ASSET PURCHASE AGREEMENT
BETWEEN
SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
AND
DONG XXX XXXX
DATED AS OF
JUNE 8, 2007
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INDEX OF SCHEDULES AND EXHIBITS
Exhibits:
A. Form of Promissory Note Schedules:
1. Dong Ying City Liu Hu Area Asset Checklist
2. Leased Property Description
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This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of June 8,
2007 (the "Effective Date") and comes into effect on the same day by and between
the following two Parties:
(1) SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED, a company validly existing
under the laws of China ("SCHC"), a subsidiary of Gulf Resources, Inc.("GUFR");
and
(2) DONG XXX XXXX, ("XXXX"), an individual resident of China who owns private
land located in the Dong Ying City Liu Hu Area.
WHEREAS: YANG wishes to sell, transfer and convey certain assets to SCHC, and
SCHC wishes to purchase and acquire the same from YANG.
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NOW, THEREFORE, in consideration of the mutual promises contained herein, and
for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, SCHC, and YANG, both have reached an AGREEMENT reciprocally
as follows:
1. CERTAIN DEFINITIONS
"Ordinary Course of Business" shall mean an action taken by YANG if such action
is taken in normal operation, consistent with past practices.
"Closing" The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at SCHC's offices, on or before June 8, 2007 and in
no event later than June 8, 2007 (the "Closing Date").
"GUFR" shall mean Gulf Resources, Inc., a Delaware corporation and parent of
SCHC.
"GUFR Common Stock" shall mean the common stock of GUFR.
"Person" shall mean any individual, entity or governmental body.
"Pre-Closing Period" shall mean the period commencing as of the date of the
Agreement and ending on the Closing Date.
2. TRANSFER OF THE ASSETS
2.1 YANG agrees that, upon the Closing, he will sell, transfer and deliver unto
SCHC, its successors and assigns forever, by duly executed deed(s), bills of
sale, assignment(s) or other instrument(s) of conveyance, for the consideration
hereinafter provided, all of YANG's right, title and interest in and to all
assets owned by YANG located at the Dong Ying City Liu Hu Area, including, but
not limited to, machinery, equipment, inventory (raw materials, work-in-progress
and finished goods), and any warranties associated therewith; said assets to be
limited to those listed and described on Schedule 1 attached hereto and
incorporated herein by reference (the "Purchased Assets"). In addition to the
Purchased Assets, YANG agrees at Closing to convey to SCHC certain leased
property described in Schedule 2 attached hereto (the "Leased Property") and to
execute and deliver such instruments of transfer and conveyance to effect the
transfer of ownership of the Leased Property from YANG to SCHC.
2.2 As full consideration for the sale, assignment, transfer and delivery of
Purchased Assets and the Leased Property to SCHC, and upon the terms and subject
to all of the conditions contained herein, (a) GUFR shall issue to YANG the
Purchase Price Shares (as hereinafter defined) within 45 days after the Closing
and (b) SCHC shall pay to YANG the sum of $4,575,761 in cash or readily
available funds within 5 days after the Closing. At Closing, SCHC shall issue to
YANG a promissory note in the principal amount of $889,005 in the form attached
hereto as Exhibit A. The parties understand and acknowledge that the total
purchase price for the Purchased Assets and the Leased Property is $6,667,538
(the "Purchase Price") and that the Purchase Price is based upon an approximate
valuation of the Dong Ying City Liu Hu Area at $6,667,538. The number of
"Purchase Price Shares" shall be equal to the result obtained by dividing
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$941,300 by the average closing price of GUFR Common Stock (the "Market Price")
as quoted by the OTC Bulletin Board during the 15 trading days immediately
preceding the Closing Date. The parties hereby agree that the Market Price is
$2.297 and that the number of Purchase Price Shares to be issued pursuant hereto
is 409,795.
