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Exhibit 10.37

 
 

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ASSET PURCHASE AGREEMENT
 
Made as of July 6, 2010
BETWEEN
 
GOLDEN PHOENIX MINERALS, INC.
 
AND
 
MHAKARI GOLD (NEVADA) INC.
 
 

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ASSET PURCHASE AGREEMENT
 
THIS AGREEMENT made as of the 6th day of July, 2010.
 
B E T W E E N :
 
GOLDEN PHOENIX MINERALS, INC.
a corporation existing under the laws of the State of Nevada
 
(hereinafter referred to as the "Purchaser")
 
- and -
 
MHAKARI GOLD (NEVADA) INC.
a corporation existing under the laws of the State of Nevada
 
(hereinafter referred to as the "Vendor")
 
RECITALS:
 
WHEREAS the Vendor owns or has an exclusive option over those mineral property
interests comprising the Mhakari Vanderbilt Properties (as defined below);
 
AND WHEREAS the Vendor wishes to sell, and the Purchaser wishes to purchase, up
to an undivided 80% interest in all of the Vendor's right, title and interest in
and to the Mhakari Vanderbilt Properties (the "Purchased Assets") upon the terms
and subject to the conditions hereinafter contained;
 
AND WHEREAS the Vendor is a wholly-owned subsidiary of Mhakari Gold Corp.
("Mhakari"), a corporation existing under the laws of the Province of Ontario.
 
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained and the sum of $1.00 and other good
and valuable consideration paid by each of the parties hereto to each of the
other parties hereto (the receipt and sufficiency of which are hereby
acknowledged), it is agreed among the parties hereto as follows:
 
ARTICLE 1
INTERPRETATION
 
1.1           Defined Terms
 
In this Agreement and in the schedules hereto, unless there is something in the
subject matter or context inconsistent therewith, the following terms and
expressions will have the following meanings:
 
 
(a)
"Business Day" means any day other than a day which is a Saturday, a Sunday or a
statutory holiday in the state of Nevada.

 
 
(b)
"Consideration Shares" shall have the meaning ascribed to such term in Section
2.2(b) of this Agreement.

 
 
(c)
"Encumbrances" means mortgages, charges, pledges, royalties, security interests,
liens, encumbrances, actions, claims, demands and equities of any nature
whatsoever or howsoever arising and any rights or privileges capable of becoming
any of the foregoing.

 
 
(d)
"Environmental Damage" means any creation of damage or threatened damage to the
air, soil, surface waters, groundwater, flora, fauna, or other natural resources
on, about or in the general vicinity of the Mhakari Vanderbilt Properties.

 
 
 

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(e)
"Environmental Laws" means applicable common law and any federal, state,
municipal or local law, statute, by-law, ordinance, regulation, rule, order,
decree, permit, agreement, judicial or administrative decision, injunction or
legally binding requirement of any governmental entity which relates to or
otherwise imposes liability or standards of conduct concerning discharges,
spills, releases or threatened releases of noises, odours or any substances
into, or the presence of noises, odours or any substances in, ambient air,
ground or surface water or land, municipal or other works (including sewers and
storm drains) or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, discharge, release, disposal, clean up,
transport or handling of substances, as in effect on the date hereof.

 
 
(f)
"Exchange Act" means the United States Securities Act of 1934, as amended.

 
 
(g)
"Forced Conversion" shall have the meaning ascribed to such term in Section
2.2(b) of this Agreement.

 
 
(h)
"Governmental Charges" shall have the meaning ascribed to such term in Section
3.1(f)(i) of this Agreement.

 
 
(i)
"Indemnified Party" shall have the meaning ascribed to such term in Section 7.3
of this Agreement.

 
 
(j)
"Indemnifying Party" shall have the meaning ascribed to such term in Section 7.3
of this Agreement.

 
 
(k)
"Indemnity Claim" shall have the meaning ascribed to such term in Section 7.3 of
this Agreement.

 
 
(l)
"Joint Venture" shall have the meaning ascribed to such term in Section 2.5(d)
of this Agreement.

 
 
(m)
"Joint Venture Agreement" shall have the meaning ascribed to such term in
Section 2.6 of this Agreement.

 
 
(n)
"JV Committee" shall have the meaning ascribed to such term in Section 2.6(c) of
this Agreement.

 
 
(o)
"Material Adverse Effect" means any change, effect, event or occurrence that is,
or could reasonably be expected to be, material and adverse to the value or
condition of the Purchased Assets or the Mhakari Vanderbilt Properties.

 
 
(p)
"Mhakari" means Mhakari Gold Corp., a corporation existing under the laws of the
Province of Ontario.

 
 
(q)
"Mhakari Claims Excluding Vanderbilt Properties" means those mineral properties
owned or over which an exclusive option is held by the Vendor located in the
State of Nevada, specifically excluding the Mhakari Vanderbilt Properties, as
more particularly described in the Option Agreement.

 
 
(r)
"Mhakari Vanderbilt Properties" means the mineral properties owned or over which
an exclusive option is held by the Vendor located in the State of Nevada, as
more particularly described in Schedule "A".

 
 
(s)
"Option Agreement" means that option agreement between the Purchaser and the
Vendor dated the date hereof, pursuant to which the Purchaser has agreed to
purchase an option to acquire up to an eighty percent (80%) interest in the
Mhakari Claims Excluding Vanderbilt Properties.

 
 
(t)
"Penalty Payment" shall have the meaning ascribed to such term in Section 2.3(a)
of this Agreement.

 
 
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(u)
"person" means and includes any individual, corporation, partnership, firm,
joint venture, syndicate, association, trust, government, governmental agency or
board or commission or authority, and any other form of entity or organization.

 
 
(v)
"Purchase Price" means, collectively, the obligation of the Purchaser to
complete the cash payments, share issuances and work expenditures identified in
Section 2.2 below.

 
 
(w)
"Purchased Assets" means up to an undivided eighty percent (80%) interest in all
of the Vendor's right, title and interest in and to the Mhakari Vanderbilt
Properties.

 
 
(x)
"Purchaser" shall have the meaning ascribed to such term in the preamble to this
Agreement.

 
 
(y)
"Scorpio Gold" means Scorpio Gold Corporation, a corporation existing under the
laws of the Province of British Columbia.

 
 
(z)
"Scorpio Gold Joint Venture Agreement" means the joint venture agreement between
the Purchaser and Scorpio Gold.

 
 
(aa)
"SEC" means the United States Securities and Exchange Commission.

 
 
(bb)
"Securities Act" means the United States Securities Act of 1933, as amended.

 
 
(cc)
"Third Party Liability" shall have the meaning ascribed to such term in Section
7.3(b) of this Agreement.

 
 
(dd)
"Transfer Documents" means:

 
 
(i)
all conveyance documents required to transfer title to the Purchased Assets,
duly executed by the Vendor;

 
 
(ii)
all documents necessary to discharge any Encumbrance registered against the
Purchased Assets; and

 
 
(iii)
all other documents required or contemplated to be delivered to the Purchaser to
transfer title to the Purchased Assets hereunder.

 
 
(ee)
"Transfer Date" means the date upon which an undivided 80% interest in the
Purchased Assets is transferred to the Purchaser.

 
 
(ff)
"Vanderbilt Option Agreement" means the option agreement dated June 19, 2009
between John Path, as optionor, and Mhakari, as optionee, pursuant to which
Mhakari received an exclusive option over those mining interests comprising that
part of the Mhakari Vanderbilt Properties identified at Schedule "A", such
option agreement having subsequently been transferred and assigned by Mhakari to
the Vendor.

 
 
(gg)
"Vendor" shall have the meaning ascribed to such term in the preamble to this
Agreement.

 
 
(hh)
"Warrant" shall have the meaning ascribed to such term in Section 2.2(b) of this
Agreement.

 
1.2           Best of Knowledge
 
Any reference herein to "the best of the knowledge" of the Vendor or Purchaser,
as applicable, will mean the actual knowledge of the senior officers of the
relevant party and the knowledge which they would have if they had conducted a
reasonably diligent inquiry into the relevant subject matter.

 
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1.3           Schedules
 
The schedules which are attached to this Agreement are incorporated into this
Agreement by reference and are deemed to be part hereof.
 
1.4           Currency
 
Unless otherwise indicated, all dollar amounts referred to in this Agreement are
in lawful money of the United States of America.
 
