Document:

ex10-13.htm

 

Exhibit 10.13

CONSULTING AGREEMENT made this 1st day of September 2011

BETWEEN:

Golden Phoenix Minerals, Inc.

(the “Company” or “GPXM”)

of

1675 East Prater Way, Suite 102, Sparks, Nevada 89434

and

Robert P. Martin

(the “Consultant”)

of

17000 Wedge Parkway, #2125, Reno, NV 89511

AGREEMENT:

WHEREAS:

	
A.

	
The Company is in the business of mining exploration and development and as such, desires to confirm the appointment of the Consultant to the position of Chairman of the Board of Directors of the Company (“Board”) per the terms of this Agreement;

	
B.

	
Consultant and Company had previously entered into that certain Employment Agreement dated March 8, 2006, as amended by that certain Addendum to Employment Agreement dated January 31, 2007 (collectively, referred to herein as the “Employment Agreement”), pursuant to which Consultant was previously employed in various executive positions within the Company, including most recently as President;

	
C.

	
Consultant and Company agreed upon certain changes in executive positions, including Consultant’s resignation as President effective March 15, 2011;

	
D.

	
Both parties agree to set forth their obligations hereunder and all particulars as related to their relationship.

1.         Definitions:

        In this Agreement save where the context otherwise requires:

	
  

	
1.1

	
“Services” means the services to be provided by the Consultant to the Company as specified in Article 4 of this Agreement.

 

	
  

	
1.2

	
“$” means United States dollars.

 

	
  

	
1.3

	
“Appointment” means the appointment of the Consultant by the Company under this Agreement.

  

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1.4       “Confidential Information” shall include any information relating to the Company, its clients, partners, suppliers and their terms of business, details of projects, results of operations, business plans, data, negotiated prices charged to and the terms of business with customers, marketing plans and sales forecasts, financial information, results and forecasts (to the extent that these are not included in published audited accounts), details of employees and officers and of the remuneration and benefits paid to them, information relating to research activities, inventions, secret processes, designs, formulae and product lines, any information
which the Consultant  is told in confidence by customers, suppliers or other persons.

	
  

	
1.5

	
The “Non-compete Period” includes the period during the Consultant's services with the Company and for twelve (12) months thereafter.

2.          Appointment

	
  

	
2.1.

	
Irrespective of the date of signing this Agreement, the parties hereby agree that this Agreement shall be effective as of March 15, 2011 (“Effective Date”).  Company and Consultant hereby acknowledge and confirm Consultant’s resignation as President as of the Effective Date, and further ratify and confirm Consultant’s continued appointment as Chairman of the Board.  Consultant further resigns from any and all other positions with the Company other than as set forth herein, including, but not limited to, as Secretary of the Company, effective as of the date of this Agreement.

 

	
  

	
2.2.

	
Company and Consultant understand and agree that Consultant’s engagement may be terminated by Company or Consultant at any time with or without notice and with or without cause.  This Agreement shall continue in effect until such time as this Agreement is terminated as provided herein or Consultant’s successor in the position of Chairman is duly appointed.

 

	
  

	
2.3.

	
The Consultant shall comply with all laws, rules or codes of conduct in force from time to time required by any regulatory body in relation to the business of the Company or the status of the Consultant or which the Company shall reasonably determine are necessary for the proper functioning of its business. The Consultant shall also comply with all Company policies that are applicable from time to time and as amended from time to time.

3.        Attention to the business of the Company

3.1      During the continuance of this Agreement the Consultant shall devote such time and attention to the business of the Company as is required to fulfill the term of the engagement, and as more particularly required by the Company pursuant to Article 4 and Appendix 1 of this Agreement.

4.        Service

4.1      The Consultant shall report to the Board of the Company or to such other persons as the Company may designate in writing from time to time.

4.2      The Consultant shall serve as, and perform the duties of Chairman of the Company with such duties, authority and responsibilities as are normally associated with and appropriate to such a position, including as set forth in Appendix 1 attached hereto and incorporated herein by reference.

  

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4.3           The Company may provide any direction given to the Consultant, in writing.  More particularly, however, the Consultant shall devote such time as is required to fulfill his duties and responsibilities to the Company. The Consultant shall disclose any outside directorships, consulting or other business positions currently held in Appendix 2 of this agreement and receive approval of the Board of any subsequent directorships.  Notwithstanding, the Consultant shall be permitted to serve on boards of other companies and to receive and retain remuneration in respect to such activities, it being expressly
understood and agreed however that the Consultant’s continuing service on such boards, or association with other companies with which he is otherwise associated shall be deemed not to be in conflict with, nor interfere with his performance of his duties and responsibilities as Chairman under this Agreement.

