ASSET PURCHASE AGREEMENT
BETWEEN
SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
AND
WENBO YU
DATED AS OF
April 4, 2007
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INDEX OF SCHEDULES AND EXHIBITS
Exhibits:
A. Form of Promissory Note
Schedules:
1. Shouguang City Qinshuibo Area Asset Checklist
2. Leased Property Description
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This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of April 4,
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 of limited
liabilities incorporated and validly existing under the laws of China ("SCHC"),
a subsidiary of Gulf Resources, Inc.("GUFR"); and
(2) Wenbo Yu, ("YU"), an individual who owns a private land located in
Shouguang City Qinshuibo Area.
WHEREAS: Yu wishes to sell, transfer and convey certain assets to SCHC, and SCHC
wishes to purchase and acquire the same from Yu.
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 YU, both have reached an AGREEMENT reciprocally
as follows:
1. CERTAIN DEFINITIONS
"Ordinary Course of Business" shall mean an action taken by YU 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 April 7, 2007 and in
no event later than April 7, 2007 (the "Closing Date").
"GUFR" shall mean Gulf Resources, Inc., a Delaware corporation and parent of
SCHC.
"GUFR Common Stock" shall mean the shares of 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 YU 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 YU's right, title and interest in and to all assets
owned by YU located at the Shouguang City Qinshuibo 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, Yu 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 Yu 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 YU 779,286
shares of restricted GUFR Common Stock within three months after the Closing
(such amount of shares is based on $2.55 price per share and equals in the
aggregate $1,987,179) and (b) SCHC shall pay to YU the sum of $3,051,282 in cash
within one week after the Closing. At Closing, SCHC shall issue to YU a
promissory note in the principal amount of $3,051,282 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 $5,064,102
(the "Purchase Price") and that the Purchase Price is based upon an approximate
valuation of Qingshuibo Area at $5,064,102.
2.3 As a result of Agreement, the Purchased Assets including, without
limitation, annual estimated bromine production capacity of 4,700 tons,
infrastructures, equipments, xxxxx, pipelines, and power circuits will be owned
by SCHC; provided, however, that any and all debts and liabilities of YU
relating to the Purchased Assets and the Leased Property are specifically
excluded.
2.4 YU covenants that the $957,692 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 YU to SCHC,
will be YU's full responsibility.
2.5 Upon execution of this Agreement by each of SCHC and YU, SCHC shall
deliver to YU a security deposit of $25,641 (the "Security Deposit"), to be held
in escrow by YU pending the Closing. At Closing the Security Deposit shall be
released to YU, 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 YU shall return the Security
Deposit to SCHC, provided, however, that YU 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 YU 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 YU represents and warrants to SCHC the following:
(a) Authority. YU 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 YU 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. YU 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,
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 YU 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
YU 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 YU represents and warrants respectively to the other as
follows:
(a) Each of SCHC and YU 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 YU 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 YU made
in this Agreement, any other agreement or instrument delivered by Yu at the
Closing;
(b) any damages or claims asserted against the Purchaser on account of any
liability of YU 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 YU, arising out of
his business, or the use, operation or possession of the Purchased Assets,
through the Closing, or thereafter.
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 YU 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 YU
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.
IN WITNESS HEREOF, SCHC and YU 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
YU: Sole owner of Shouguang City Qingshuibo Area
Signed by: /s/ Wenbo Yu
---------------------------------
Name: Wenbo Yu
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
Schedule 1
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Shouguang City Qinshuibo Area Asset checklist
Checked Time Fixed Asset Unit Quantity
------------ ----------- ---- --------
February/9/2007 Office 21
February/9/2007 Plant 6,720 square meter 1
February/9/2007 Garage 1
February/9/2007 Boiler 0.2 ton 1
February/9/2007 Underwater pump 23
February/9/2007 Power cable 100 meter
February/9/2007 Water container 4.5 square meter 1
February/9/2007 Generator 1
February/9/2007 Stove 1
February/9/2007 PVC pipe 500 meter
February/9/2007 Vaporizer 2
February/9/2007 Stove Operating Room 1
February/9/2007 Shower Room 1
February/9/2007 Sulfur stove 1
February/9/2007 Washing Tower 1
February/9/2007 Precipitation Cylinder 1
February/9/2007 Water Pump 1
February/9/2007 Clean water processing pool 60 cubic meter 1
February/9/2007 Finalized pool 210 cubic meter 1
February/9/2007 sulfuric acid container 13 cubic meter 1
February/9/2007 Liquid Chlorine cylinder 20
February/9/2007 brimstone storage 3
February/9/2007 Control Room 1
February/9/2007 Laboratory 1
February/9/2007 Blowing Tower 1
February/9/2007 Receiving Tower 1
February/9/2007 Motor 1
February/9/2007 Brine Pool 6000 cubic meter 1
February/9/2007 High-Voltage wire set 5
February/9/2007 Bromine well 575
February/9/2007 convey trench 13,451meter
Raw Material
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February/9/2007 Sulfuric Acid ton 5.8
February/9/2007 Brimstone ton 22.5
February/9/2007 Coal ton 26.57
February/9/2007 Liquid Chlorine ton 15
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Checker:Xxx Xx Witness:XxxXxxxx Xx Owner: Wenbo Yu
Schedule 2
Leased Property Description
Shouguang City Qinshuibo Area
Area: 7.47 square-kilometers
Lease Period: 50 years (1/1/2003-12/31/2052)
Lease Payment: (Annual Rent of $2,564.1/ square-kilometer, totaled $957,692)
Payment terms: One-time payment paid off by YU.
Ownership: The properties and mining rights of the lands above and underground
120 meters are belonged to owner.
EXHIBIT A
FORM OF PROMISSORY NOTE
SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
PROMISSORY NOTE
NO. ___ $____________ ______, 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
Wenbo Yu (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
____________________________________________________.
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.
IN WITNESS WHEREOF, the Maker has executed and delivered this Promissory Note
effective as of , 2007.
SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
By:
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Xxxx Xxxx
Chief Executive Officer
