INDEPENDENT CONTRACTOR AGREEMENT

 

THIS INDEPENDENT CONTRACTOR AGREEMENT (“Agreement”) is made and entered into as
of December 18, 2006 (the “Effective Date”) between Dennis P. Gauger
(hereinafter referred to as “Contractor”) whose address is 620 East 100 North,
Alpine, Utah 84004, and Golden Phoenix Minerals, Inc., a Minnesota corporation
with its principal executive office located at 1675 East Prater Way, Suite 102,
Sparks, Nevada 89434 (hereinafter referred to as the “Company”).

 

WITNESSETH:

 

WHEREAS, the Company desires to obtain the services of Contractor as its Chief
Financial Officer and in such other capacities as the Company deems appropriate;

 

WHEREAS, Contractor desires to perform services for the Company; and

 

WHEREAS, the Company and Contractor desire to set forth in the Agreement the
terms and conditions of such relationship.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto do promise and agree as follows:

 

 

1.

DUTIES OF CONTRACTOR

 

1.1          During the term hereof, Contractor agrees to use his best efforts
and devote such time as may be reasonably necessary to perform the duties listed
in Exhibit “A” hereto (the “Services”). Contractor agrees to report directly to
the President, Chief Executive Officer, the Board of Directors and the Audit
Committee of the Company and be readily available to consult with and assist the
Chief Executive Officer and other management of the Company in the performance
of their duties.

 

1.2          While Contractor has the right to enter into engagements to perform
services for other entities, Contractor agrees that during the term hereof he
will not perform any services for any entity which directly or indirectly
competes with the Company or otherwise creates a conflict of interest.
Contractor certifies that Contractor has no outstanding agreement or obligation
that is in conflict with any of the provisions of this Agreement, or that would
preclude Contractor from complying with the provisions hereof.

 

1.3          Contractor shall conduct all of his business in his own name and in
such manner as consistently exhibits high standards and integrity.

 

1.4          Contractor shall abide by the policies from time to time
established by the Company.

 

 

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1.5          Contractor agrees to perform all services under this Agreement in
compliance with all applicable federal and state securities laws.

 

 

2.

OBLIGATIONS OF THE COMPANY

 

2.1          The Company agrees to pay Contractor in accordance with the
schedule listed in Exhibit “B” attached hereto.

 

2.2          The Company shall exercise no control over the conduct of the
Contractor’s business relating to the provision of services to companies or
clients other than the Company, and the Company shall not be responsible for any
act of the Contractor in the conduct of such business.

 

 

3

AGENCY

 

The parties hereto agree that the scope of Contractor’s agency hereunder is
limited to performing the services identified in Exhibit “A” and that Contractor
is not authorized to make any representation, agreement or contract, or incur
any obligation or indebtedness on behalf of the Company of any kind, regardless
of the nature thereof, except as authorized by the Board of Directors of the
Company.

 

 

4

CONFIDENTIALITY

 

4.1           “Confidential Information” shall mean any and all information
concerning any aspect of Company’s business or products including but not
limited to the Company’s products, design information, engineering details,
technical specifications, schematics, pricing data, production plans, business
sources and strategies, stock profile/investor relations plans, customer lists,
business opportunities, financial or marketing techniques, development plans,
marketing plans, projects, processes, research materials, intellectual property,
and other proprietary information related to the Company’s business that is not
generally known to persons not associated with the Company (including, without
limitation, information concerning “know-how”, products, product designs,
manufacturing processes, techniques, product schematics, trade secrets,
inventions, patents, source and object code, data, and works of authorship) or
other business information disclosed by the Company either directly or
indirectly in writing or orally or that Contractor becomes exposed to while
performing Services for the Company.

 

4.2         Contractor will not, during or subsequent to the term of this
Agreement, use the Company’s Confidential Information for any purpose whatsoever
other than the performance of the Services on behalf of the Company or disclose
the Company’s Confidential Information to any third party. It is understood that
said Confidential Information shall remain the sole property of the Company.
Contractor further agrees to take all reasonable precautions to prevent any
unauthorized disclosure of such Confidential Information. Confidential
Information does not include information which (i) is known to Contractor at the
time of disclosure to Contractor by the Company as

 

 

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evidenced by written records of Contractor, (ii) has become publicly known and
made generally available through no wrongful act of Contractor, or (iii) has
been rightfully received by Contractor from a third party who is authorized to
make such disclosure. Without the Company’s prior written approval, Contractor
will not directly or indirectly disclose to anyone the contents of this
Agreement.