4.4          Consultant will act as an independent contractor in the performance of his duties under this Agreement.  Accordingly, Consultant will be responsible for payment of all federal, state, and local taxes, if any, on compensation paid under this Agreement, including income and social security taxes, unemployment insurance, and any other taxes, and any and all business license fees as may be required.  This Agreement neither expressly nor impliedly creates a relationship of principal and agent, or employee and employer, between Consultant and the Company.  Consultant understands and agrees that this Agreement
sets forth the entire compensation to be paid by the Company to Consultant resulting from the Services to be performed by Consultant, and that except as specifically set forth under Section 5 below, under no circumstances will Consultant be eligible for any benefits or rights under any employee benefit plan of the Company, including without limitation any unemployment or disability benefits, even if a government agency or taxing authority re-characterizes the relationship between the parties as an employment relationship.

4.5          Consultant agrees to resign from the Board and provide a written voluntary resignation from such position at the request of the Company at any such time as this Agreement is terminated or Consultant’s successor is duly appointed; provided, however, that the compensation obligations set forth in Section 5 have been completely and fully satisfied.

5.        Compensation

5.1           Monthly Consulting Fee.  The Company agrees to pay the Consultant a consulting fee in the amount of three thousand dollars ($3,000) monthly commencing as of the Effective Date, without deduction, and shall furnish Consultant with a form 1099.  The consulting fee will be reviewed by the Compensation Committee of the Company on an annual basis.  Such amounts accrued between the Effective Date and the date of mutual execution of this Agreement shall be payable on the date of this Agreement first above written and on the same date of
each month thereafter during the term of this Agreement.

 

5.2           Director’s Fees.  In addition there will be monthly directors fees payable as decided by the Board from time to time. These are currently set at $1,000 per month.

 

5.3           Debt Settlement.  That certain outstanding promissory note (“Note”) in Consultant’s favor made pursuant to the Debt Settlement Agreement between Company and Consultant dated April 2, 2010 (the “Debt Settlement Agreement”), in the principal amount of $215,939.97, plus interest accrued thereon (as of the Effective Date, the amount due on the Note including principal and interest accrued thereon totaled $228,487.46), will be paid in full and fully
satisfied by the Company in two (2) lump sum payments in accordance with the following schedule:  (i) first payment of one half of the remaining principal, together with accrued interest from the Effective Date, within ninety (90) days of the date of mutual execution of this Agreement; and (ii) second payment of all remaining principal, together with accrued interest from the Effective Date, within one hundred eighty (180) days from the date of mutual execution of this Agreement.  There shall be a late payment penalty of $100/day for each day beyond such 90 and 180-day payment dates for the Note, which late payment shall be paid not later than the next occurring payment of Consultant’s Monthly Consulting Fee.

 

  

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5.3.1           In the event the Company secures any new equity financing arrangements or engages in any equity raise transactions prior to the Note payment installment dates, the Company agrees that up to twenty percent (20%) of the net proceeds received by the Company (up to a maximum of $100,000) shall be immediately allotted for repayment of the Note.

 

5.3.2           Notwithstanding the foregoing, subject to necessary approvals, Consultant may elect, in his sole and absolute discretion to convert the sums due thereunder into shares of the Company’s common stock.

 

5.3.3           The parties acknowledge and agree that the Note shall be amended to reflect the above terms and the Debt Settlement Agreement shall be deemed fulfilled and all obligations satisfied upon payment of the Note as set forth herein.

 

5.4           Stock Options and Bonus.  The Consultant shall be able to participate in any Company equity incentive plan or stock option scheme as may be set up from time to time by the Company’s Compensation Committee.

5.4.1             As a one-time bonus, the Company shall grant Consultant the maximum allowable grant of stock options pursuant to the Company’s 2007 Equity Incentive Plan of five hundred thousand (500,000) stock options, to be priced at the fair market value as of the date of Board approval of such option grant.

5.4.2           Notwithstanding the bonus stock option, in addition the Company shall grant Consultant a stock option exercisable for up to 1,500,000 shares of the Company’s common stock, with a minimum expiration date of three (3) years from the date of this Agreement, subject to standard vesting provisions and exercisable at a price per share to be determined at the date of Board approval of such grant as the fair market value based on the closing price of a share of Company common stock as quoted on the OTC Bulletin Board; subject, however, to Board approval and to Consultant complying with and providing the full release and
acknowledgment contained in Section 12.

