicable tax
rules, by gift to any Family Member of the Holder, subject to compliance with applicable laws. An Award may be exercisable during
the lifetime of the Holder only by such Holder or by the Holder’s guardian or legal representative unless it has been transferred
by gift to a Family Member of the Holder, in which case it shall be exercisable solely by such transferee. Notwithstanding any
such transfer, the Holder shall continue to be subject to the withholding requirements provided for under Section 17.3 hereof.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
17.6
Beneficiary Designations. Each Holder may, from time to time, name a beneficiary or beneficiaries (who may
be contingent or successive beneficiaries) for purposes of receiving any amount which is payable in connection with an Award under
the Plan upon or subsequent to the Holder’s death. Each such beneficiary designation shall serve to revoke all prior beneficiary
designations, be in a form prescribed by the Company and be effective solely when filed by the Holder in writing with the Company
during the Holder’s lifetime. In the absence of any such written beneficiary designation, for purposes of the Plan, a Holder’s
beneficiary shall be the Holder’s estate.
17.7
Rule 16b-3. It is intended that the Plan and any Award made to a person subject to Section 16 of the Exchange
Act shall meet all of the requirements of Rule 16b-3. If any provision of the Plan or of any such Award would disqualify the
Plan or such Award under, or would otherwise not comply with the requirements of, Rule 16b-3, such provision or Award shall
be construed or deemed to have been amended as necessary to conform to the requirements of Rule 16b-3.
17.8
Clawback Policy. Notwithstanding any contained herein or in any incentive “performance based”
Awards under the Plan shall be subject to reduction, forfeiture or repayment by reason of a correction or restatement of the Company’s
financial information if and to the extent such reduction or repayment is required by any applicable law.
17.9
Section 409A. Notwithstanding any other provision of the Plan, the Committee shall have no authority to issue
an Award under the Plan with terms and/or conditions which would cause such Award to constitute non-qualified “deferred compensation”
under Section 409A of the Code unless such Award shall be structured to be exempt from or comply with all requirements of
Code Section 409A. The Plan and all Award Agreements are intended to comply with the requirements of Section 409A of the Code
(or to be exempt therefrom) and shall be so interpreted and construed and no amount shall be paid or distributed from the Plan
unless and until such payment complies with all requirements of Code Section 409A. It is the intent of the Company that the provisions
of this Agreement and all other plans and programs sponsored by the Company be interpreted to comply in all respects with Code
Section 409A, however, the Company shall have no liability to the Holder, or any successor or beneficiary thereof, in the event
taxes, penalties or excise taxes may ultimately be determined to be applicable to any payment or benefit received by the Holder
or any successor or beneficiary thereof.
17.10
Indemnification. Each person who is or shall have been a member of the Committee or of the Board shall be
indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred thereby in connection with or resulting from any claim, action, suit, or proceeding to which such person may
be made a party or may be involved by reason of any action taken or failure to act under the Plan and against and from any and
all amounts paid thereby in settlement thereof, with the Company’s approval, or paid thereby in satisfaction of any judgment
in any such action, suit, or proceeding against such person; provided, however, that such person shall give the Company
an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive and shall be independent of any other rights of indemnification
to which such persons may be entitled under the Company’s Articles of Incorporation or By-laws, by contract, as a matter
of law, or otherwise.
Gulf Resources, Inc. 2019 Omnibus Equity Incentive Plan
17.11
Other Benefit Plans. No Award, payment or amount received hereunder shall be taken into account in computing
an Employee’s salary or compensation for the purposes of determining any benefits under any pension, retirement, life insurance
or other benefit plan of the Company or any Affiliate, unless such other plan specifically provides for the inclusion of such Award,
payment or amount received. Nothing in the Plan shall be construed to limit the right of the Company to establish other plans or
to pay compensation to its employees, in cash or property, in a manner which is not expressly authorized under the Plan.
17.12
Limits of Liability. Any liability of the Company with respect to an Award shall be based solely upon the
contractual obligations created under the Plan and the Award Agreement. None of the Company, any member of the Board nor any member
of the Committee shall have any liability to any party for any action taken or not taken, in good faith, in connection with or
under the Plan.
17.13
Governing Law. Except as otherwise provided herein, the Plan shall be construed in accordance with the laws
of the State of Nevada, without regard to principles of conflicts of law.
17.14
Severability of Provisions. If any provision of the Plan is held invalid or unenforceable, such invalidity
or unenforceability shall not affect any other provision of the Plan, and the Plan shall be construed and enforced as if such invalid
or unenforceable provision had not been included in the Plan.
