ASSET PURCHASE AGREEMENT
BETWEEN
SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
AND
Xingji Liu
DATED AS OF
October 26th, 2007
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INDEX OF SCHEDULES AND EXHIBITS
Schedules:
1. Shouguang City Houxing Area Asset Checklist
2. Leased Property Description
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This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as
of October
26th, 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) Xingji Liu, ("LIU"), an individual resident of China who owns
private land
located in the Shouguang City Houxing Area.
WHEREAS: LIU wishes to sell, transfer and convey certain assets to
SCHC, and
SCHC wishes to purchase and acquire the same from LIU.
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 LIU, both have reached an AGREEMENT
reciprocally
as follows:
<PAGE>
1. CERTAIN DEFINITIONS
"Ordinary Course of Business" shall mean an action taken by LIU 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 October 26, 2007
(the "Closing
Date") or as soon thereafter as is practicable.
"GUFR" shall mean Gulf Resources, Inc., a Delaware corporation and
parent of
SCHC.
"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 LIU 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 right, title and interest in and to all
assets listed
and described on Schedule 1 attached hereto and incorporated herein
by reference
(the "Purchased Assets"). In addition to the Purchased Assets, LIU
agrees at
Closing to convey to SCHC all rights to the Lease (the "Lease")
whereby LIU
leases the 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 LIU
to SCHC.
2.2 As full consideration for the sale, assignment, transfer and
delivery of the
Purchased Assets and the Leased Property to SCHC, and upon the
terms and subject
to all of the conditions contained herein, SCHC shall pay to LIU
the sum of
$6,665,778 (the "Purchase Price") of which $2,879,616 (the "Initial
Payment")
shall be paid to LIU at the Closing and $3,786,162 shall be paid in
cash or
readily available funds within 5 days after the Closing.
2.3 As a result of Agreement, the Purchased Assets including,
without
limitation, annual estimated bromine production capacity of 3,900
tons,
buildings, equipment, wells, pipelines, and power circuits will be
owned by
SCHC. SCHC is not assuming and shall not be liable for any and all
debts,
obligations and liabilities of LIU relating to the Purchased Assets
and the
Leased Property.
2.4 LIU covenants that the $872,550 lease payment due under the
50-year land
lease for the Leased Property has been paid. Any economic losses or
legal
disputes relating to the ownership of the Leased Property, whether
arising prior
to or after the transfer of the Lease from LIU to SCHC, will be
LIU's full
responsibility.
2.5 If the transactions contemplated hereunder are not consummated
within ten
days of the date hereof, this Agreement shall terminate, and each
party shall
have no further obligation to the other party, except that if the
transactions
contemplated hereunder are not consummated due to a material
default or breach
on the part of SCHC, SCHC shall pay to LIU the sum of $333,289 as
liquidated
damages and not as a penalty.
2
<PAGE>
2.6 Three days after the Effective Date, SCHC and LIU 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 LIU represents and warrants to SCHC the following:
(a) Authority. LIU 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
LIU to vest
legal title to and possession of the Purchased Assets and the
Leased in the
Purchaser, its successors and assigns forever.
(b) Title to Assets. LIU has good and marketable title to the
Purchased Assets
and holds a valid leasehold interest to the Leased Property
pursuant to the
Lease, free and clear of liens or encumbrances of any kind and no
person, firm
or corporation has any undisclosed adverse interest therein. The
Lease pursuant
to which LIU holds the Leased Property is in full force and effect
and the
assignment of the Lease to SCHC as provided for herein shall not
give rise to a
breach of the Lease.
(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 LIU 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 LIU
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.
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<PAGE>
3.2 Each of SCHC and LIU represents and warrants respectively to
the other as
follows:
(a) Each of SCHC and LIU 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