 

4.3          Contractor agrees that Contractor will not, during the term of this
Agreement, improperly use or disclose any proprietary information or trade
secrets of any former or current employer or other person or entity with which
Contractor has an agreement or duty to keep in confidence information acquired
by Contractor, if any, and that Contractor will not bring onto the premises of
the Company any unpublished document or proprietary information belonging to
such employer, person or entity unless consented to in writing by such employer,
person or entity. Contractor will indemnify the Company and hold it harmless
from and against all claims, liabilities, damages and expenses, including
reasonable attorneys fees and costs of suit, arising out of or in connection
with any violation or claimed violation of a third party’s rights resulting in
whole or in part from the Company’s use of the work product of Contractor under
this Agreement.

 

4.4          Contractor recognizes that the Company has received and in the
future will receive from third parties their confidential or proprietary
information subject to a duty on the Company’s part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. Contractor agrees that Contractor owes the Company and such third
parties, during the term of this Agreement and thereafter, a duty to hold all
such confidential or proprietary information in the strictest confidence and not
to disclose it to any person, firm or corporation or to use it except as
necessary in carrying out the Services for the Company consistent with the
Company’s agreement with such third party.

 

4.5        Because the Company is a “public company” with its shares of common
stock registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended, the Confidential Information supplied to Contractor may be “material”
information which has not yet been disclosed to the public markets.
Consequently, Contractor may not trade (purchase or sell) the Company’s common
stock in the public market so long as it is in possession of the Confidential
Information which is “material” information which has not yet been disclosed to
the public market by press release and/or in one of the Company’s filings with
the Securities Exchange Commission.

 

4.6          Upon the termination of this Agreement, or upon Company’s earlier
request, Contractor will deliver to the Company all of the Company’s property or
Confidential Information that Contractor may have in Contractor’s possession or
control.

 

 

 

 

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5

REPORTS

 

Except as specifically set forth on Exhibit A attached hereto, Contractor agrees
that it will from time to time during the term of this Agreement or any
extension thereof keep the Company advised as to Contractor’s progress in
performing the Services hereunder and that Contractor will, as requested by the
Company, prepare written reports with respect thereto. It is understood that the
time required in the preparation of such written reports shall be considered
time devoted to the performance of the Services.

 

 

6

EXPENSES

 

The Company shall reimburse Contractor for all reasonable expenses incurred by
the Contractor directly related to the performance of his duties hereunder,
including, without limitation, travel, lodging, meals, long distance telephone,
and office supplies. Contractor shall be responsible for all other expenses
related to the operation of his local office, including, without limitation,
insurance, telephone, office supplies, professional licenses and dues, FICA,
state and federal taxes, unemployment tax and disability insurance.

 

 

7

RELATIONSHIP

 

The relationship of Contractor to the Company is that of an independent
contractor, and nothing contained herein or otherwise shall be construed in such
a manner as to constitute Contractor as an employee of the Company. The Company
shall not be responsible in any manner for Contractor’s Social Security
withholding, federal or state income tax withholding, or any comparable
unemployment law of any other appropriate state or jurisdiction and any other
amounts required to be withheld or paid by an employer with respect to its
employees under any applicable laws or regulations. Contractor agrees to obtain
and maintain workers compensation insurance through out the term of this
Agreement and to provide the Company with a certificate showing coverage within
thirty (30) days of the date first written above.

 

 

8

TERM AND TERMINATION

 

8.1          This Agreement will commence on the Effective Date and will
continue until December 31, 2007 (the “Initial Term”) or until termination as
provided below. After the Initial Term, this Agreement will automatically renew
for one (1) year terms unless notice of termination is provided thirty (30) days
prior to the end of the then current term.

 

8.2        Notwithstanding the provisions of Section 8.1, this Agreement shall
terminate immediately upon the breach of any covenant, representation, or
obligation herein by either the Contractor or the Company.

 

8.3          Notwithstanding any other provision, this Agreement will terminate
automatically without the necessity of written notice if any of the following
events occur:

 

 

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8.3.1.

either party files for protection under the bankruptcy laws, or seeks similar
protection from its creditors, whether voluntary or involuntary; or

 

 

8.3.2.

either party commences winding up or liquidation of its business, whether
voluntary or involuntary; or

 

 

8.3.3.

either party ceases to do business or becomes incapable of performing its
obligations under this Agreement, for any reason.