1.5           Choice of Law and Attornment
 
This Agreement shall be governed by and construed in accordance with the laws of
the State of Nevada and the federal laws of the United States applicable
therein, and the parties hereby attorn to the non-exclusive jurisdiction of the
courts of such state.
 
1.6           Interpretation Not Affected by Headings or Party Drafting
 
The division of this Agreement into articles, sections, paragraphs,
subparagraphs and clauses and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement. The terms "this Agreement", "hereof", "herein", "hereunder" and
similar expressions refer to this Agreement and the schedules hereto and not to
any particular article, section, paragraph, subparagraph, clause or other
portion hereof and include any agreement or instrument supplementary or
ancillary hereto. Each party hereto acknowledges that it and its legal counsel
have reviewed and participated in settling the terms of this Agreement, and the
parties hereby agree that any rule of construction to the effect that any
ambiguity is to be resolved against the drafting party shall not be applicable
in the interpretation of this Agreement.
 
1.7           Number and Gender
 
In this Agreement, unless there is something in the subject matter or context
inconsistent therewith:
 
 
(a)
words in the singular number include the plural and such words shall be
construed as if the plural had been used;

 
 
(b)
words in the plural include the singular and such words shall be construed as if
the singular had been used, and

 
 
(c)
words importing the use of any gender shall include all genders where the
context or party referred to so requires, and the rest of the sentence shall be
construed as if the necessary grammatical and terminological changes had been
made.

 
1.8           Time of Essence
 
Time shall be of the essence hereof.
 
ARTICLE 2
PURCHASE AND SALE
 
2.1           Purchased Assets
 
On the terms and subject to the fulfillment of the conditions hereof, the Vendor
hereby agrees to sell, transfer and assign to the Purchaser, and the Purchaser
hereby agrees to purchase and accept from the Vendor, the Purchased Assets.
 
2.2           Purchase Price
 
The Purchase Price payable by the Purchaser to the Vendor for the Purchased
Assets will be as follows:

 
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(a) 
upon signing of this Agreement, and in any event no later than June 15, 2010,
the Purchaser shall pay to the Vendor (i) the sum of twenty five thousand
dollars ($25,000), by wire transfer or other means of immediately available
funds, which the Vendor agrees to direct to Mr. John Path to satisfy the June
payment owing under the Vanderbilt Option Agreement and (ii) a sum sufficient to
pay the reasonable legal fees and disbursements of the Vendor's legal counsel;

 
 
(b)
upon signing of this Agreement, the Purchaser shall issue to the Vendor, or any
nominee that the Vendor may direct: (i) two million (2,000,000) common shares
(the "Consideration Shares") in the capital of the Purchaser in the manner noted
in Section 2.4 below; and (ii) two million (2,000,000) common share purchase
warrants (each a "Warrant" and collectively the "Warrants"), whereby each
Warrant shall entitle the holder to purchase one common share of the Purchaser
at a price of $0.05 for a period of five (5) years from the date of this
Agreement. Notwithstanding the foregoing, the Purchaser shall have the right,
upon written notice to the Vendor, to force the Vendor to exercise the Warrants
in the event that the two hundred (200) day volume weighted average price of the
Purchaser's common shares is equal to fifteen cents ($0.15) (the "Forced
Conversion"). In the event of a Forced Conversion, the Purchaser shall have
ninety (90) days from the time it receives the Forced Conversion notice to pay
for the Warrants before they expire.

 
 
(c)
on or before, but in any event no later than July 15, 2010, the Purchaser shall
pay to the Vendor the sum of twenty six thousand dollars ($26,000), by wire
transfer or other means of immediately available funds, which the Vendor agrees
to direct to Mr. John Path to satisfy the July payment owing under the
Vanderbilt Option Agreement;

 
 
(d)
within 48 months of signing this Agreement, the Purchaser shall be required to
expend no less than $350,000 in exploration and development expenditures (of
which no more than $80,000 may be expended on permitting, claim, holding-related
or insurance costs) on the Mhakari Vanderbilt Properties; and

 
 
(e)
the Purchaser completes all payments necessary to acquire the Purchased Assets
from the Vendor, as specified by Sections 2.2(a), 2.2(b), 2.2(c), and 2.2(d)
above, provided that, should the Purchaser elect not to increase its interest in
the Mhakari Claims Excluding Vanderbilt Properties from fifty one percent (51%)
to eighty percent (80%), any balance owing in respect of exploration and
development expenditures shall be applied to the Mhakari Vanderbilt Properties
such that the Purchaser has incurred a minimum of one million five hundred
thousand dollars ($1,500,000) in exploration and development expenditures in
total between the Mhakari Vanderbilt Properties and the Mhakari Claims Excluding
Vanderbilt Properties within 48 months of signing this Agreement,

 
(collectively, the "Purchase Price").
 
For greater certainty, in the event that the Purchaser fails to satisfy the
Purchase Price by completing the foregoing cash payments, securities issuance
and property expenditures within the above-noted time frame, this Agreement
shall be deemed to have been terminated, all payments made to-date shall be
forfeited to the Vendor, and no interest in the Mhakari Vanderbilt Properties
shall be transferred to the Purchaser.  
 
The Purchaser may accelerate any or all of such payments and, except as
expressly noted above, any and all excess payments shall be carried forward and
applied as a credit against payments that the Purchaser is required to make in
the succeeding period or periods.
 
The parties hereby recognize and agree to honour the existing net smelter return
royalty affecting a portion of the Mhakari Vanderbilt Properties, all as more
particularly described at Schedule "A".
 
2.3           Penalties
 
 
(a)
In the event that the Purchaser does not pay the Vendor the payment as required
by Section 2.2(a) above by June 15, 2010, the Vendor will be entitled to a
penalty payment of five thousand dollars ($5,000) (the "Penalty Payment") for
every week such payment is not received.

 
 
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(b)
In the event that the Purchaser does not pay the Vendor the payment as required
by Section 2.2(c) above by July 15, 2010, the Vendor shall be entitled to a
Penalty Payment for every week that such payment is not received.

 
 
(c)
In the event that the Penalty Payments are not made immediately upon becoming
due and payable, this Agreement will be terminable by the Vendor in its sole
discretion, and upon such termination the Purchaser shall have no further rights
to the Mhakari Vanderbilt Properties.

 
2.4           Consideration Shares
 
The Consideration Shares issuable to the Vendor pursuant to Section 2.2(b) shall
be issued as fully paid and non-assessable. The Vendor acknowledges that the
Consideration Shares may be subject to regulatory hold periods, in which case
the share certificates representing the Consideration Shares shall bear the
appropriate legends; provided that, so long as in compliance with applicable
federal and state securities laws, the maximum hold period shall be no longer
than six months from the issue date, pursuant to Rule 144 promulgated under the
Securities Act, as in effect on the date hereof.  The Purchaser shall make all
such filings and take all such further actions as may be necessary to ensure
that the common stock of the Purchaser shall remain validly designated for
quotation on the OTC.BB. or another mutually agreed upon, recognized North
American stock exchange or quotation system. The Consideration Shares shall be
adjusted in the event of a consolidation, share split or other similar event or
in the event that the Purchaser is acquired pursuant to a takeover, amalgamation
or other similar transaction.
 
2.5           Transfer of Ownership Interest
 
 
(a)
Upon signing of this Agreement, the Purchaser shall be designated the operator
of the Mhakari Vanderbilt Properties in order that it may complete the
exploration and development work required under Section 2.2, but it shall not
receive any ownership interest in the Purchased Assets until the full
satisfaction of the Purchase Price.

 
Upon satisfying the Purchase Price in full:
 
 
(b)
the Purchaser shall be granted an undivided eighty percent (80%) interest in the
Mhakari Vanderbilt Properties;

 
 
(c)
the Vendor shall file all Transfer Documents necessary to effect and record with
the relevant government agencies the transfer of the ownership interest
stipulated hereunder; and

 
 
(d)
the parties shall forthwith enter into a joint venture (the "Joint Venture")
with respect to the Mhakari Vanderbilt Properties in accordance with the
provisions of Section 2.6 below.

