Exhibit 10.1
 

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ASSET PURCHASE AGREEMENT

BETWEEN

SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED,

GULF RESOURCES, INC.

AND

Jinjin Li and Qiuzhen Wang

DATED AS OF

June 7, 2010

 
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INDEX OF SCHEDULES AND EXHIBITS
 
1. Asset Checklist

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This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of June 7,
2010 (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) Jinjin Li and Qiuzhen Wang, two individual residents of China (the
“Sellers”) who collectively own private land use rights located for 3.07 square
kilometers of land in the Shouguang City Yangkou Township, East of the
Yangzhuang Villageas (the “Leased Property”)

WHEREAS: THE SELLERS wish to sell, transfer and convey certain assets listed on
Schedule 1 hereto with annual bromine production capacity of 3,000 tons and
annual crude salt production capacity of 100,000 tons to 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 THE
SELLERS located on the Leased Property, 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 (collectively the “Purchased Assets”), 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 THE SELLERS 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 within 10 days from the date that SCHC receives a
satisfactory report from its assessment team as set forth in Section 2.4 (the
"Closing Date").
 
 
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"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 THE SELLERS agree that, upon the Closing, they will sell, transfer and
deliver the Purchased Assets.

2.2 The parties understand and acknowledge that the total purchase price for the
Purchased Assets and the Leased Property is RMB95,000,000 (the "Purchase Price")
and that the Purchase Price is based upon an approximate valuation of the Leased
Property and Purchased Assets.  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, the Purchase Price shall be paid as follows:

(a) SCHC shall pay to Jinjin Li the sum of RMB90,250,000 in cash (95% of the
total purchase price) in the aggregate (the “Cash Purchase Price”); and

(b) GUFR shall issue to THE SELLERS GUFR Common Stock in the principal amount of
RMB4,750,000 in the aggregate (the “Purchase Price Shares”).

2.3 The number of "Purchase Price Shares" shall be SEVENTY THOUSAND FIVE HUNDRED
SIXTY] (70,560), based on a price of $9.859 per share, which is the average
closing price of the Company’s Common Stock on the NASDAQ Stock Market for the
30 trading days prior to the Effective Date and an exchange rate of $1 =
RMB6.82810, which is the published average exchange rate of the People’s Bank of
China on June 4, 2010. The Purchase Price Shares will be delivered to THE
SELLERS within twenty (20) days after the Closing Date; 65,560 Purchase Price
Shares shall be delivered to Jinjin Li and 5,000 Purchase Price shares shall be
delivered to Qiuzhen Wang.
 
 
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2.4 Upon execution of this Agreement by all of the parties, SCHC shall deliver
to Jinjin Li a security deposit of RMB18,050,000 (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 Purchase Price on or before the Closing Date if it has
received a receipt of a report from its 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.). Upon the Closing, the SELLERS shall pay
the land lease fees relating to Leased Property incurred up to June 30, 2010,
and SCHC shall pay the land lease fees relating to the Leased Property incurred
from July 1, 2010 forward.
 
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 THE SELLERS 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 THE SELLERS represent and warrant to SCHC the following:

(a) Authority.  THE SELLERS 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  THE SELLERS 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. THE SELLERS 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.
 
 
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(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 THE SELLERS 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  THE SELLERS 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 THE SELLERS represents and warrants respectively to the
other as follows:

(a) Each of SCHC and THE SELLERS 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.
 
 
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3.3 Investment Representations of THE SELLERS:
 
(a)  Intent. Each of THE SELLERS warrants that they are acquiring the Purchase
Price Shares for their own account and not for the account or benefit of any
U.S. person, and not with a view towards the distribution or dissemination
thereof.
 
(b)  Independent Investigation.  Each of THE SELLERS, in making the decision to
acquire the Purchase Price Shares has relied upon an independent investigation
of the Company and has not relied upon any information or representations made
by any third parties or upon any oral or written representations or assurances
from the Company, its officers, directors or employees or any other
representatives or agents of the Company, other than as set forth in this
Agreement. Each of THE SELLERS is familiar with the business, operations and
financial condition of the Company and has had an opportunity to ask questions
of, and receive answers from, the Company’s officers and directors concerning
the Company and the Purchase Price Shares and has had full access to such other
information concerning the Company as each of THE SELLERS has requested.
 
(c) Reliance on Representations and Warranties.  Each of THE SELLERS understands
that the Purchase Price Shares are being offered and sold to the Purchaser in
reliance on specific provisions of United States federal and state securities
laws and that the Seller is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
each of THE SELLERS set forth in this Agreement in order to determine the
applicability of such provisions.
 
(d)  Each of THE SELLERS is a “non-US person” as defined in Regulation S and
further makes the representations and warranties as set forth on Exhibit “B”
attached hereto.