 

8.4          Either party may terminate this Agreement for convenience upon
ninety (90) days prior written notice.

 

8.5          Upon termination of this Agreement for any reason, Contractor
hereby agrees that he will:

 

 

8.5.1

redeliver to the Company all originals and all copies of any and all physical,
written, graphical and/or machine readable materials and media (including, for
example, notes, notebooks, memoranda, diskettes and photographic slides, prints
and negatives) that contain, embody, represent, or disclose the Confidential
Information (whether prepared by Contractor hereunder, its advisors or
otherwise) and will not retain any copies, extracts, memoranda, notes or
reproduction in whole or in part of such material in any media whatsoever; or

 

 

8.5.2

destroy all notes, memoranda, documents and other writings in any media
whatsoever prepared by Contractor hereunder or its advisors based on the
information in the Confidential Information and not redelivered pursuant to
Section 8.5.1 above, shall be destroyed, and such destruction shall be certified
in writing to the Company by an authorized officer of Contractor supervising
such destruction.

 

8.6          Upon such termination all rights and duties of the parties toward
each other shall cease except Sections 4 (Confidentiality), 7 (Relationship) and
8 (Term and Termination) shall survive termination of this Agreement.

 

 

 

 

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9

BENEFITS

 

Contractor acknowledges and agrees, and it is the intent of the parties, that
Contractor shall receive no benefits, including disability or unemployment
insurance, worker's compensation, medical insurance, or sick leave, from the
Company, either as an independent contractor or employee. If Contractor is
reclassified by a state or federal agency or court as an employee for tax or
other purposes, Contractor will become a non-benefit employee and will receive
no benefits from the Company, except those mandated by state or federal law,
even if by the terms of the benefit plans or programs of the Company in effect
at the time of such reclassification Contractor would otherwise be eligible for
such benefits.

 

 

10

ASSIGNMENT

 

This Agreement may not be assigned by either party without the express prior
written consent of the other; provided, however, that (i) if the Company shall
merge or consolidate with or into, or transfer substantially all of its assets,
including goodwill, in a single transaction or a series of related transactions,
to an unrelated purchaser, this Agreement shall be binding upon and inure to the
benefit of the successor from such merger, consolidation or sale, and (ii)
either party may assign this Agreement to a subsidiary, parent or affiliated
entity without obtaining such consent, and (iii) the Company may withhold its
consent to a proposed assignment in the event Contractor shall merge or
consolidate with or into, or transfer substantially all of its assets, including
goodwill, in a single transaction or a series of related transactions, to an
unrelated purchaser or purchasers.

 

 

11

EQUITABLE RELIEF

 

Contractor agrees that it would be impossible or inadequate to measure and
calculate the Company’s damages from any breach of the covenants set forth in
Section 4 herein. Accordingly, Contractor agrees that if Contractor breaches
Section 4, the Company will have available, in addition to any other right or
remedy available, the right to obtain from any court of competent jurisdiction
an injunction restraining such breach or threatened breach and specific
performance of any such provision. Contractor further agrees that no bond or
other security shall be required in obtaining such equitable relief and
Contractor hereby consents to the issuances of such injunction and to the
ordering of such specific performance.

 

 

12

INDEMNIFICATION

 

12.1       Contractor hereby agrees to indemnify and hold the Company, its
officers, directors, shareholders, employees and agents, harmless against any
and all claims as may be asserted by any third party against the Company based
on the performance by Contractor of the Services under the terms of this
Agreement.

 

 

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12.2      In the event Contractor or his estate or executors becomes a party, or
is threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether or not by or in the right of Company, and
whether civil, criminal, administrative, investigative or otherwise, by reason
of Contractor's performance of Contractor's duties hereunder or the fact that
Contractor is or was a director, officer, employee, agent or fiduciary of the
Company, or is or was serving at the partnership, joint venture, trust or other
enterprise, the Company shall, to the maximum extent permitted by applicable
law, hold the Contractor harmless from and against any claim, loss or cause of
action arising from or relating thereto; provided, however, that the indemnity
provided under this Section 12.2 shall not apply with respect to any liability
or matter arising from acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for any breach of the
Contractor’s duty of loyalty to the Company, or for any transaction from which
the Contractor derived an improper personal benefit. If any claim is asserted
against the Contractor for which the Contractor reasonably believes in good
faith he is entitled to be indemnified hereunder, the Company shall, at its
option and to the maximum extent permitted by applicable law, (i) assume the
defense thereof or (ii) pay the Contractor’s reasonable legal expenses (or cause
such expenses to be paid) on a quarterly basis, if the Company does not so
assume the defense; provided, that the Contractor shall reimburse the Company
for such amounts if the Contractor shall be found by a final, non-appealable
order of a court of competent jurisdiction or any arbitrator not to be entitled
to indemnification hereunder. Contractor shall cooperate as reasonably requested
by the Company in the defense of any such threatened or pending action, suit or
proceeding. The Company's indemnity obligations and duties as set forth in this
Section 12.2 shall survive indefinitely the termination or expiration of this
Agreement; provided, however, that the Company’s indemnity obligations and
duties as set forth in this Section 12.2 shall terminate upon any felony
conviction of the Contractor at any time.