 
2.6           Joint Venture
 
 
(a)
Upon satisfying the Purchase Price in full, in accordance with Section 2.2, and
simultaneously with the transfer of the ownership interest, in accordance with
Section 2.5, the parties shall, acting reasonably and in good faith, enter into
a definitive and binding joint venture agreement (the "Joint Venture Agreement")
with respect to the Mhakari Vanderbilt Properties, which Joint Venture Agreement
shall contain the customary terms, conditions, covenants, representations and
warranties substantially reflecting the following terms:

 
 
(b)
The ownership structure of the Joint Venture shall be as follows:

 
Party
Ownership Percentage
Golden Phoenix Minerals Inc.
80%
Mhakari Gold (Nevada) Inc.
20%

 
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(c) 
Under the terms of the Joint Venture Agreement, the Purchaser will assume
day-to-day operational control of the Mhakari Vanderbilt Properties. Questions
relating to the structure, budget, funding and strategy of the Joint Venture and
other considerations outside the ordinary course of business or day-to-day
operation of the Joint Venture will be determined by a joint venture committee
("JV Committee") to be comprised of one representative of each of the Purchaser
and the Vendor. Every question to determined by the JV Committee shall be
decided by a majority of votes; a party owning greater than a 50% interest in
the Joint Venture shall have the casting or tie-breaking vote in the event of an
equality of votes on any question to be determined by the JV Committee. The
Joint Venture Agreement will contain customary terms and conditions and will
provide that, should either party not contribute its proportionate share of
required capital relative to its ownership interest in the Purchased Assets, its
ownership interest shall be reduced on the basis of 1% for every $200,000 which
such party fails to contribute toward the expenses of the Joint Venture. Either
party holding a minority interest in the Purchased Assets shall receive a
"tag-along" right whereby the party holding such minority interest shall have
the right to participate, on a pro rata basis, in a sale by the majority
interest holder of all or any part of its interest in the Purchased Assets to a
bona fide third party purchaser; provided that, upon either party being diluted
to less than a 1% ownership interest in the Purchased Assets, such minority
owner's interest shall be converted into a 1% net smelter return royalty
(subject to an option in favour of the majority owner to acquire such royalty
for an aggregate purchase price of $1,000,000), such net smelter return royalty
being subject to the terms and conditions outlined at Schedule "B".

                 
 
(d)
For any expenditures that the Vendor is required to contribute to the work
program for the Joint Venture:

 
 
(i)
for any amount up to one hundred thousand dollars ($100,000), the Purchaser
shall provide the Vendor with sixty (60) days written notification;

 
 
(ii)
for any amount from one hundred thousand and one dollars ($100,001) to three
hundred thousand dollars ($300,000), the Purchaser shall provide the Vendor with
one hundred and twenty (120) days written notification; and

 
 
(iii)
for any amount greater than five hundred thousand and one dollars ($500,001),
the Purchaser shall, if requested by the Vendor, arrange financing.

 
2.7           Exploration Work on the Mhakari Vanderbilt Properties
 
In order to allow the Purchaser to complete the exploration and development work
required under Section 2.2, upon signing of this Agreement, the Purchaser and
its employees, agents or nominees shall be granted the sole and exclusive right:
 
 
(a)
to enter upon the Mhakari Vanderbilt Properties;

 
 
(b)
to have exclusive and quiet possession thereof;

 
 
(c)
to explore, develop, diamond drill and do such other mining work thereon and
thereunder as it thinks advisable;

 
 
(d)
to remove from the Mhakari Vanderbilt Properties and dispose of reasonable
quantities of ores, concentrates, minerals and metals for the purposes of making
assays or tests thereof; and

 
 
(e)
to bring upon and/or erect in and upon the Mhakari Vanderbilt Properties such
mining plant, buildings, machinery, tools, appliances and/or equipment as may be
deemed appropriate.

 
Both parties shall have equal access, in a timely manner, to all exploration
data from any and all exploration and development work.
 
The Vendor shall have the opportunity to review and have reasonable input into
any exploration and development work program that is proposed by Purchaser to
complete the exploration and development work required under Section
2.2.  Further, Mhakari shall reserve the right to obtain three (3) independent
competitive quotes for such exploration and development work. In the event that
Mhakari exercises its option to obtain such independent quotes, the average
dollar figure of the three (3) independent quotes shall be used on the
exploration and development work program proposed by the Purchaser.
 

 
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Notwithstanding the foregoing, commencing upon signing of this Agreement, the
parties shall work together in good faith and on a best efforts basis to improve
the fencing and safety measures around the Mhakari Vanderbilt Properties. For
further clarity, the parties shall, on a best efforts basis, map, GPS and
prioritize all potential areas that may need to be fenced on or around the
Mhakari Vanderbilt Properties and up to one hundred thousand dollars ($100,000)
may be incurred for such purpose, which amount shall be included in the minimum
of one million five hundred thousand dollars ($1,500,000) in exploration and
development expenditures required to be expended by the Purchaser in accordance
with Section 2.2(e) above, or alternatively, such amount may be included in the
minimum of one million dollars ($1,000,000)  in exploration and development
expenditures required to be expended by the Purchaser pursuant to Section 2.2(g)
of the Option Agreement. Further, Mr. Ron Dockweiler and Mr. Casey McFarlane, or
any other person that the parties may mutually agree upon, may supervise the
exploration and development work required by this Section 2.7.
 
2.8           Vendor's Option to Spend on Mhakari Vanderbilt Properties
 
 
(a)
Vendor reserves the right, at its sole option and upon thirty (30) days prior
written notice to Purchaser, to spend the following amounts on the Mhakari
Vanderbilt Properties, and in the event that Mhakari spends the following
amounts on the Mhakari Vanderbilt Properties, the Purchaser shall be obligated
to match such payments separate and above the expenditure obligations which form
part of the Purchase Price:

 
Year
Amount Reserved by Mhakari to be Spent
1
$50,000
2
$75,000
3
$150,000

2.9           Payment of Taxes
 
The Purchaser shall be liable for and shall pay all applicable federal and state
land transfer taxes and all other taxes (other than income and capital gains
taxes of the Vendor), properly payable upon and in connection with the
conveyance and transfer of the Mhakari Vanderbilt Properties to the Purchaser.
 
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
 
3.1           Representations and Warranties by the Vendor
 
The Vendor hereby represents and warrants to the Purchaser as follows, and
confirms that the Purchaser is relying upon the accuracy of each of such
representations and warranties in connection with the purchase of the Purchased
Assets and the completion of the other transactions hereunder:
 
 
(a)
Corporate Authority and Binding Obligation. The Vendor has good right, full
corporate power and absolute authority to enter into this Agreement and to sell,
assign and transfer the Purchased Assets to the Purchaser in the manner
contemplated herein and to perform all of the Vendor's obligations under this
Agreement. The Vendor has taken all necessary or desirable actions, steps and
corporate and other proceedings to approve or authorize, validly and
effectively, the entering into, and the execution, delivery and performance of,
this Agreement and the sale and transfer of the Purchased Assets by the Vendor
to the Purchaser. This Agreement is a legal, valid and binding obligation of the
Vendor, enforceable against it in accordance with its terms subject to (i)
bankruptcy, insolvency, moratorium, reorganization and other laws relating to or
affecting the enforcement of creditors' rights generally, and (ii) the fact that
equitable remedies, including the remedies of specific performance and
injunction, may only be granted in the discretion of a court.

 
 
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(b)
No Other Purchase Agreements. Except pursuant to the Vanderbilt Option
Agreement, no person has any agreement, option, understanding or commitment, or
any right or privilege (whether by law, pre-emptive or contractual) capable of
becoming an agreement, option or commitment, for the purchase or other
acquisition from the Vendor of any of the Mhakari Vanderbilt Properties, or any
rights or interests therein.

 
 
(c)
Contractual and Regulatory Approvals. The Vendor is not under any obligation,
contractual or otherwise, to request or obtain the consent of any person, and no
permits, licences, certifications, authorizations or approvals of, or
notifications to, any federal, state, municipal or local government or
governmental agency, board, commission or authority are required to be obtained
by the Vendor in connection with the execution, delivery or performance by the
Vendor of this Agreement or the completion of any of the transactions
contemplated herein.

 
 
(d)
Status and Governmental Licences. The Vendor is a corporation duly incorporated
and validly subsisting in all respects under the laws of its jurisdiction of
incorporation. The Vendor has all necessary corporate power to own the Purchased
Assets to the extent that it presently has such ownership and to carry on its
business as it is now being conducted.