4.  COVENANTS OF THE SELLERS
4.1  THE SELLERS covenant that if there are more than ten wells 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 wells and pipelines from the Purchase
Price.

4.2  THE SELLERS covenant that upon the Closing, the contract signed between THE
SELLERS and the village for the Leased Property will be cancelled, and THE
SELLERS will help SCHC to sign a new lease for the remainder of the lease term
with the village, and if THE SELLERS do not provide such assistance, THE SELLERS
shall pay to SCHC 10% of the Security Deposit as a compensation fee.
 
 
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4.3 As of the Closing, THE SELLERS 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, THE SELLERS 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 THE SELLERS , 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  THE SELLERS 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 THE
SELLERS made in this Agreement, any other agreement or instrument delivered by
THE SELLERS at the Closing;

(b) any damages or claims asserted against the Purchaser on account of any
liability of THE SELLERS 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 THE SELLERS 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  THE SELLERS,
arising out of his business, or the use, operation or possession of the
Purchased Assets, through the Closing, or thereafter.
 
 
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6.2 Restrictive Legend.  Each certificate representing Purchase Price Shares
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
 
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES
ACT, AND BASED ON AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT THE PROVISIONS OF REGULATION S HAVE
BEEN SATISFIED, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (3) PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER
CONTEMPLATED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS.  HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

6.3 Books and Records. Those books and records reasonably deemed primarily to
relate to the Purchased Assets and maintained separately from the other records
of THE SELLERS shall be delivered to and become the property of SCHC.

6.4 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.
 
 
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6.5 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.

6.6 Binding Effect. All of the covenants, conditions, agreements and
undertakings set forth in this Agreement shall extend to and be binding
upon  THE SELLERS and SCHC and their respective successors and assigns.

6.7 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

6.8 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.

6.9 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.

6.10 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.

[Signature page follows]
 
 
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IN WITNESS HEREOF the 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/ Ming Yang    Name:   Ming Yang   Position:   CEO        

 
THE SELLERS: Owners of Shouguang City Yangkou Township, East of the Yangzhuang
Village
 

     
Signed by:   
/s/ Jinjin Li   Name:   JINJIN LI  

 

     
Signed by:   
/s/ Qiuzhen Wang   Name:   QIUZHEN WANG  

As to Section 2.2(b) and 2.3 only:

AGREED as of the date first above written:
 
 
GUFR: GULF RESOURCES, INC.
 

     
Signed by:   
/s/ Xiaobin Liu   Name:   Xiaobin Liu   Position:   CEO        

 
 
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SCHEDULE 1
ASSET CHECKLIST
No.9 Asset List
 
Index
  Name
Units
1
Office
1
2
Warehouse
3
3
Maintenance Room
2
4
Guard Room
1
5
Garbage
2
6
Power Distribution Room
4
7
Central Control Room
1
8
Steaming Building
1
9
Sulfur Warehouse
1
10
Boiler Room
1
11
Chemical Laboratory
2
12
Wash Room
2
13
Boiler
1 set
14
Brine Reservoir
1
15
Halogen Water Reservoir
1
16
Tea Furnace(small)
1
17
rail-mounted gantry crane
1 set
18
air choke valve
1 set
19
Liquid chlorine cylinders
18
20
Draught Fan
1 set
21
Sulphur-furnace
1 set
22
Water Scrubber
1 set
23
Distillation Tower
1 set
24
Glass Tower
1 set
Secondary Extraction of Bromine Equipment
25
Steam Pot Equipment
1 set
26
Bromine Can
3 sets
27
Hydrotreater
1 set
28
Deep Wells
1
29
Pressure Tank
1
30
FRP Sulfuric Acid
1
31
The circulating water (boiler)
1

 
 
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32
Tea Room
1
33
Mother Liquor Pool
1
34
Freshwater Pool
1
35
Boiled Water Pool
1
36
Water Softening Pool
1
37
Drinking Water Pool
1
38
Glass Reinforced Plastics
2
39
Tractor
1 set
40
Steel frame structure chlorine shed
1
41
Stripping tower
1
42
Absorbency
1
43
Mist Eliminator
1
44
Office
3
45
Kitchen
2
46
Accomodation
4
47
Accomodation
12
48
Water Line Canal(large)
20800 meters
Water Line Canal(Small)
11048 meters
49
Waste water drainage (sewer ）
2600 meters
50
Wells
359 meters
51
Yu pump child (alternate)
20
52
Transformer（315）
1 set
Transformer （200）
5 sets
Transformer （160）
1 set
53
low-voltage line
11680 meters
54
Crude Salt Pan
30,000 KM2
55
Air-conditioner
1 set

 

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