ASSET PURCHASE AGREEMENT BETWEEN SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED, GULF RESOURCES, INC. AND Fengxia Yuan, Han Wang, Qing Yang DATED AS OF September 7 , 2009
BETWEEN
SHOUGUANG
CITY HAOYUAN CHEMICAL COMPANY LIMITED,
AND
Xxxxxxx
Xxxx, Xxx Xxxx, Xxxx Xxxx
DATED AS
OF
September
7 ,
2009
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INDEX OF
SCHEDULES AND EXHIBITS
1.
Shouguang City Yingli Township Beishan Village Leased Property and Asset
Checklist
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This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of September 7, 2009 (the "Effective Date") by and between the following Parties:
(1)
SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED, a company validly existing
under the laws of China ("SCHC"), a subsidiary of Gulf Resources,
Inc.;
(2) GULF
RESOURCES, INC. (“GUFR”); and
(3)
Xxxxxxx Xxxx，Xxx Xxxx and Xxxx
Xxxx, three individual residents of China (the “Sellers”) who collectively own
private land use rights located in the Shouguang City Yingli Township Beishan
Village as further described on Schedule 1 attached hereto (the “Leased
Property”)
WHEREAS:
Xxxxxxx Xxxx，Xxx Xxxx and Xxxx
Xxxx wish to sell, transfer and convey certain assets listed on Schedule 1
hereto, to SCHC, and SCHC
wishes to purchase and acquire the same from the Sellers.
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, the parties agree as
follows:
1.
CERTAIN DEFINITIONS
"Ordinary
Course of Business" shall mean an action taken by Xxxxxxx Xxxx，Xxx Xxxx and Xxxx
Xxxx if such action is taken in normal operation of the assets, 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 September 30, 2009 and in no
event later than September 30, 2009 (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.
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2.
TRANSFER OF THE ASSETS
2.1
Xxxxxxx Xxxx，Xxx Xxxx and Xxxx
Xxxx agree that, upon the Closing, they will sell, transfer and deliver its
asset with annual bromine production 4,000 tons and crud salt 150,000 tons 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 the Sellers’ right, title and interest in and to
all assets owned by Xxxxxxx Xxxx，Xxx Xxxx and Xxxx
Xxxx located at the Shouguang City Yingli Township Beishan Village, 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").
2.2 As
full consideration for the sale, assignment, transfer and delivery of Purchased
Assets to SCHC and for the value of the rights to the Leased Property , and upon
the terms and subject to all of the conditions contained herein,
(a) SCHC
shall pay to the Sellers the sum of RMB78, 400,000 in cash ( 70% of the total
purchase price) in the aggregate; and
(b) GUFR
shall issue to the Sellers GUFR Common Stock in the principal amount of RMB33,
600,000 in the aggregate (the “Purchase Price Shares”).
2.3 The
parties understand and acknowledge that the total purchase price for the
Purchased Assets and the Leased Property is RMB112,000,000 (the "Purchase
Price") and that the Purchase Price is based upon an approximate valuation of
the Shouguang City Yingli Township Beishan Village at RMB112,000,000. The number
of "Purchase Price Shares" shall be Four Million Two Hundred Twenty Nine
Thousand Three Hundred Sixty Six (4,229,366), based on a price of $1.163 per
share, which is the average closing price of the Company’s Common Stock on the
Over-the Counter Bulletin Board for the 30 trading days prior to the Effective
Date and an exchange rate of $1 = RMB6.8310, which is the published average
exchange rate of the People’s Bank of China on September 4, 2009. The Purchase
Price Shares will be delivered to the sellers within twenty (20) days after the
closing date.
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2.4 Upon execution of this Agreement by all of the parties, SCHC shall deliver to Xxxxxxx Xxxx，Xxx Xxxx and Xxxx Xxxx a security deposit of RMB15,680,000 (the "Security Deposit"). Three days after the date hereof, SCHC will establish an asset assessment team to assess the condition and the operation of the Purchased Assets and the Leased Property for transfer and conveyance to SCHC. Thereafter, SCHC shall pay the remainder of the cash portion before September 30, 2009 of the receipt of a report from the assessment team that is acceptable to SCHC with respect to the Purchased Assets and Leased Property. If the report concludes that the condition of the Purchased Assets is not acceptable, SCHC and the Sellers shall negotiate a reduction in the Purchase Price. If such amount can not be mutually agreed, SCHC shall have the right to terminate this Agreement and the Security Deposit shall be returned to SCHC. As of the date hereof, both parties have started the formal transfer procedures (including the related property lease contracts, etc.)