 
 
(e)
Compliance with Constating Documents, Agreements and Laws. The execution,
delivery and performance of this Agreement and each of the other agreements
contemplated or referred to herein by the Vendor, and the completion of the
transactions contemplated hereby, will not constitute or result in a violation,
breach or default, or cause the acceleration of any obligations, under:

 
 
(i)
any term or provision of the constating documents of the Vendor;

 
 
(ii)
the terms of any indenture, agreement (written or oral), instrument or
understanding or other obligation or restriction to which the Vendor is a party
or by which it is bound; or

 
 
(iii)
any term or provision of any licenses, registrations, or qualifications of the
Vendor or any order of any court, governmental authority or regulatory body or
any applicable law or regulation of any jurisdiction.

 
 
(f)
Tax Matters.

 
 
(i)
For the purposes of this Agreement, the term "Governmental Charges" means and
includes all taxes, customs duties, rates, levies, assessments, reassessments
and other charges, together with all penalties, interest and fines with respect
thereto, payable to any federal, state, municipal, local or other government or
governmental agency, authority, board, bureau or commission, domestic or
foreign, in each case, relating to the Mhakari Vanderbilt Properties.

 
 
(ii)
The Vendor has paid all Governmental Charges which are due and payable by it on
or before the date hereof. There are no actions, suits, proceedings,
investigations, enquiries or claims now pending or made or, to the best of the
knowledge of the Vendor, threatened against the Vendor in respect of
Governmental Charges.

 
 
(g)
Litigation. There are no actions, suits or proceedings, judicial or
administrative (whether or not purportedly on behalf of the Vendor) pending or,
to the best of the knowledge of the Vendor, threatened in writing, by or against
or affecting the Vendor which relate to the Mhakari Vanderbilt Properties, at
law or in equity, or before or by any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign which, in any case, could reasonably be
expected to have a Material Adverse Effect on the Mhakari Vanderbilt Properties.

 
 
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(h)
Title to Purchased Assets. The Vendor is the recorded and beneficial owner of or
has an exclusive option over all of the Mhakari Vanderbilt Properties, as more
particularly described at Schedule "A", free and clear of any Encumbrances
except those royalties listed at Schedule "A".

 
 
(i)
Mining Interests. To the best of the Vendor's knowledge, the mineral interests
comprising the Mhakari Vanderbilt Properties have been properly tagged, staked
and recorded in accordance with the laws of the State of Nevada. All assessment
work has been performed, filed and recorded to maintain the mineral interests
comprising the Mhakari Vanderbilt Properties in good standing in accordance with
the laws of the State of Nevada.

 
 
(j)
Compliance with Laws. The Vendor is not in violation in any material respect of
any federal, state or other law, regulation or order of any government or
governmental or regulatory authority, domestic or foreign, including, without
limitation, Environmental Laws and any law, regulation or order relating to the
Mhakari Vanderbilt Properties.  Further, the conditions existing on or with
respect to the Mhakari Vanderbilt Properties are not in violation of any laws,
including, without limitation, any Environmental Laws, nor causing or permitting
any damage (including Environmental Damage) or impairment to the health, safety,
or enjoyment of any person at or on the Mhakari Vanderbilt Properties or in the
general vicinity of the Mhakari Vanderbilt Properties.

 
 
(k)
Complete Conveyance. The Purchased Assets include all rights, properties,
interests, assets (both tangible and intangible) and agreements necessary to
enable the Purchaser to carry on the exploration of the Mhakari Vanderbilt
Properties in the same manner and to the same extent as it has been carried on
by the Vendor prior to the date hereof.

 
 
(l)
Investment Representations.  In connection with the issuance of the
Consideration Shares and Warrants contemplated hereunder: (i) such Consideration
Shares and Warrants to be received by the Vendor will be acquired for the
Vendor’s own account, and not with a view to the resale or distribution of any
part thereof in violation of the Securities Act; (ii) the Vendor is not a
broker-dealer registered with the SEC under the Exchange Act or an entity
engaged in a business that would require it to be so registered; (iii) the
Vendor is an “accredited investor” as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act; (iv) the Vendor, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Consideration Shares and Warrants and
is able to bear the economic risk of an investment in the Consideration Shares
and Warrants; and (v) is not acquiring the Consideration Shares or Warrants as a
result of any “general solicitation” or “general advertising” (as such terms are
defined in Regulation D promulgated under the Securities Act).

 
3.2           Representations and Warranties by the Purchaser
 
The Purchaser hereby represents and warrants to the Vendor as follows, and
confirms that the Vendor is relying upon the accuracy of each of such
representations and warranties in connection with the sale of the Purchased
Assets and the completion of the other transactions hereunder:
 
 
(a)
Corporate Authority and Binding Obligation. The Purchaser is a corporation duly
incorporated and validly subsisting in all respects under the laws of its
jurisdiction of incorporation. The Purchaser has good right, full corporate
power and absolute authority to enter into this Agreement and to purchase the
Purchased Assets from the Vendor in the manner contemplated herein and to
perform all of the Purchaser's obligations under this Agreement. The Purchaser
has taken all necessary or desirable actions, steps and corporate and other
proceedings to approve or authorize, validly and effectively, the entering into
of, and the execution, delivery and performance of, this Agreement, the issuance
of the Consideration Shares and the purchase of the Purchased Assets by the
Purchaser from the Vendor. This Agreement is a legal, valid and binding
obligation of the Purchaser, enforceable against it in accordance with its terms
subject to bankruptcy, insolvency, moratorium, reorganization and other laws
relating to or affecting the enforcement of creditors' rights generally and the
fact that equitable remedies, including the remedies of specific performance and
injunction, may only be granted in the discretion of a court.

 
 
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(b)
Contractual and Regulatory Approvals. The Purchaser is not under any obligation,
contractual or otherwise, to request or obtain the consent of any person, and no
permits, licences, certifications, authorizations or approvals of, or
notifications to, any federal, state, municipal or local government or
governmental agency, board, commission or authority are required to be obtained
by the Purchaser in connection with the execution, delivery or performance by
the Purchaser of this Agreement or the completion of any of the transactions
contemplated herein.

 
 
(c)
Compliance with Constating Documents, Agreements and Laws. The execution,
delivery and performance of this Agreement and each of the other agreements
contemplated or referred to herein by the Purchaser, and the completion of the
transactions contemplated hereby, will not constitute or result in a violation
or breach of or default under:

 
 
(i)
any term or provision of the constating documents of the Purchaser;

 
 
(ii)
the terms of any indenture, agreement (written or oral), instrument or
understanding or other obligation or restriction to which the Purchaser is a
party or by which it is bound, or

 
 
(iii)
any term or provision of any licences, registrations or qualification of the
Purchaser or any order of any court, governmental authority or regulatory body
or any applicable law or regulation of any jurisdiction.

 
 
(d)
Authorized and Issued Capital. The Purchaser is authorized to issue up to
400,000,000 common shares of which, as of the date hereof, 234,328,762 common
shares are issued and outstanding. In addition, as of the date hereof, the
Purchaser has issued and outstanding 3,981,667 stock options and 29,582,258
common share purchase warrants. Except as aforesaid, at the date hereof, there
are no outstanding shares of the Purchaser or options, warrants, rights or
conversion or exchange privileges or other securities entitling anyone to
acquire any shares of the Purchaser or any other rights, agreements or
commitments of any character whatsoever requiring the issuance, sale or transfer
by the Purchaser of any shares of the Purchaser or any securities convertible
into, exchangeable or exercisable for, or otherwise evidencing a right to
acquire, any shares of the Purchaser. All outstanding common shares in the
capital of the Purchaser have been duly authorized and validly issued, and are
fully paid and non-assessable and are not subject to, nor have they been issued
in violation of, any pre-emptive rights, and all common shares issuable upon
exercise of outstanding stock options and common share purchase warrants in
accordance with their respective terms will be duly authorized and validly
issued, fully paid and non-assessable and will not be subject to any pre-emptive
rights.

 
 
(e)
Absence of Liabilities. Except as disclosed in the Form 10-Q for the most recent
quarter ended, the Purchaser has no liabilities, except those arising in the
ordinary course of business and which in no event exceed $50,000 in the
aggregate.

 
 
(f)
Legal Proceedings. Except as disclosed in the Form 10-Q for the most recent
quarter ended, the Vendor is not a party to any legal proceedings, and no such
proceedings are, to the best of the Purchaser's knowledge, contemplated or
threatened.