 

 

13

NOTICE

 

Any notice required or permitted to be given hereunder shall be deemed to be
sufficiently given and received in all respects if personally delivered or if
deposited in the United States Mail, certified mail, postage pre-paid, return
receipt requested, addressed to the addressee at its or his last address
furnished to the sender in writing by the addressee for the purpose of receiving
notices hereunder, or, unless or until such address shall have been so
furnished, addressed to the addressee at the address indicated in the opening
paragraph of this Agreement.

 

 

14

AMENDMENT

 

This Agreement may not be modified, amended, terminated or discharged except in
writing and signed by the parties hereto.

 

 

 

 

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15

ENFORCEMENT FEES

 

The parties hereto acknowledge and agree that in the event of any dispute or
proceeding initiated under this Agreement, the party prevailing in the ultimate
award shall, in addition to the other remedies and damages actually awarded, be
entitled to reimbursement of all reasonable attorneys’ fees and other
out-of-pocket costs and disbursements incurred by the party in asserting its
claims hereunder.

 

 

16

ENTIRE AGREEMENT

 

All terms, covenants and conditions of this Agreement are contained herein and
there are no other warranties, obligations, covenants or understandings between
the parties other than those expressed herein. Any and all agreements for
solicitation of orders, as amended, modified, or supplemented, heretofore
entered into between the parties hereto, or claims or compensation arising
therefrom, are hereby canceled, terminated and released as of the effective date
of this Agreement.

 

 

17

COUNTERPARTS

 

This Agreement may be executed simultaneously in one or more counterparts, each
of which shall be deemed original, but all of which shall constitute one and the
same instrument or by way of facsimile in its entirety. The exhibits attached
hereto are an integral part hereof and incorporated herein by this reference. An
executed facsimile signature shall be deemed an original.

 

 

18

SEVERABILITY

 

If any provision of this Agreement is held to be unenforceable for any reason,
such provision shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties to the maximum extent possible. In any event,
all other provisions of this Agreement shall be deemed valid and enforceable to
the full extent possible.

 

 

19

WAIVER

 

The parties agree that if any provision of this Agreement shall under any
circumstance be invalid or inoperative, this Agreement shall be construed with
the invalid or inoperative provision deleted, and the rights and obligations of
the parties shall be construed and enforced accordingly.

 

 

20

GOVERNING LAW

 

This Agreement shall be construed and interpreted in accordance with the
internal laws of the State of Nevada or any successor provision thereto.

 

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

 

 

COMPANY:

 

 

GOLDEN PHOENIX MINERALS, INC.

 

 

 

By:_____________________________

 

Name: David A. Caldwell

 

Title: President

 

 

 

CONTRACTOR:

 

 

 

________________________________

 

Dennis P. Gauger

 

 

 

 

 

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EXHIBIT A

 

DUTIES

 

Supervision of Accounting Staff

 

 

•

Directly supervise and train the Accounting Staff of the Company, currently
comprised of one full time accountant, part time clerical assistant(s) and a
part time accounting consultant working as an independent contractor.

 

•

Define the duties of and develop work plan for the Accounting Staff of the
Company.

 

•

Perform monthly reviews of the financial statements of the Company and its joint
ventures or affiliated entities over with the Company maintains administrative
or management responsibility.

 

•

Assume the responsibility for and coordinate the use of outside consultants for
the establishment of the Company’s accounting, budgeting and management
reporting system currently in the process of development.

 

•

Be readily available to answer questions and provide day-to-day guidance to the
Accounting Staff of the Company.

 

Assume the Role of Principal Accounting Officer

 

 

•

Serve as the “Principal Accounting Officer” of the Company, as that term is
defined by the rules and regulations of the Securities and Exchange Commission
(“SEC”).

 

•

Report directly to the President, Chief Executive Officer, the Board of
Directors and the Audit Committee of the Company and be readily available to
consult with and assist the Chief Executive Officer and other management of the
Company in the performance of their duties.

 

•

Sign the officer certifications required of the Principal Accounting Officer in
the Company’s quarterly and annual periodic filings with the SEC.