2.5 If
SCHC cannot pay off the remainder of the cash portion within the time period
provided in Section 2.4 above, the Sellers have the right to terminate this
Agreement and to retain the Security Deposit with no further obligations or
liabilities to SCHC or GUFR.
2.6 As a
result of this Agreement, the Purchased Assets including, without limitation,
any and all bromine and crude salt that can be produced on the Leased Property,
buildings, equipment, xxxxx, pipelines, and power circuits will be acquired by
SCHC; provided, however, that any and all debts, obligations and liabilities
(the “’Obligations”) of Xxxxxxx Xxxx，Xxx Xxxx and Xxxx
Xxxx relating to the Purchased Assets and the Leased Property are specifically
excluded from such Purchased Assets and shall remain the Obligations of the
Sellers after the Closing.
3.
REPRESENTATIONS AND WARRANTIES
3.1 Each
of XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX represent and warrant to SCHC the following:
(a)
Authority. XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX each has the individual power and authority to execute and deliver this
Agreement
and to perform his respective obligations hereunder, and to consummate the
transactions hereby, and upon the execution and delivery of the instruments and
documents specified herein, except for the covenant by the Sellers to assist
SCHC to sign a new 50 year land lease contract with the village for the Leased
Property. no further action will be required of XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX to vest legal title to and possession of the Purchased Assets and the
Leased Property in the name of the Purchaser, its successors and assigns
forever.
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(b) Title
to Assets. XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX have good and marketable title to the Purchased Assets and have the
appropriate land use right certificates, or other required governmental approval
evidencing the rights to use the Leased Property and ability to transfer 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. The lease payment due under the 50-year land lease for the
Leased Property has been paid-off.
(c)
Condition of Purchased Assets. The Purchased Assets are in good 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,
plants, machinery and equipment and other Purchased Assets listed on Schedule 1
hereto, necessary 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 XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX contained in this Agreement or any written statement furnished to SCHC
pursuant hereto or in connection with the transactions contemplated by this
Agreement, contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statement contained herein or therein true
and not misleading.
(e)
Reliance. The foregoing representations and warranties have been made
by XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX 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 XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX represents and warrants respectively to the other as follows:
(a) Each
of SCHC and XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX warrants that has taken all necessary actions for the execution and
performance of this Agreement.
(b)
Except as otherwise disclosed, 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.
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3.3 Investment
Representations of the Sellers:
(a) Intent. Each of the
Sellers warrants that they are acquiring the Purchase Price Shares for their own
account and not for the account or benefit of any U.S. person, and not with a
view towards the distribution or dissemination thereof.
(b) Independent
Investigation. Each of the Sellers, in making the decision to
acquire the Purchase Price Shares has relied upon an independent investigation
of the Company and has not relied upon any information or representations made
by any third parties or upon any oral or written representations or assurances
from the Company, its officers, directors or employees or any other
representatives or agents of the Company, other than as set forth in this
Agreement. Each of the Sellers is familiar with the business, operations and
financial condition of the Company and has had an opportunity to ask questions
of, and receive answers from, the Company’s officers and directors concerning
the Company and the Purchase Price Shares and has had full access to such other
information concerning the Company as each of the Sellers has
requested.
(c) Reliance on Representations
and Warranties. Each of the Sellers understands that the
Purchase Price Shares are being offered and sold to the Purchaser in reliance on
specific provisions of United States federal and state securities laws and that
the Seller is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of each of the
Sellers set forth in this Agreement in order to determine the applicability of
such provisions.
(d) Each
of the Sellers is a “non-US person” as defined in Regulation S and further makes
the representations and warranties as set forth on Exhibit “B” attached
hereto.
4. COVENANTS
OF THE SELLERS
4.1 XXXXXXX
XXXX，XXX XXXX
AND XXXX XXXX covenant that if there are more than ten xxxxx that cannot be used
and if there is more than 200 meters of pipeline that cannot be used located at
the Leased Premises, the Sellers will deduct an amount equal to 2 times the
total replacement value of such xxxxx and pipelines from the Purchase
Price.