 
 
(g)
Compliance with Laws. The Purchaser is not in violation in any material respect
of any federal, state or other law, regulation or order of any government or
governmental or regulatory authority, domestic or foreign, including, without
limitation, Environmental Laws and any law, regulation or order, and the
Purchaser has not received any notice from any federal, state or provincial
government or regulatory authority with respect to a violation of any law,
regulation or order.

 
 
(h)
Current Filings. The Purchaser is current in all of its filings under the
Exchange Act and it has not been informed by the SEC that any of its filings is
under review.

 
 
(i)
Trading of Shares. The common shares of the Purchaser are quoted on the Over The
Counter Bulletin Board under the symbol "GPXM.OB" and the Purchaser has not
received any notice of an intent to remove such quotation.

 
 
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(j)
Scorpio Gold Joint Venture Agreement.  The Purchaser has performed all of its
obligations required to be performed by it and is entitled to all of the
benefits under the Scorpio Gold Joint Venture Agreement.  The Scorpio Gold Joint
Venture Agreement is in full force and effect, unamended, and no default exists
on the part of the Purchaser or Scorpio Gold.  The Purchaser is not in default
or in breach of the Scorpio Gold Joint Venture Agreement and there exists no
condition, event or act which, with the giving of notice or lapse of time or
both would constitute such a default or breach, and the Scorpio Gold Joint
Venture Agreement is in good standing.

 
ARTICLE 4
SURVIVAL AND LIMITATIONS OF REPRESENTATIONS AND WARRANTIES
 
4.1           Survival of Warranties by the Vendor
 
The representations and warranties made by the Vendor and contained in this
Agreement, or contained in any document or certificate given in order to carry
out the transactions contemplated hereby, will survive the closing of the
purchase of the Purchased Assets provided for herein and, notwithstanding such
closing or any investigation made by or on behalf of the Purchaser or any other
person or any knowledge of the Purchaser or any other person, shall continue in
full force and effect for the benefit of the Purchaser, subject to the following
provisions of this section.
 
 
(a)
Except as provided in paragraph (b) of this section, no claim may be made or
brought by the Purchaser after the date which is thirty-six (36) months
following the Transfer Date.

 
 
(b)
Any claim which is based upon or relates to the title to the Mhakari Vanderbilt
Properties or which is based upon intentional misrepresentation or fraud by the
Vendor may be made or brought by the Purchaser at any time.

 
After the expiration of the period of time referred to in paragraph (a) of this
section, the Vendor will be released from all obligations and liabilities in
respect of the representations and warranties made by the Vendor and contained
in this Agreement or in any document or certificate given in order to carry out
the transactions contemplated hereby except with respect to any claims made by
the Purchaser in writing prior to the expiration of such period and subject to
the rights of the Purchaser to make any claim permitted by paragraph (b) of this
section.
 
4.2           Survival of Warranties by Purchaser
 
The representations and warranties made by the Purchaser and contained in this
Agreement, or contained in any document or certificate given in order to carry
out the transactions contemplated hereby, will survive the closing of the
purchase of the Purchased Assets provided for herein and, notwithstanding such
closing or any investigation made by or on behalf of the Vendor or any other
person or any knowledge of the Vendor or any other person, shall continue in
full force and effect for the benefit of the Vendor, subject to the following
provisions of this section.
 
 
(a)
Except as provided in paragraph (b) of this section, no claim may be made or
brought by the Vendor after the date which is thirty-six (36) months following
the Transfer Date.

 
 
(b)
Any claim which is based upon intentional misrepresentation or fraud by the
Purchaser may be made or brought by the Vendor at any time.

 
After the expiration of the period of time referred to in paragraph (a) of this
section, the Purchaser will be released from all obligations and liabilities in
respect of the representations and warranties made by the Purchaser and
contained in this Agreement or in any document or certificate given in order to
carry out the transactions contemplated hereby except with respect to any claims
made by the Vendor in writing prior to the expiration of such period and subject
to the rights of the Vendor to make any claim permitted by paragraph (b) of this
section.

 
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4.3           Limitations on Claims
 
 
(a)
Neither the Purchaser nor the Vendor shall be entitled to make a claim if the
Purchaser or the Vendor, as applicable, has been advised in writing or otherwise
has actual knowledge prior to the Transfer Date of the inaccuracy,
non-performance, non-fulfillment or breach which is the basis for such claim and
the Purchaser or the Vendor, as applicable, completes the transactions hereunder
notwithstanding such inaccuracy, non-performance, non-fulfillment or breach.

 
 
(b)
The amount of any damages which may be claimed by the Purchaser or the Vendor,
as applicable, pursuant to a claim shall be calculated to be the cost or loss to
the Purchaser or the Vendor, as applicable, after giving effect to:

 
 
(i)
any insurance proceeds available to the Purchaser or the Vendor, as applicable,
in relation to the matter which is the subject of the claim, and

 
 
(ii)
the value of any related, determinable tax benefits realized, or to be realized
within a two year period following the date of incurring such cost or loss, by
the Purchaser or the Vendor, as applicable, in relation to the matter which is
the subject of the claim.

 
 
(c)
Neither the Purchaser nor the Vendor shall be entitled to make any claim until
the aggregate amount of all damages, losses, liabilities and expenses incurred
by the Purchaser or the Vendor, as applicable, as a result of all
misrepresentations and breaches of warranties contained in this Agreement or
contained in any document or certificate given in order to carry out the
transactions contemplated hereby, after taking into account paragraph (b) of
this section, is equal to $10,000. After the aggregate amount of such damages,
losses, liabilities and expenses incurred by the Purchaser or the Vendor, as
applicable, exceeds $10,000, the Purchaser or the Vendor, as applicable, shall
only be entitled to make claims to the extent that such aggregate amount, after
taking into account the provisions of paragraph (b) of this section, exceeds
$10,000.

 
ARTICLE 5
COVENANTS
 
5.1           Covenants by the Vendor
 
The Vendor covenants to the Purchaser that it will do or cause to be done the
following:
 
 
(a)
Investigation of Mhakari Vanderbilt Properties. Prior to the Transfer Date, the
Vendor will provide access to and will permit the Purchaser, through its
representatives, to make such investigation of the Mhakari Vanderbilt Properties
as the Purchaser deems reasonably necessary or advisable to familiarize itself
with such matters.

 
 
(b)
Transfer of the Purchased Assets. At or before the Transfer Date, the Vendor
will cause all necessary steps and corporate proceedings to be taken in order to
permit the transfer of the Purchased Assets.

 
 
(c)
Vanderbilt Option. The Vendor will do all such acts and things as may be
necessary or desirable to maintain the Vanderbilt Option Agreement in good
standing (including, without limitation, by directing the payments required
pursuant to Sections 2.2(a) and 2.2(c) to Mr. John Path to satisfy the remaining
payments owing under the Vanderbilt Option Agreement) and will, prior to the
Transfer Date, exercise the option granted to it under the Vanderbilt Option
Agreement such that it owns a 100% interest in the mining interests covered by
the Vanderbilt Option Agreement.

 
5.2           Covenants by the Purchaser
 
The Purchaser covenants to the Vendor that it will do or cause to be done the
following:
 
 
(a)
Work Assessment. The Purchaser shall perform such work, incur such expenditures
and file all necessary assessment reports with the appropriate governmental
authorities in order to maintain the Purchased Assets in good standing with such
authorities as of and from the date hereof. The Purchaser shall also provide
written records of its exploration and development expenditures on the Mhakari
Vanderbilt Properties to the Vendor on a quarterly basis.

 
 
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(b)
Listing of Consideration Shares and Warrants. The Purchaser shall make all such
filings and take any such actions as may be necessary to maintain its common
stock as designated for quotation on the OTC.BB, or such other North American
stock exchange or quotation system as mutually agreed upon by the parties.

 
 
(c)
Confidentiality. Prior to the Transfer Date and, if the transaction contemplated
hereby is not completed, the Purchaser will keep confidential all information
obtained by it relating to the Mhakari Vanderbilt Properties, except such
information which:

 
 
(i)
prior to the date hereof was already in the possession of the Purchaser, as
demonstrated by written records;

 
 
(ii)
is generally available to the public, other than as a result of a disclosure by
the Purchaser, or

 
 
(iii)
is made available to the Purchaser on a non-confidential basis from a source
other than the Vendor or its representatives.