2.3 As a result of Agreement, the Purchased Assets including, without
limitation, annual estimated bromine production capacity of 4,000 tons,
buildings, equipment, xxxxx, pipelines, and power circuits will be owned by
SCHC; provided, however, that any and all debts, obligations and liabilities of
YANG relating to the Purchased Assets and the Leased Property are specifically
excluded.
2.4 YANG covenants that the $653,680 lease payment due under the 50-year land
lease for the Leased Property has been paid-off. Any economic losses or legal
disputes relating to the ownership of the Leased Property, whether arising prior
to or after the transfer of ownership of the Leased Property from YANG to SCHC,
will be YANG's full responsibility.
2.5 Upon execution of this Agreement by each of SCHC and YANG, SCHC shall
deliver to YANG a security deposit of $261,472 (the "Security Deposit"), to be
held in escrow by YANG pending the Closing. At Closing the Security Deposit
shall be released to YANG, and shall be applied to the Purchase Price due by
SCHC at Closing. If the transactions contemplated hereunder are not consummated
by the Closing Date, this Agreement shall terminate, and each party shall have
no further obligation to the other party, except that YANG shall return the
Security Deposit to SCHC within 30 days, provided, however, that YANG shall be
entitled to retain the Security Deposit if the transactions contemplated
hereunder are not consummated due to the material default or breach on the part
of SCHC.
2.6 Three days after the Effective Date, SCHC and YANG will both establish an
asset assessment team to assess all of the Purchased Assets and the Leased
Property for transfer and conveyance to SCHC.
3. REPRESENTATIONS AND WARRANTIES
3.1 YANG represents and warrants to SCHC the following:
(a) Authority. YANG has the power and authority to execute and deliver this
Agreement and to perform his obligations hereunder, and to consummate the
transactions hereby, and upon the execution and delivery of the instruments and
documents specified herein, no further action will be required of YANG to vest
legal title to and possession of the Purchased Assets and the Leased Property in
the Purchaser, its successors and assigns forever.
(b) Title to Assets. YANG has good and marketable title to the Purchased Assets
and the Leased Property, free and clear of liens or encumbrances of any kind and
no person, firm or corporation has any undisclosed adverse interest therein.
(c) Condition of Purchased Assets. The Purchased Assets are in operating
condition and repair, ordinary wear and tear excepted, and are suitable for
continued use by SCHC in the production of bromine. The material buildings,
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plants, machinery and equipment necessary of in connection with the production
of bromine located on the Leased Property as presently conducted are
structurally sound, are in good operating condition and repair and are adequate
for the uses to which they are being put or would be put in the Ordinary Course
of Business, in each case, taken as a whole, and none of such buildings, plants,
machinery or equipment is in need of maintenance or repairs, except for
ordinary, routine maintenance and repairs that are not material in nature or
cost.
(d) Disclosure. No representation or warranty by YANG contained in this
Agreement or any written statement furnished to SCHC pursuant hereto, contains
any untrue statement of a material fact, or omits to state a material fact
necessary to make the statement contained herein true and not misleading.
(e) Reliance. The foregoing representations and warranties have been made by
YANG with the knowledge and expectation that SCHC is placing reliance thereon,
and all such representations and warranties shall survive the Closing for a
period of one (1) year.
3.2 Each of SCHC and YANG represents and warrants respectively to the other as
follows:
(a) Each of SCHC and YANG warrants that has taken all necessary actions for the
execution and performance of this Agreement.
(b) The performance of the transaction contemplated hereunder is not subject to
the consent, approval or order of any governmental authorities or any other
third parties, nor is it subject to any conditions precedent as registration
with, qualification verification by or document delivery to any governmental
authorities or any other third parties.