17.15
No Funding. The Plan shall be unfunded. The Company shall not be required to establish any special or separate
fund or to make any other segregation of funds or assets to ensure the payment of any Award. Prior to receipt of Shares or a cash
distribution pursuant to the terms of an Award, such Award shall represent an unfunded unsecured contractual obligation of the
Company and the Holder shall have no greater claim to the Shares underlying such Award or any other assets of the Company or Affiliate
than any other unsecured general creditor.
17.16
Headings. Headings used throughout the Plan are for convenience only and shall not be given legal significance.
*** Exercise Your Right to Vote ***
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Important Notice Regarding the Availability of Proxy Materials for the
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Stockholder Meeting to Be Held on December 18, 2019
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Meeting Information
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GULF RESOURCES, INC.
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Meeting Type: Annual Meeting
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For holders as of: October 18, 2019
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Date: December 18, 2019 Time: 10:00 AM LST
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B
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Location: Gulf Resources, Inc.
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Level 11, Vegetable Building
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Industrial Park of East City
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Shouguang City
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Shandong Province, China
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GULF
RESOURCES,INC.
Level
11, Vegetable Building
Industrial
Park of the East City
Shouguang
City, Shandong Province
People’s
Republic of China 262700
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You are receiving this
communication because you hold shares in the above named company.
This is not a ballot.
You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy
materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com
or easily request a paper copy (see reverse side).
We encourage you to access
and review all of the important information contained in the proxy materials before voting.
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Investor
Address Line 1
Investor
Address Line 2
Investor
Address Line 3
Investor
Address Line 4
Investor
Address Line 5
John
Sample
1234
ANYWHERE STREET
ANY
CITY, ON A1A 1A1
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See
the reverse side of this notice to obtain proxy materials and voting instructions.
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Broadridge
Internal Use Only
Job
#
Envelope
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Sequence
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# of # Sequence #
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—— Before
You Vote ——
How to Access the Proxy Materials
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Proxy Materials Available to VIEW or RECEIVE:
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1. Notice & Proxy Statement 2. 10-K 3.
10-K/A
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How to View Online:
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Have the
information that is printed in the box marked by the arrow
(located on the following page) and visit: www.proxyvote.com.
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How to Request and Receive a PAPER or E-MAIL Copy:
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If you want to receive a paper or e-mail copy of these documents, you must request one. There
is NO charge for requesting a copy. Please choose one of the following methods to make your request:
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1) BY INTERNET: www.proxyvote.com
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2) BY TELEPHONE: 1-800-579-1639
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3) BY E-MAIL*: sendmaterial@proxyvote.com
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* If requesting
materials by e-mail, please send a blank e-mail with the information that is printed in the box marked by
the arrow
(located on the following page) in the subject line.
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Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded
to your investment advisor. Please make the request as instructed above on or before December 04, 2019 to facilitate
timely delivery.
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—— How
To Vote ——
Please Choose One
of the Following Voting Methods
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Vote
In Person: Many stockholder meetings have attendance requirements including, but not limited to, the possession of an
attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements
for meeting attendance. At the meeting, you will need to request a ballot to vote these shares.
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Vote
By Internet: To vote now by Internet, go to www.proxyvote.com. Have the information that is printed in the box
marked by the arrow
available and follow the instructions.
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Internal
Use
Only
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Vote
By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card.
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Voting
items
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The Board of Directors recommends you
vote FOR the following:
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1.
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Election of Directors
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Nominees
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1a.
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Ming Yang
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1b.
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Xiaobin Liu
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1c.
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Naihui Miao
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1d.
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Shengwei Ma
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1e.
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Yang Zou
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1f.
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Shi Tong Jiang
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1g.
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Tengfei Zhang
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A
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The Board of Directors recommends
you vote FOR proposals 2, 3 and 4.
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2
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To ratify
the appointment of Morison Cogen LLP, independent public accountants, as the auditor of the Company for the fiscal year 2019.
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D
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3
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To approve
a reverse split of the Company's common stock, par value $0.0005 (the 'Common Stock") on the basis of one (1) share for
every two (2) to eight (8) outstanding shares of Common Stock, subject to the discretion of the Board of Directors, so that
two (2) to eight (8) outstanding shares of Common Stock before the reverse stock split shall represent one (1) share of Common
Stock after the reverse stock split;
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4
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To approve the Company's 2019 Omnibus
Equity Incentive Plan.
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NOTE:
To transact any other business as may properly be presented at the Annual Meeting or any adjournment thereof.