 
The Purchaser further agrees that such information will be disclosed only to
those of its employees and representatives of its advisors who need to know such
information for the purposes of evaluating and implementing the transaction
contemplated hereby.
 
Notwithstanding the foregoing provisions of this paragraph, the obligation to
maintain the confidentiality of such information will not apply to the extent
that disclosure of such information is required in connection filings with
securities regulatory authorities or filings with governmental or other
applicable regulatory bodies relating to the transactions hereunder. If the
transactions contemplated hereby are not consummated for any reason, the
Purchaser will return forthwith, without retaining any copies thereof, all
information and documents obtained from the Vendor.
 
 
(d)
Area of Interest Waiver from Scorpio Gold.  The Purchaser will do all such acts
and things necessary or desirable to obtain and receive an area of interest
waiver from Scorpio Gold with respect to the Mhakari Claims Excluding Vanderbilt
Properties, in form and substance satisfactory to the Purchaser and the Vendor.

 
 
(e)
Scorpio Gold Joint Venture Agreement.  The Purchaser will do all such acts and
things as may be necessary or desirable to maintain the Scorpio Gold Joint
Venture Agreement in good standing.

 
ARTICLE 6
CONDITIONS & CLOSING
 
6.1           Conditions to the Obligations of the Purchaser
 
Notwithstanding anything herein contained, the obligation of the Purchaser to
complete the transactions provided for herein will be subject to the fulfillment
of the following conditions at or prior to the Transfer Date, and the Vendor
covenants to use its best efforts to ensure that such conditions are fulfilled.
 
 
(a)
Accuracy of Representations and Warranties and Performance of Covenants. The
representations and warranties of the Vendor contained in section 3.1 of this
Agreement shall be true and accurate on the date hereof and at the Transfer Date
with the same force and effect as though such representations and warranties had
been made as of such date (except to the extent such representations and
warranties are by their express terms made as of the date of this Agreement or
another specific date, in which case such representations and warranties shall
be true and correct of such date). In addition, the Vendor shall have complied
with all covenants and agreements herein agreed to be performed or caused to be
performed by it at or prior to the applicable date(s) for such performance.

 
 
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(b)
Material Adverse Changes.  There will have been no change in the condition in
the Mhakari Vanderbilt Properties, howsoever arising, except changes which have
occurred in the ordinary course of business and which, individually or in the
aggregate would not have a Material Adverse Effect, or changes resulting from
the Purchaser's negligence in conducting operations at the Mhakari Vanderbilt
Properties. Without limiting the generality of the foregoing, no damage to or
destruction of any material part of the Mhakari Vanderbilt Properties shall have
occurred, whether or not covered by insurance.

 
 
(c)
No Restraining Proceedings. No order, decision or ruling of any court, tribunal
or regulatory authority having jurisdiction shall have been made, and no action
or proceeding shall be pending or threatened which, in the opinion of counsel to
the Purchaser, is likely to result in an order, decision or ruling:

 
 
(i)
to disallow, enjoin, prohibit or impose any limitations or conditions on the
purchase and sale of the Purchased Assets contemplated hereby or the right of
the Purchaser to own the Purchased Assets, or

 
 
(ii)
to impose any limitations or conditions which may have a Material Adverse Effect
on the Mhakari Vanderbilt Properties.

 
 
(d)
Consents. All consents required to be obtained in order to carry out the
transactions contemplated hereby in compliance with all laws and agreements
binding upon the parties hereto shall have been obtained.

 
 
(e)
Option Agreement.  The Vendor shall have entered into the Option Agreement with
the Purchaser.

 
6.2           Waiver or Termination by Purchaser
 
The conditions contained in section 6.1 hereof are inserted for the exclusive
benefit of the Purchaser and may be waived in whole or in part by the Purchaser
at any time. The Vendor acknowledges that the waiver by the Purchaser of any
condition or any part of any condition shall constitute a waiver only of such
condition or such part of such condition, as the case may be, and shall not
constitute a waiver of any covenant, agreement, representation or warranty made
by the Vendor herein that corresponds or is related to such condition or such
part of such condition, as the case may be. If any of the conditions contained
in section 6.1 hereof are not fulfilled or complied with as herein provided, the
Purchaser may, at or prior to the Transfer Date at its option, rescind this
Agreement by notice in writing to the Vendor and in such event the Purchaser
shall be released from any further obligations hereunder and, unless the
condition or conditions which have not been fulfilled are reasonably capable of
being fulfilled or caused to be fulfilled by the Vendor, then the Vendor shall
also be released from any further obligations hereunder.
 
6.3           Conditions to the Obligations of the Vendor
 
Notwithstanding anything herein contained, the obligations of the Vendor to
complete the transactions provided for herein will be subject to the fulfillment
of the following conditions at or prior to the Transfer Date, and the Purchaser
covenants to use its best efforts to ensure that such conditions are fulfilled.
 
 
(a)
Accuracy of Representations and Warranties and Performance of Covenants. The
representations and warranties of the Purchaser contained in this Agreement or
in any documents delivered in order to carry out the transactions contemplated
hereby will be true and accurate on the date hereof and at the Transfer Date
with the same force and effect as though such representations and warranties had
been made as of such date (except to the extent such representations and
warranties are by their express terms made as of the date of this Agreement or
another specific date, in which case such representations and warranties shall
be true and correct of such date). In addition, the Purchaser shall have
complied with all covenants and agreements herein agreed to be performed or
caused to be performed by it at or prior to the applicable date(s) for such
performance.

 
 
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(b)
No Restraining Proceedings. No order, decision or ruling of any court, tribunal
or regulatory authority having jurisdiction shall have been made, and no action
or proceeding shall be pending or threatened which, in the opinion of counsel to
the Vendor, is likely to result in an order, decision or ruling, to disallow,
enjoin or prohibit the purchase and sale of the Purchased Assets contemplated
hereby.

 
 
(c)
Consents. All consents required to be obtained in order to carry out the
transactions contemplated hereby in compliance with all laws and agreements
binding upon the parties hereto shall have been obtained.

 
 
(d)
Scorpio Gold Area of Interest Waiver.  The Purchaser shall have received an area
of interest waiver from Scorpio Gold with respect to the Mhakari Claims
Excluding Vanderbilt Properties.

 
 
(e)
Option Agreement.  The Purchaser shall have entered into the Option Agreement
with the Vendor.

 
6.4           Waiver or Termination by Vendor
 
The conditions contained in section 6.3 hereof are inserted for the exclusive
benefit of the Vendor and may be waived in whole or in part by the Vendor at any
time. The Purchaser acknowledges that the waiver by the Vendor of any condition
or any part of any condition shall constitute a waiver only of such condition or
such part of such condition, as the case may be, and shall not constitute a
waiver of any covenant, agreement, representation or warranty made by the
Purchaser herein that corresponds or is related to such condition or such part
of such condition, as the case may be. If any of the conditions contained in
section 6.3 hereof are not fulfilled or complied with as herein provided, the
Vendor may, at or prior to the Transfer Date at its option, rescind this
Agreement by notice in writing to the Purchaser and in such event the Vendor
shall be released from any further obligations hereunder and, unless the
condition or conditions which have not been fulfilled are reasonably capable of
being fulfilled or caused to be fulfilled by the Purchaser, then the Purchaser
shall also be released from any further obligations hereunder.
 
ARTICLE 7
INDEMNIFICATION AND SET-OFF
 
7.1           Indemnity by the Vendor
 
 
(a)
The Vendor hereby agrees to indemnify and save the Purchaser harmless from and
against any claims, demands, actions, causes of action, damage, loss,
deficiency, cost, liability and expense which may be made or brought against the
Purchaser or which the Purchaser may suffer or incur as a result of, in respect
of or arising out of:

 
 
(i)
any non-performance or non-fulfillment of any covenant or agreement on the part
of the Vendor contained in this Agreement or in any document given in order to
carry out the transactions contemplated hereby;

 
 
(ii)
any misrepresentation, inaccuracy, incorrectness or breach of any representation
or warranty made by the Vendor contained in this Agreement or contained in any
document or certificate given in order to carry out the transactions
contemplated hereby; or

 
 
(iii)
all reasonable costs and expenses including, without limitation, reasonable
legal fees on a substantial indemnity basis, incidental to or in respect of the
foregoing.

