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
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INDEX OF
SCHEDULES AND EXHIBITS
1. Shouguang
City Yingli Township Beishan Village Leased Property and Asset
Checklist
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) Fengxia
Yuan ，
Han Wang and Qing Yang, 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:
Fengxia Yuan ，
Han Wang and Qing Yang 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 Fengxia
Yuan ，
Han Wang and Qing Yang 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.
2. TRANSFER OF
THE ASSETS
2.1 Fengxia
Yuan ，
Han Wang and Qing Yang 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 Fengxia Yuan
，
Han Wang and Qing Yang 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.
2.4 Upon execution of this Agreement by all of the parties, SCHC
shall deliver to Fengxia Yuan ，
Han Wang and Qing Yang 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, wells, pipelines, and
power circuits will be acquired by SCHC; provided, however, that
any and all debts, obligations and liabilities (the
“’Obligations”) of Fengxia Yuan
，
Han Wang and Qing Yang 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 FENGXIA YUAN ，
HAN WANG AND QING YANG represent and
warrant to SCHC the following:
(a)
Authority. FENGXIA YUAN ，
HAN WANG AND QING YANG 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 FENGXIA
YUAN ，
HAN WANG AND QING YANG 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.
(b) Title to
Assets. FENGXIA YUAN ，
HAN WANG AND QING YANG 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
