ASSET PURCHASE AGREEMENT BETWEEN SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED AND Qiufen Yuan, Han Wang, Yufen Zhang DATED AS OF JANUARY 7, 2009
BETWEEN
SHOUGUANG
CITY HAOYUAN CHEMICAL COMPANY LIMITED
AND
Qiufen
Yuan, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
DATED AS
OF
JANUARY
7, 2009
_________________________________________________
INDEX OF
SCHEDULES AND EXHIBITS
1.
Shouguang City Renjiazhuangzi Village North Area Asset Checklist
_________________________________________________
This
ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of January 7,
2009 (the "Effective Date") by and betweenthe 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.("GUFR");
and
(2)
Fenqiu Yuan，▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇, three individual residents of China who
collectively own private land use rights located in the Shouguang City
Renjiazhuangzi Village North Area (the “Sellers”)
WHEREAS:
Fenqiu Yuan，▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ 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 Fenqiu Yuan，▇▇▇ ▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇ 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 January 30, 2009 and in no
event later than January 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
Fenqiu Yuan，▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ agree that, upon the Closing, they 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 the Sellers’
right, title and interest in and to all assets owned by Fenqiu Yuan，▇▇▇ ▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇ located at the Shouguang City Renjiazhuangzi Village North 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").
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 $10,000,000 in cash in the aggregate;
and
(b) GUFR
shall issue to the Sellers GUFR Common Stock in the principal amount of
$1,500,000 in the aggregate (the “Purchase Price Shares”).
2.3The
parties understand and acknowledge that the total purchase price for the
Purchased Assets and the Leased Property is $11,500,000 (the "Purchase Price")
and that the Purchase Price is based upon an approximate valuation of the
Shouguang City Renjiazhuangzi Village North Area at $11,500,000. The number of
"Purchase Price Shares" shall be equal to $1 per share, which is approximately
five times the 2008 EPS of GUFR. So the number of Purchase Price Shares to be
issued pursuant hereto is 1,500,000, in the aggregate and will be delivered to
the sellers within 30 days after the closing date .
2.4 Upon
execution of this Agreement by all of the parties, SCHC shall deliver to FENQIU
▇▇▇▇▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ a security deposit of $2,000,000 (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 for
a period of 10 days thereafter. SCHC shall pay the remainder of the
cash portion within 10 days 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 reports 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( schedule 1) including, without
limitation, any and all bromine and crude salt that can be produced on the
Leased Property, buildings, equipment, ▇▇▇▇▇, pipelines, and power circuits will
be acquired by SCHC; provided, however, that any and all debts, obligations and
liabilities (the “’Obligations”) of FENQIU YUAN, ▇▇▇ ▇▇▇▇ AND
▇▇▇▇▇ ▇▇▇▇▇ 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 FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ represent and warrant to SCHC the
following:
(a)
Authority. FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ 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 Lease
Property. no further action will be required of FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇
▇▇▇▇▇ 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. FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ has good and marketable title to
the Purchased Assets and has 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 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 FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇
▇▇▇▇▇ contained in this Agreement or any written statement furnished to SCHC
pursuant hereto or in connection with the transactions contemplated by this
Agreement, contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statement contained herein or therein true
and not misleading.
(e)
Reliance. The foregoing representations and warranties have been made by FENQIU
YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ 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 FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ represents and warrants
respectively to the other as follows:
(a) Each
of SCHC and FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ warrants that has taken all
necessary actions for the execution and performance of this
Agreement.
(b)
Except as otherwise disclosed, 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. COVENANTS
OF THE SELLERS
4.1
FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ covenant that if there are more than ten
▇▇▇▇▇ that cannot be used and if there is more than 200 meters of pipeline that
cannot be used located at the Leased Premises, the Sellers will deduct an amount
equal to 2 times the total replacement value of such ▇▇▇▇▇ and pipelines from
the Purchase Price.
4.2
FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ covenant that upon the Closing, the
contract signed between FENQIU YUAN，▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ and the village for
6.52KM2 property’s 50 years lease will be automatically canceled,
and FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ will help SCHC to sign a new
50 years land lease contract with the village, and if the Sellers do not provide
such assistance, the Sellers would have to pay SCHC 10% of the
Security Deposit as the compensation fee.
4.3 As of
the Closing, FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ shall cancel the employment
contract with any previous employees and pay staff wages and
compensation according to relevant national laws and regulations.
4.4 As of
the Closing, FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ shall settle all the contacts
with original suppliers and customers, and shall pay at Closing, or be bound in
their individual capacities to pay all the corresponding debt and obligations.
4.5 SCHC
is buying the Purchased Assets from FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇
▇▇▇▇▇ , and has no relationship or affiliation with the Sellers or
the original operations of the Purchased Assets, and as a result is
not assuming any rights and/or duties with respect to the operations of the
Purchased Assets, including without limitation, no rights to (a) customers and
supplier lists (other than such customers or suppliers who have pre-existing
relationships with SCHC), (b) employees; (c) market distribution systems; (d)
sales force; (e) operating rights; (f) production techniques, or (g) trade
names.
5.