 

•

Attend meetings of the Audit Committee and Board of Directors as requested, and
serve as a resource to the members of the Board of Directors and its committees
as needed.

 

Under the Direction of the Audit Committee, Coordinate Relationships with the
Company’s Outside Accounting and Tax Advisors

 

 

•

Under the direction of the Audit Committee, coordinate the services provided by
the external auditors in the quarterly reviews and the annual audit of the
Company’s financial statements, including the financial statements of joint
ventures or other entities material to the financial statements of the Company
for which the Company retains administrative or management responsibility.

 

 

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•

Under the direction of the Audit Committee, coordinate all other services
provided by the external auditors, including consultation on accounting and
reporting matters, income tax matters, and other required services.

 

•

Assume responsibility for the preparation of federal and state corporate income
tax returns and related consultation, and recommend to the Audit Committee for
approval the engagement all outside tax professionals.

 

•

Assume responsibility for the preparation of all employment and payroll related
tax returns and reports, and recommend to the Audit Committee for approval the
engagement of all outside payroll tax professionals.

 

Under the Direction of the Audit Committee, Assume the Responsibility to Lead
the Company’s Sarbanes – Oxley Section 404 Internal Control Compliance Program

 

 

•

Under the direction of the Audit Committee, develop the plan for the Company’s
compliance with Sarbanes – Oxley Section 404 Internal Control Compliance.

 

•

Identify the need for, select and recommend for approval to the Audit Committee
the use of any outside consultants required to develop and complete the
Company’s 404 Internal Control Compliance Plan.

 

•

Provide ongoing reports to the Chief Executive Officer and the Audit Committee
of the Company’s progress in completing and implementing its 404 Internal
Control Compliance Plan.

 

•

Recommend to the Chief Executive Officer and the Audit Committee changes in
operating and accounting procedures necessary to strengthen internal accounting
controls.

 

Take the Lead in SEC Compliance for the Company’s Financial Statements and SEC
Reports

 

 

•

With assistance from the Company’s accounting staff, timely complete the
financial statements, footnotes, and all financial related sections of the
Company’s quarterly and annual reports filed with the SEC.

 

•

Coordinate with the Chief Executive Officer, the Audit Committee, outside legal
counsel, and independent auditors the timely completion of all other sections of
the Company’s quarterly and annual reports filed with the SEC.

 

•

Using compliance checklist tools, perform a compliance review of each report
prior to its filing with the SEC.

 

•

In coordination with outside legal counsel, see that the Company is in
compliance with and files all other necessary forms and reports with the SEC
(Form 8-K, Forms 3,4 and 5 and other miscellaneous filings).

 

•

Determine the correct accounting policies and procedures and reporting practices
of the Company, coordinating any required outside consultation as approved by
the Audit Committee.

 

 

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EXHIBIT B

 

COMPENSATION SCHEDULE

 

December 2006:

 

$1,000 balance on consulting retainer applied to compensation

 

January 2007:

 

$4,000 due as follows:

 

-$2,000 paid by January 1, 2007

-$2,000 paid by January 16, 2007

 

February 2007:

 

$4,500 due as follows:

-$2,250 paid by February 1, 2007

-$2,250 paid by February 16, 2007

 

March 2007 and thereafter:

$6,000 per month due as follows:

-$3,000 paid by the 1st of each month

-$3,000 paid by the 16th of each month

 

On the Effective Date, Contractor is herby granted options to purchase one
hundred thousand (100,000) shares of the Company's common stock (“Options”)
pursuant to the terms and conditions of the Stock Option Agreement to be agreed
to by the parties. One fourth of the Options shall vest every three (3) months
resulting in one hundred percent (100%) vesting at December 18, 2007. The
Options shall have a term of no less than five (5) years from the date of each
vesting within which they must be exercised. The Options will be priced at
$0.395, the closing price of the Company’s common stock as traded on the OTC
Bulletin Board on December 18, 2006. If the number of outstanding shares of
Company stock are increased or decreased, or such shares are exchanged for a
different number or kind of shares or securities of the Company through
reorganization, merger, recapitalization, reclassification, stock dividend,
stock split, combination of shares, or other similar transaction, the aggregate
number of shares of Company stock subject to any Options granted to Contractor
under this Agreement, or in any future grant of options, shall be deemed
proportionately adjusted. Such adjustment shall not change the aggregate
purchase price applicable to the unexercised portion of the Options but shall
have a proportionate adjustment in the price for each share covered by the
Option. The Company agrees that it will use its best efforts to register the
Options issued in connection with this Agreement pursuant to a registration
statement on Form S-8 under the Securities Act of 1933, as amended.