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ASSET PURCHASE AGREEMENT
BETWEEN
SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
AND
DONG HUA YANG
DATED AS OF
JUNE 8, 2007
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INDEX OF SCHEDULES AND EXHIBITS
Exhibits:
A. Form of Promissory Note Schedules:
1. Dong Ying City Liu Hu Area Asset Checklist
2. Leased Property Description
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This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into
as of June 8,
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) DONG HUA YANG, ("YANG"), an individual resident of China who
owns private
land located in the Dong Ying City Liu Hu Area.
WHEREAS: YANG wishes to sell, transfer and convey certain assets
to SCHC, and
SCHC wishes to purchase and acquire the same from YANG.
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<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 YANG, both have reached an
AGREEMENT reciprocally
as follows:
1. CERTAIN DEFINITIONS
"Ordinary Course of Business" shall mean an action taken by YANG
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 June
8, 2007 and in
no event later than June 8, 2007 (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.
"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 YANG 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 YANG's right, title and interest in
and to all
assets owned by YANG located at the Dong Ying City Liu Hu 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, YANG 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 YANG 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 YANG the
Purchase Price Shares (as hereinafter defined) within 45 days
after the Closing
and (b) SCHC shall pay to YANG the sum of $4,575,761 in cash or
readily
available funds within 5 days after the Closing. At Closing,
SCHC shall issue to
YANG a promissory note in the principal amount of $889,005 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 $6,667,538
(the "Purchase Price") and that the Purchase Price is based upon
an approximate
valuation of the Dong Ying City Liu Hu Area at $6,667,538. The
number of
"Purchase Price Shares" shall be equal to the result obtained by
dividing
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<PAGE>
$941,300 by the average closing price of GUFR Common Stock (the
"Market Price")
as quoted by the OTC Bulletin Board during the 15 trading days
immediately
preceding the Closing Date. The parties hereby agree that the
Market Price is
$2.297 and that the number of Purchase Price Shares to be issued
pursuant hereto
is 409,795.
2.3 As a result of Agreement, the Purchased Assets including,
without
limitation, annual estimated bromine production capacity of
4,000 tons,
buildings, equipment, wells, pipelines, and power circuits will
be owned by
SCHC; provided, however, that any and all debts, obligations and
liabilities of
YANG relating to the Purchased Assets and the Leased Property
are specifically
excluded.
2.4 YANG covenants that the $653,680 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 YANG to SCHC,
will be YANG's full responsibility.
2.5 Upon execution of this Agreement by each of SCHC and YANG,
SCHC shall
deliver to YANG a security deposit of $261,472 (the "Security
Deposit"), to be
held in escrow by YANG pending the Closing. At Closing the
Security Deposit
shall be released to YANG, 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 YANG shall
return the
Security Deposit to SCHC within 30 days, provided, however, that
YANG 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 YANG 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 YANG represents and warrants to SCHC the following:
(a) Authority. YANG 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 YANG 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. YANG 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.
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