INDEMNIFICATION
5.1
FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ agrees to indemnify, hold harmless and
reimburse SCHC 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 FENQIU YUAN，▇▇▇ ▇▇▇▇
AND ▇▇▇▇▇ ▇▇▇▇▇ made in this Agreement, any other agreement or instrument
delivered by FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ at the Closing;
(b) any
damages or claims asserted against the Purchaser on account of any liability of
FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ in connection with his ownership of the
Purchased Assets and the
Leased Property , whether arising prior to or after the transfer of ownership of
the Leased Property from FENQIU YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ to
SCHC,
(c) all
actions, suits, proceedings, demands, assessments, judgments, costs and
expenses, including reasonable attorneys' fees, incident to the
foregoing.
6.
MISCELLANEOUS PROVISIONS.
6.1 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 FENQIU YUAN，▇▇▇ ▇▇▇▇ AND
▇▇▇▇▇ ▇▇▇▇▇, arising out of his
business, or the use, operation or possession of the Purchased Assets, through
the Closing, or thereafter.
6.2 Books
and Records. Those books and records reasonably deemed primarily to relate to
the Purchased Assets and maintained separately from the other records of FENQIU
YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ shall be delivered to and become the property of
SCHC.
6.3
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.
6.4
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.
6.5
Binding Effect. All of the covenants, conditions, agreements and undertakings
set forth in this Agreement shall extend to and be binding upon FENQIU YUAN，▇▇▇
▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇ and SCHC and their respective successors and
assigns.
6.6
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.
6.7
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.
6.8
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.
6.9
Counterparts. This Agreement may be executed in three (3) 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 HEREOFthe Parties hereto 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/ ▇▇▇▇ ▇▇▇▇ | |
| Name: | ▇▇▇▇ ▇▇▇▇ | |
| Position: | CEO | |
|
FENQIU
YUAN，▇▇▇ ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇: Owners of Shouguang City Renjiazhuangzi
Village North Area
|
||
| Signed by: | /s/ FENQIU YUAN | |
| Name: | FENQIU YUAN | |
| Signed by: | /s/ ▇▇▇ ▇▇▇▇ | |
| Name: | ▇▇▇ ▇▇▇▇ | |
| Signed by: | /s/ ▇▇▇▇▇ ▇▇▇▇▇ | |
| Name: | ▇▇▇▇▇ ▇▇▇▇▇ | |
As to
Section 2.2(b) only:
AGREED as
of the date first above written:
|
GUFR: GULF RESOURCES, INC.
|
||
| Signed by: | /s/ ▇▇▇▇ ▇▇▇▇ | |
| Name: | ▇▇▇▇ ▇▇▇▇ | |
| Position: | CEO | |
Schedule
1
Shouguang
City Renjiazhuangzi Village North Area Asset checklist
|
Check
Time
|
Asstes
|
Model
|
quantity
|
|
November/28/2008
|
Office
|
|
|
|
November/28/2008
|
Warehouse
|
|
|
|
November/28/2008
|
Manufacture
|
|
|
|
November/28/2008
|
Water
Furnace
|
0.2
Ton
|
1
Unit
|
|
November/28/2008
|
Gunbarrel
|
|
2
Units
|
|
November/28/2008
|
Electri
▇▇▇▇
|
3.5
Kw.
|
1
Unit
|
|
November/28/2008
|
Fan
& Air duct
|
|
2
Sets
|
|
November/28/2008
|
Boiler
|
2
Ton
|
1
Unit
|
|
November/28/2008
|
Boiler
Room
|
|
|
|
November/28/2008
|
Labouratory
|
|
|
|
November/28/2008
|
Sulfur
Warehouse
|
|
|
|
November/28/2008
|
Sulphur-furnace
|
|
1
Unit
|
|
November/28/2008
|
Sulphur-pot
|
15
Cubic Metres
|
1
Unit
|
|
November/28/2008
|
Brine
Reservoir
|
|
|
|
November/28/2008
|
Carburettor
|
|
3
Units
|
|
November/28/2008
|
Subaqueous
Pump
|
3
Kw.
|
25
Units
|
|
November/28/2008
|
Water
Pump
|
|
1
Unit
|
|
November/28/2008
|
Water
Scrubber
|
|
2
Units
|
|
November/28/2008
|
Absorbency
|
|
2
Units
|
|
November/28/2008
|
Stripping
tower
|
|
2
Units
|
|
November/28/2008
|
Bromine
▇▇▇▇▇
|
|
350
Aperture
|
|
November/28/2008
|
Pipelines
|
|
9500
Meters
|
|
November/28/2008
|
Sluice
Pot
|
4.5
Cubic Metre
|
|
|
November/28/2008
|
Salt
Field
|
|
100000
Ares
|
|
November/28/2008
|
Liquid
chlorine cylinder
|
|
30
Units
|
|
November/28/2008
|
Accommodation
|
|
|
|
November/28/2008
|
Power
distribution room
|
|
|
|
November/28/2008
|
Central
Control Room
|
|
|
|
Inventory
Checker:
|
Recorded
by:
|
Supervised
by:
|