4.2 XXXXXXX
XXXX，XXX XXXX
AND XXXX XXXX covenant that upon the Closing, the contract signed between
Xxxxxxx Xxxx，Xxx Xxxx and Xxxx
Xxxx and the village for 11.02KM2 property’s 50 years lease will be
automatically canceled, and XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX will help SCHC to sign a new 50 years land lease contract with the village,
and if the Sellers do not provide such assistance, the Sellers would have to pay
SCHC 10% of the Security Deposit as the compensation fee.
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4.3 As of
the Closing, XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX shall cancel the employment contract with any previous employees
and pay staff wages and compensation according to relevant national
laws and regulations.
4.4 As of
the Closing, XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX shall settle all the contacts with original suppliers and customers, and
shall pay at Closing, or be bound in their individual capacities to pay all the
corresponding debt and obligations. .
4.5 SCHC
is buying the Purchased Assets from XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX , and has no relationship or affiliation with the Sellers or
the original operations of the Purchased Assets, and as a result is
not assuming any rights and/or duties with respect to the operations of the
Purchased Assets, including without limitation, no rights to (a) customers and
supplier lists (other than such customers or suppliers who have pre-existing
relationships with SCHC), (b) employees; (c) market distribution systems; (d)
sales force; (e) operating rights; (f) production techniques, or (g) trade
names.
5.
INDEMNIFICATION
5.1 XXXXXXX
XXXX，XXX XXXX
AND XXXX XXXX agrees to indemnify, hold harmless and reimburse SCHC 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 XXXXXXX
XXXX，XXX XXXX
AND XXXX XXXX made in this Agreement, any other agreement or instrument
delivered by XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX at the Closing;
(b) any
damages or claims asserted against the Purchaser on account of any liability
of XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX in connection with his ownership of the Purchased Assets and the Leased
Property , whether arising prior to or after the transfer of ownership of the
Leased Property from XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX to SCHC,
(c) all
actions, suits, proceedings, demands, assessments, judgments, costs and
expenses, including reasonable attorneys' fees, incident to the
foregoing.
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6.
MISCELLANEOUS PROVISIONS.
6.1 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 XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX, arising out of his
business, or the use, operation or possession of the Purchased Assets, through
the Closing, or thereafter.
6.2
Restrictive
Legend. Each certificate representing Purchase Price Shares
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES
ACT, AND BASED ON AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT THE PROVISIONS OF REGULATION S HAVE
BEEN SATISFIED, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (3) PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER
CONTEMPLATED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS. HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.”
6.3 Books
and Records. Those books and records reasonably deemed primarily to relate to
the Purchased Assets and maintained separately from the other records
of XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX shall be delivered to and become the property of SCHC.
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6.4
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.
6.5
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.
6.6
Binding Effect. All of the covenants, conditions, agreements and undertakings
set forth in this Agreement shall extend to and be binding
upon XXXXXXX XXXX，XXX XXXX AND XXXX
XXXX and SCHC and their respective successors and assigns.
6.7
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
6.8
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.
6.9
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.
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6.10 Counterparts. This Agreement may be executed in three (3) 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.
IN
WITNESS HEREOF the Parties hereto 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
|
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| Name: | Xxxx Xxxx |
|
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| Position: |
CEO
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|
XXXXXXX
XXXX，XXX XXXX AND
XXXX XXXX: Owners of Shouguang City Yingli Township Beishan
Village
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| Signed by: |
/s/
XXXXXXX XXXX
|
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| Name: |
XXXXXXX XXXX
|
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| Signed by: |
/s/
XXX XXXX
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| Name: |
XXX
XXXX
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| Signed by: |
/s/
XXXX XXXX
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| Name: |
XXXX
XXXX
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As to
Section 2.2(b) and 2.3 only:
AGREED as
of the date first above written:
|
GUFR:
GULF RESOURCES, INC.
|
|||||
| Signed by: |
/s/
Xiao Xxx Xxx
|
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| Name: | Xiao Xxx Xxx |
|
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| Position: |
CEO
|
|
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