 
 
(b)
The obligations of indemnification by the Vendor pursuant to paragraph (a) of
this section will be:

 
 
(i)
subject to the limitations referred to in section 4.1 hereof with respect to the
survival of the representations and warranties by the Vendor; and

 
 
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(ii)
subject to the limitations referred to in sections 4.3 and 7.3 hereof.

 
7.2           Indemnity by the Purchaser
 
 
(a)
The Purchaser hereby agrees to indemnify and save the Vendor harmless from and
against any claims, demands, actions, causes of action, damage, loss,
deficiency, cost, liability and expense which may be made or brought against the
Vendor or which the Vendor may suffer or incur as a result of, in respect of or
arising out of:

 
 
(i)
any non-performance or non-fulfillment of any covenant or agreement on the part
of the Purchaser contained in this Agreement or in any document given in order
to carry out the transactions contemplated hereby;

 
 
(ii)
any misrepresentation, inaccuracy, incorrectness or breach of any representation
or warranty made by the Purchaser contained in this Agreement or contained in
any document or certificate given in order to carry out the transactions
contemplated hereby; and

 
 
(iii)
all reasonable costs and expenses including, without limitation, reasonable
legal fees on a substantial indemnity basis, incidental to or in respect of the
foregoing.

 
 
(b)
The obligations of indemnification by the Purchaser pursuant to paragraph (a) of
this section will be:

 
 
(i)
subject to the limitations referred to in section 4.2 hereof with respect to the
survival of the representations and warranties by the Purchaser; and

 
 
(ii)
subject to the limitations referred to in sections 4.3 and 7.3 hereof.

 
7.3           Provisions Relating to Indemnity Claims
 
The following provisions will apply to any claim by the either the Vendor or the
Purchaser (the "Indemnified Party") for indemnification by the other (the
"Indemnifying Party") pursuant to section 7.1 or 7.2 hereof, as the case may be
(hereinafter, in this section, called an "Indemnity Claim").
 
 
(a)
Promptly after becoming aware of any matter that may give rise to an Indemnity
Claim, the Indemnified Party will provide to the Indemnifying Party written
notice of the Indemnity Claim specifying (to the extent that information is
available) the factual basis for the Indemnity Claim and the amount of the
Indemnity Claim or, if an amount is not then determinable, an estimate of the
amount of the Indemnity Claim, if an estimate is feasible in the circumstances.

 
 
(b)
If an Indemnity Claim relates to an alleged liability to any other person
(hereinafter, in this section, called a "Third Party Liability"), including
without limitation any governmental or regulatory body or any taxing authority,
which is of a nature such that the Indemnified Party is required by applicable
law to make a payment to a third party before the relevant procedure for
challenging the existence or quantum of the alleged liability can be implemented
or completed, then the Indemnified Party may, notwithstanding the provisions of
paragraphs (c) and (d) of this section, make such payment and forthwith demand
reimbursement for such payment from the Indemnifying Party in accordance with
this Agreement; provided that, if the alleged liability to the third party as
finally determined upon completion of settlement negotiations or related legal
proceedings is less than the amount which is paid by the Indemnifying Party in
respect of the related Indemnity Claim, then the Indemnified Party shall
forthwith following the final determination pay to the Indemnifying Party the
amount by which the amount of the liability as finally determined is less than
the amount which is so paid by the Indemnifying Party.

 
 
(c)
The Indemnified Party shall not negotiate, settle, compromise or pay (except in
the case of payment of a judgment) any Third Party Liability as to which it
proposes to assert an Indemnity Claim, except with the prior consent of the
Indemnifying Party (which consent shall not be unreasonably withheld or
delayed), unless there is a reasonable possibility that such Third Party
Liability may materially and adversely affect the condition of the Purchased
Assets or the Indemnified Party, in which case the Indemnified Party shall have
the right, after notifying the Indemnifying Party, to negotiate, settle,
compromise or pay such Third Party Liability without prejudice to its rights of
indemnification hereunder.

 
 
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(d)
With respect to any Third Party Liability, provided the Indemnifying Party first
admits the Indemnified Party's right to indemnification for the amount of such
Third Party Liability which may at any time be determined or settled, then in
any legal, administrative or other proceedings in connection with the matters
forming the basis of the Third Party Liability, the following procedures will
apply:

 
 
(i)
except as contemplated by subparagraph (iii) below, the Indemnifying Party will
have the right to assume carriage of the compromise or settlement of the Third
Party Liability and the conduct of any related legal, administrative or other
proceedings, but the Indemnified Party shall have the right and shall be given
the opportunity to participate in the defence of the Third Party Liability, to
consult with the Indemnifying Party in the settlement of the Third Party
Liability and the conduct of related legal, administrative and other proceedings
(including consultation with counsel) and to disagree on reasonable grounds with
the selection and retention of counsel, in which case counsel satisfactory to
the Indemnifying Party and the Indemnified Party shall be retained by the
Indemnifying Party;

 
 
(ii)
the Indemnifying Party will co-operate with the Indemnified Party in relation to
the Third Party Liability, will keep it fully advised with respect thereto, will
provide it with copies of all relevant documentation as it becomes available,
will provide it with access to all records and files relating to the defence of
the Third Party Liability and will meet with representatives of the Indemnified
Party at all reasonable times to discuss the Third Party Liability, and

 
 
(iii)
notwithstanding subparagraphs (i) and (ii), the Indemnifying Party will not
settle the Third Party Liability or conduct any legal, administrative or other
proceedings in any manner which could, in the reasonable opinion of the
Indemnified Party, have a material adverse affect on the condition of the
Purchased Assets or the Indemnified Party, except with the prior written consent
of the Indemnified Party.

 
 
(e)
If, with respect to any Third Party Liability, the Indemnifying Party does not
admit the Indemnified Party's right to indemnification or decline to assume
carriage of the settlement or of any legal, administrative or other proceedings
relating to the Third Party Liability, then the following provisions will apply:

 
 
(i)
the Indemnified Party, at its discretion, may assume carriage of the settlement
or of any legal, administrative or other proceedings relating to the Third Party
Liability and may defend or settle the Third Party Liability on such terms as
the Indemnified Party, acting in good faith, considers advisable, and

 
 
(ii)
any cost, lost, damage or expense incurred or suffered by the Indemnified Party
in the settlement of such Third Party Liability or the conduct of any legal,
administrative or other proceedings shall be added to the amount of the
Indemnity Claim.

 
7.4           Right of Set-Off
 
The Purchaser shall have the right to satisfy any amount from time to time owing
by it to the Vendor by way of set-off against any amount from time to time owing
by the Vendor to the Purchaser, including any amount owing to the Purchaser
pursuant to the Vendor's indemnification pursuant to section 7.1 hereof.

 
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Article 8
General Provisions
 
8.1           Further Assurances
 
Each of the Vendor and the Purchaser hereby covenants and agrees that at any
time and from time to time after the Transfer Date it will, upon the request of
the others, do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered all such further acts, deeds, assignments, transfers,
conveyances and assurances as may be required for the better carrying out and
performance of all the terms of this Agreement.
 
8.2           Remedies Cumulative
 
The rights and remedies of the parties under this Agreement are cumulative and
in addition to and not in substitution for any rights or remedies provided by
law. Any single or partial exercise by any party hereto of any right or remedy
for default or breach of any term, covenant or condition of this Agreement does
not waive, alter, affect or prejudice any other right or remedy to which such
party may be lawfully entitled for the same default or breach.
 
8.3           Notices
 
 
(a)
Any notice, designation, communication, request, demand or other document,
required or permitted to be given or sent or delivered hereunder to any party
hereto shall be in writing and shall be sufficiently given or sent or delivered
if it is:

 
 
(i)
delivered personally;

 
 
(ii)
sent to the party entitled to receive it by registered mail, postage prepaid, or
by courier; or

 
 
(iii)
sent by facsimile.

 
 
(b)
Notices shall be sent to the following addresses or facsimile numbers:

 
 
(i)
in the case of the Purchaser;

 
1675 East Prater Way
Suite 102
Sparks, Nevada 89434
 
Attention:         Tom Klein, CEO
 
with a copy to (such copy shall not constitute notice)
 
Bullivant Houser Bailey PC
1415 L Street, Suite 1000
Sacramento, CA 95814
Attention: Scott E. Bartel
 
 
(ii)
in the case of the Vendor:

 
c/o Mhakari Gold Corp.
141 Davisville Ave.
Suite 506
Toronto, Ontario

Attention:         Sheldon Davis, President
 
with a copy to (such copy shall not constitute notice)
 
 
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Fogler, Rubinoff LLP
95 Wellington Street West, Suite 1200
Toronto, Ontario
M5J 2Z9
 
Attention:     Aaron Sonshine
Fax:                416.941.8852
 
or to such other address or facsimile number as the party entitled to or
receiving such notice, designation, communication, request, demand or other
document shall, by a notice given in accordance with this section, have
communicated to the party giving or sending or delivering such notice,
designation, communication, request, demand or other document.
 