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Broadridge
Internal Use Only
xxxxxxxxxx
xxxxxxxxxx
Cusip
Job #
Envelope
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Sequence
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Reserved for Broadridge Internal Control Information
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NAME
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THE COMPANY NAME INC. - COMMON
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS A
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS B
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS C
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS D
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS E
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS F
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123,456,789,012.12345
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THE COMPANY NAME INC. - 401K
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123,456,789,012.12345
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Broadridge
Internal Use
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THIS SPACE RESERVED FOR SIGNATURES IF APPLICABLE
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Only
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GULF RESOURCES,INC.
Level 11, Vegetable Building
Industrial Park of the East City
Shouguang City, Shandong Province
Peoples Republic of China 262700
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VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create
an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred
by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using
the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit
your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card
in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return
it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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Investor Address Line 1
Investor Address Line 2
Investor Address Line 3
Investor Address Line 4
Investor Address Line 5
John Sample
1234 ANYWHERE STREET
ANY CITY, ON A1A 1A1
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1
OF
2
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CONTROL # —> 0000000000000000
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NAME
THE COMPANY NAME INC. - COMMON
THE COMPANY NAME INC. - CLASS A
THE COMPANY NAME INC. - CLASS B
THE COMPANY NAME INC. - CLASS C
THE COMPANY NAME INC. - CLASS D
THE COMPANY NAME INC. - CLASS E
THE COMPANY NAME INC. - CLASS F
THE COMPANY NAME INC. - 401 K
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SHARES
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123,456,789,012.12345
123,456,789,012.12345
123,456,789,012.12345
123,456,789,012.12345
123,456,789,012.12345
123,456,789,012.12345
123,456,789,012.12345
123,456,789,012.12345
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PAGE
1 OF 2
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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x
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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For
All
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Withhold
All
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For All
Except
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To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
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The Board of Directors recommends you vote FOR the following:
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☐
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☐
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☐
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1.
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Election of Directors
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Nominees
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01 Ming Yang
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02 Xiabin Liu
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03 Naihui Miao
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04 Shengwei Ma
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05 Yang Zou
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06 Shi Tong Jiang
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07 Tengfei Zhang
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The Board of Directors recommends you vote FOR proposals 2, 3, 4.
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For
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Against
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Abstain
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2.
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To ratify the appointment of Morison Cogen LLP, independent public accountants, as the auditor of the
Company for the fiscal year 2019.
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☐
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☐
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3.
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To approve a reverse split of the Company’s common stock, par value $0.0005 (the “Common Stock”)
on the basis of one (1) share for every two (2) to eight (8) outstanding shares of Common Stock, subject to the discretion of the
Board of Directors, so that two (2) to eight (8) outstanding shares of Common Stock before the reverse stock split shall represent
one (1) share of Common Stock after the reverse stock split;
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☐
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☐
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4
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To approve the Company’s 2019 Omnibus Equity Incentive Plan.
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NOTE: To transact any other business as may properly be presented at the Annual Meeting or any adjournment thereof.
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Please sign exactly as your name appears below. When shares are held by joint tenants, each should sign.
When signing as attorney, executor, administrator, trustee, guardian, corporate officer, or partner, please give full title as
such. Joint owners should each sign personally.
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Investor Address Line 1
Investor Address Line 2
Investor Address Line 3
Investor Address Line 4
Investor Address Line 5
John Sample
1234 ANYWHERE STREET
ANY CITY, ON A1A 1A1
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SHARES
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CUSIP #
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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JOB #
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Signature (Joint Owners)
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Date
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SEQUENCE #
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The Annual Meeting of the Stockholders
of Gulf Resources, Inc., a Nevada corporation
("Company"), will be held on
December 18, 2019, at 10:00 a.m. (local time), at the Company's
headquarters located at
Level 11, Vegetable Building, Industrial
Park of the East City, Shouguang City, Shandong
Province, 262700
People's Republic of China.
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, 10-K, as amended, is/are available
at www.proxyvote.com
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF
DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
OF GULF RESOURCES, INC.
Gulf Resources, Inc.,
Annual Meeting of Stockholders
December 18, 2019 at 10:00 AM Local Time
This proxy is solicited by the Board
Of Directors
The stockholders hereby appoints Ming Yang
and Xiaobin Liu, and each of them, each with full power of substitution, hereby are authorized to vote as specified on the reverse
side or, with respect to any matter not set forth on the reverse side, as a majority of those or their substitutes present and
acting at the meeting shall determine, all of the shares of capital stock of Gulf Resources, Inc. that the undersigned would be
entitled to vote, if personally present, at the 2019 Annual Meeting of Stockholders and any adjournment thereof.
Unless otherwise specified, this proxy
will be voted FOR Proposals 1,2, 3, 4. The Board of Directors recommends a vote FOR Proposals 1, 2, 3, 4.
Continued and to be signed on reverse
side
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