4. INDEMNIFICATION
4.1 YANG agrees to indemnify, hold harmless and reimburse the Purchaser at all
times after the Closing, against and with respect to:
(a) any damage or deficiency resulting from any misrepresentation, breach of
warranty or non-fulfillment of any covenant or agreement on the part of YANG
made in this Agreement, any other agreement or instrument delivered by YANG at
the Closing;
(b) any damages or claims asserted against the Purchaser on account of any
liability of YANG in connection with his ownership of the Purchased Assets and
the Leased Property ; and
(c) all actions, suits, proceedings, demands, assessments, judgments, costs and
expenses, including reasonable attorneys' fees, incident to the foregoing.
5. MISCELLANEOUS PROVISIONS.
5.1 No Assumption of Liabilities. Except as specifically set forth in this
Agreement, nothing in this Agreement shall be construed to impose upon SCHC the
assumption of any claim against or liability or obligation of YANG, arising out
of his business, or the use, operation or possession of the Purchased Assets,
through the Closing, or thereafter.
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5.2 Books and Records. Those books and records reasonably deemed primarily to
relate to the Purchased Assets and maintained separately from the other records
of YANG shall be delivered to and become the property of SCHC.
5.3 Expenses of Negotiation and Transfer. Each party to this Agreement shall pay
its own expenses and other costs incidental to or resulting from this Agreement,
whether or not the transactions contemplated hereby are consummated.
5.4 Entire Agreement. This Agreement, along with the documents and agreements to
be executed in connection herewith, constitutes the full understanding of the
parties, a complete allocation of risks between them and a complete and
exclusive statement of the terms and conditions of their agreement relating to
the subject matter hereof and supersedes any and all prior agreements, whether
written or oral, that may exist between the parties with respect thereto. Except
as otherwise specifically provided in this Agreement, no conditions, usage of
trade, course of dealing or performance, understanding or agreement purporting
to modify, vary, explain or supplement the terms or conditions of this Agreement
shall be binding unless hereafter made in writing and signed by the party to be
bound, and no modification shall be effected by the acknowledgment or acceptance
of documents containing terms or conditions at variance with or in addition to
those listed in this Agreement. No waiver by any party with respect to any
breach or default or of any right or remedy and no course of dealing shall be
deemed to constitute a continuing waiver of any other breach or default or of
any other right or remedy, unless such waiver be expressed in writing signed by
the party to be bound. Failure of a party to exercise any right shall not be
deemed a waiver of such right or rights in the future.
5.5 Binding Effect. All of the covenants, conditions, agreements and
undertakings set forth in this Agreement shall extend to and be binding upon
YANG and SCHC and their respective successors and assigns.
5.6 Assignability. Neither this Agreement nor any right, remedy, obligation or
liability arising hereunder or by reason hereof nor any of the documents
executed in connection herewith may be assigned by any party without the consent
of the other parties
5.7 Headings. Headings as to the contents of particular Sections are for
convenience only and are in no way to be construed as part of this Agreement or
as a limitation of the scope of the particular Sections to which they refer.
5.8 Exhibits and Schedules. The Exhibits and Schedules (and any appendices
thereto) referred to in this Agreement are and shall be incorporated herein and
made a part hereof.
5.9 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together will constitute an integral
party of this Agreement.
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IN WITNESS HEREOF, SCHC and YANG have caused this Agreement to be executed by
their duly authorized representatives as of the date first hereinabove
mentioned.
SCHC: SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
Signed by: /s/ Xxxx Xxxx
---------------------------------
Name: Xxxx Xxxx
Position: CEO
YANG: Sole owner of Dong Ying City Liu Hu Area
Signed by: /s/ Dong Xxx Xxxx
---------------------------------
Name: Dong Xxx Xxxx
As to Section 2.2(a) only:
AGREED as of the date first above written:
GUFR: GULF RESOURCES, INC.