 
(c)
Any notice, designation, communication, request, demand or other document given
or sent or delivered as aforesaid shall:

 
 
(i)
if delivered personally as aforesaid, be deemed to have been given, sent,
delivered and received on the date of delivery;

 
 
(ii)
if sent by mail as aforesaid, be deemed to have been given, sent, delivered and
received (but not actually received) on the fourth Business Day following the
date of mailing, unless at any time between the date of mailing and the fourth
Business Day thereafter there is a discontinuance or interruption of regular
postal service, whether due to strike or lockout or work slowdown, affecting
postal service at the point of dispatch or delivery or any intermediate point,
in which case the same shall be deemed to have been given, sent, delivered and
received in the ordinary course of the mails, allowing for such discontinuance
or interruption of regular postal service, and

 
 
(d)
if sent by facsimile, be deemed to have been given, sent, delivered and received
on the date the sender receives the telecopy answer back confirming receipt by
the recipient.

 
8.4           Counterparts
 
This Agreement may be executed (by original or facsimile transmission) in
several counterparts, each of which so executed shall be deemed to be an
original, and such counterparts together shall constitute but one and the same
instrument.
 
8.5           Expenses of Parties
 
Except as otherwise provided herein, each of the parties hereto shall bear all
expenses incurred by it in connection with this Agreement.
 
8.6           Brokerage and Finder's Fees
 
It is understood and agreed that no broker, agent or other intermediary acted
for either the Vendor or the Purchaser in connection with the sale or purchase
of the Purchased Assets and no such party is entitled to a commission, brokerage
or finder's fee in connection with the transactions contemplated herein.
 
8.7           Announcements
 
No announcement with respect to this Agreement will be made by any party hereto
without the prior approval of the other parties. The foregoing will not apply to
any announcement by any party required in order to comply with laws pertaining
to timely disclosure, provided that such party consults with the other parties
before making any such announcement.
 

 
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8.8           Successors and Assigns
 
The rights of the Vendor hereunder shall not be assignable without the written
consent of the Purchaser. The rights of the Purchaser hereunder shall not be
assignable without the written consent of the Vendor. Subject to the foregoing,
this Agreement shall be binding upon and enure to the benefit of the parties
hereto and their respective successors and permitted assigns.
 
8.9           Entire Agreement
 
This Agreement and the schedules referred to herein constitute the entire
agreement between the parties hereto and supersede all prior agreements,
representations, warranties, statements, promises, information, arrangements and
understandings, whether oral or written, express or implied, with respect to the
subject matter hereof. None of the parties hereto shall be bound or charged with
any oral or written agreements, representations, warranties, statements,
promises, information, arrangements or understandings not specifically set forth
in this Agreement or in the schedules, documents and instruments to be delivered
on or before the Transfer Date pursuant to this Agreement. The parties hereto
further acknowledge and agree that, in entering into this Agreement and in
delivering the schedules, documents and instruments to be delivered on or before
the Transfer Date, they have not in any way relied, and will not in any way
rely, upon any oral or written agreements, representations, warranties,
statements, promises, information, arrangements or understandings, express or
implied, not specifically set forth in this Agreement or in such schedules,
documents or instruments.
 
8.10           Waiver
 
Any party hereto which is entitled to the benefits of this Agreement may, and
has the right to, waive any term or condition hereof at any time on or prior to
the Transfer Date; provided, however, that such waiver shall be evidenced by
written instrument duly executed on behalf of such party.
 
8.11           Amendments
 
No modification or amendment to this Agreement may be made unless agreed to by
the parties hereto in writing.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
 
 

 
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IN WITNESS WHEREOF the parties hereto have duly executed this agreement as of
the day and year first written above.
 

 
GOLDEN PHOENIX MINERALS, INC.
     
by:
       
Name:           Thomas Klein
Title:             Chief Executive Officer
(I have authority to bind the company)

 

 
MHAKARI GOLD (NEVADA) INC.
     
by:
       
Name:           Sheldon Davis
Title:             President
(I have authority to bind the company)

 

 

 
 

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SCHEDULE "A"
DESCRIPTION OF THE PURCHASED ASSETS
 
See attached.
 

 
 

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SCHEDULE "B"
TERMS OF NET SMELTER RETURN ROYALTY
 
The following terms shall govern the payment of the net smelter return royalty
payable to a minority interest holder in the Purchased Assets whose ownership
interest is reduced to 1% or less, as contemplated by Section 2.6(c) of the
Agreement:
 
In this exhibit:
 
 
(a)
"Metal Price" means for any Product the lower of the "LME cash" or the "3
months" price as per the Metal Bulletin published by the London Metal Exchange.
If trading on the London Metal Exchange is discontinued or interrupted, the
Owner shall utilize a comparable commodity quotation, reasonably acceptable to
the Payee, for the purposes of calculating the Net Smelter Returns;

 
 
(b)
"Net Smelter Returns" means for any period, the gross proceeds received by the
Owner for all Product that is irrevocably and unconditionally sold by the Owner
and credited to the account of the Owner by a smelter, refiner or other bona
fide purchaser during the subject period (without deduction in respect of any
other royalty in respect of the Mhakari Vanderbilt Properties) less the
following expenses if actually incurred by the Owner:

 
 
(i)
sales, use, gross receipt and severance taxes and all mining taxes, payable by
the Owner or other operator of the Mhakari Vanderbilt Properties, that are based
directly upon, and actually assessed against, the value or quantity of Product
sold or otherwise disposed of from the Mhakari Vanderbilt Properties; but
excluding any and all taxes based upon the net or gross income of the Owner or
other operator of the Mhakari Vanderbilt Properties, the value of the Mhakari
Vanderbilt Properties or the privilege of doing business, and other taxes
assessed on similar basis;

 
 
(ii)
charges and costs, if any, for transportation (including but not limited to,
direct insurance costs while in transit) of the Product from the Mhakari
Vanderbilt Properties to places where such Product are smelted, refined and/or
sold or otherwise disposed of; and

 
 
(iii)
charges, costs (including assaying, sampling and sales costs) and all penalties,
if any, charged by a smelter or refiner of the Product; but, if smelting and/or
refining are carried out in facilities owned or controlled, in whole or in part,
by the Owner, then the charges and costs for such smelting or refining of such
Product shall be the lesser of : (A) the charges and costs the Owner would have
incurred if such smelting or refining was carried out at the facilities that are
not owned or controlled by the Owner and that are offering comparable services
for comparable products; and (B) the actual charges and costs incurred by the
Owner with respect to such smelting and refining;

 
 
(c)
"Owner" means the party paying the Royalty;

 
 
(d)
"Payee" means the party receiving the Royalty;

 
 
(e)
"Processor" means any smelter, refiner or other processor, purchaser or other
user of the Product.

 
 
(f)
"Product" means all metals and minerals mined or otherwise recovered from the
Mhakari Vanderbilt Properties, whether in the form of doré, concentrates,
tailings or otherwise, and all beneficiated or derivative products thereof;

 
 
(g)
"Royalty" means the amounts payable from time to time to the Payee and
calculated as 1.00% of Net Smelter Returns, as described in Section 2.2 of this
Agreement.

 
Payment of the Royalty by the Owner to the Payee shall be made periodically
within fifteen (15) days after receipt by the Owner of any funds pertaining to
the Mhakari Vanderbilt Properties from any smelter or refiner. A statement
containing pertinent information in sufficient detail to explain the calculation
of the Royalty payment will be provided to the Payee within 30 days following
the end of each fiscal quarter (the "applicable period") of the Owner.
      
With respect to precious metals produced from the Mhakari Vanderbilt Properties,
the Payee may, at its option, elect to receive payment of the Royalty in-kind at
the time such precious metals are produced at the refinery where the final
product is produced. The value of any in-kind payment of the Royalty hereunder
shall be based on the Metal Price at the time the Royalty payment is due and
payable.
 
 

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