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.
<PAGE>
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.
<PAGE>
2.3 As a result
of Agreement, the Purchased Assets including, without
limitation, annual estimated bromine production capacity of 4,700
tons,
infrastructures, equipments, wells, 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
Ordina