Signed by: /s/ Xxxx Xxxx
---------------------------------
Name: Xxxx Xxxx
Position: CEO
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Schedule 1
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Dong Ying City Liu Hu Area Asset checklist
Checked Time Fixed Asset Unit Quantity
May/9/2007 Bromine Area Acre 2317.85
May/9/2007 Plant 6,500 square meter 1
May/9/2007 Garage 1
May/9/2007 Boiler 0.2 ton 1
May/9/2007 Underwater pump 23
May/9/2007 Power cable 275 meter
May/9/2007 Water container 4.5 square meter 1
May/9/2007 Generator 1
May/9/2007 Stove 1
May/9/2007 PVC pipe 650 meter
May/9/2007 Vaporizer 2
May/9/2007 Stove Operating Xxxx 0
Xxx/0/0000 Xxxxxx Xxxx 0
Xxx/0/0000 Sulfur stove 1
May/9/2007 Washing Tower 1
May/9/2007 Precipitation Cylinder 1
May/9/2007 Water Pump 1
May/9/2007 sulfuric acid container 15 cubic meter 1
May/9/2007 Liquid Chlorine cylinder 20
May/9/2007 brimstone storage 3
May/9/2007 Control Room 1
May/9/2007 Laboratory 1
May/9/2007 Blowing Tower 1
May/9/2007 Receiving Tower 1
May/9/2007 Motor 1
May/9/2007 Brine Pool 10,000 cubic meter 1
May/9/2007 High-Voltage wire set 1
May/9/2007 Bromine well 405
May/9/2007 convey trench 8,730meter
Raw Material
May/9/2007 Sulfuric Acid ton 8.2
May/9/2007 Brimstone ton 17.45
May/9/2007 Coal ton 30.15
May/9/2007 Liquid Chlorine ton 13.00
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Checker:Xxx Xx Owner:Dong Xxx Xxxx
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Schedule 2
Leased Property Description
Dong Ying City Liu Hu Area
Area: 2317.85 Acre
Lease Period: 50 years (April/30/2003-April/29/2052)
Lease Payment: (Annual Rent of $5.64/ Acre, totaled $653,680)
Payment terms: One-time payment paid off by YANG.
Ownership: The properties and mining rights of the lands above and underground
120 meters are belonged to owner.
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EXHIBIT A
FORM OF PROMISSORY NOTE
SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
PROMISSORY NOTE
NO. 1 $ , 2007
--- ---- ------------
FOR VALUE RECEIVED, the undersigned, Shouguang City Haoyuan Chemical Company
Limited, a company of limited liabilities incorporated and validly existing
under the laws of China (the "Maker"), hereby promises to pay to the order of
Dong Xxx Xxxx (the "Payee"), the principal amount of _____$__________, all in
accordance with the provisions of this Promissory Note.
1. Payment of Principal. The full amount of the principal shall be due and
payable on or before __________________ (the "Maturity Date").
2. No Interest. Under no circumstances shall interest accrue or be charged on
the unpaid principal balance of this Promissory Note.
3. Method of Payment. Payments hereunder shall be in lawful money of the United
States and shall be made to Payee at the following address or at such other
place as Payee may designate to Maker in writing: c/o __ Wo Pu Town, Xxxx Xx Oil
Extraction Plant 2nd Living District, Shouguang City, Shandong Province, China.
4. Unconditional Payment Obligation. No provision of this Promissory Note shall
alter or impair the obligation of the Maker, which is absolute and
unconditional, to pay the principal of this security deposit at the time and
place and in the currency herein prescribed.
5. Governing Law. This promissory note shall be construed in accordance with the
laws of the State of New York, without regard to its conflicts of laws rules.
6. Notices. All notices, requests, demands and other communications with respect
to this security deposit shall be given in person or forwarded by mail, postage
prepaid, registered or certified mail, with return receipt requested, addressed
to the party's address. Any notice, request, demand or communication shall be
deemed validly given and received upon delivery if given in person, and on the
5th business day after deposit in the mail if given by mail as provided for in
the preceding sentence.
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IN WITNESS WHEREOF, the Maker has executed and delivered this Promissory Note
effective as of , 2007.
SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
By: ___________________________
Xxxx Xxxx
Chief Executive Officer
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