5.4.3           In the event that the Company merges with or is acquired by another entity, all options granted by the Company shall become immediately vested in the Consultant in accordance with the provisions of this Agreement, but no later than the termination date of this Agreement.

5.4.4     The Company may, in its sole discretion and in order to further the purposes of this Agreement, accelerate the vesting of shares to the Consultant.

  

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5.4.5           The Parties hereto acknowledge that, subject to compliance with Rule 144 and such other federal and state securities laws as may be applicable, the trading restrictions previously governing shares of the Company presently owned by Consultant have expired and that any restrictive legends appearing on such shares may be removed by Consultant and are of no further force and effect.  The Company shall include any qualifying shares held by Consultant in any registration statement that it files, subject to necessary approvals.  The options described in this Section 5 shall be adjusted for any stock split that
occurs after the date of this Agreement, so that the options shall not be increased or diluted on a pro rata basis as a result of such split.

5.5            Consultant shall receive such fringe benefits as are, and that may be from time to time made available to other Consultants of the Company.

5.6            All fees due as described in this Article 5 shall be payable upon invoice for so long as the Agreement remains in effect and the Company has the funds to pay such.

5.7            During the Consultant’s tenure with the Company, the Consultant shall be eligible to receive a performance bonus in accordance with the performance-based bonus plans established by the Board for senior Consultant officers from time to time after taking into account the performance of the Company and the Consultant and such other facts and circumstances as the Board may deem appropriate to consider.

5.8            Consultant is entitled to take such time off as vacation as previously approved by the Chief Executive Officer and is deemed reasonable and appropriate in furtherance of Consultant’s duties.

5.9            Consultant will not be authorized to make any representation, contract or commitment on behalf of Company unless specifically requested or authorized in writing to do so by Company’s Board of Directors.

6.       Confidential Information and Company Documents

6.1     The Consultant shall not, during the term of this Agreement, nor at any time thereafter:

	
  

	
a.

	
Divulge or communicate Confidential Information to any person, company, business entity or other organization;

	
  

	
b.

	
Use for its own purposes or for any purposes other than those of the Company, through any failure to exercise due care and diligence, cause any unauthorized disclosure of any trade secrets, or Confidential Information relating to the Company and its business. These restrictions shall cease to apply to any information, which is or becomes generally available to the public other than as a result of any act or default on the part of the Consultant.

6.2    Any notes, memoranda, records, lists of customers and suppliers and employees, correspondence, documents, computers an other disk and tape, data, project results, plans, maps, codes, designs and drawings and other documents and material whatsoever  (whether made or created by the Consultant or otherwise) relating to the business of the Company (and any copies of the same) and which have come into the possession of the Consultant in relation to this Agreement:

  

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        a)  Shall be and remain the property of the Company, and;

        b)  Shall be surrendered by the Consultant on demand.

6.3             Upon termination of this Agreement the Consultant shall deliver up to the Company all Confidential Information and any copies (however stored) and in relation thereto, and any other property belonging to the Company which is in the Consultant’s possession.

7.           Non-competition.

7.1           In further consideration of the compensation to be paid to the Consultant hereunder, the Consultant acknowledges that in the course of his rendering consulting services with the Company he has become familiar with the Company’s trade secrets and with other Confidential Information concerning the Company and its subsidiaries and that his services have been and shall be of special, unique and extraordinary value to the Company. Therefore, the Consultant agrees that during the “Non-compete Period” he shall not, without prior express written consent of the Board, directly or indirectly (whether for compensation
or otherwise) own or hold any interest in, manage, operate, control, participate in, consult with, render services for, or in any manner participate in any business engaged in any of the businesses or services provided by the Company or its Subsidiaries during the rendering of consulting services with the Company or the Non-compete Period (a “Competing Company”) or otherwise competing with the businesses of the Company or its subsidiaries, either as a general or limited partner, proprietor, significant shareholder, officer, director, agent, employee, consultant, trustee, affiliate or otherwise.  The Consultant acknowledges that the Company’s and its affiliates’ businesses are conducted nationally and internationally and agrees that the provisions in this shall operate throughout Canada, the United States and the world.  Nothing herein shall
prohibit the Consultant from being a passive owner of not more than ten percent (10%) of the outstanding securities of any publicly traded company that constitutes a Competing Company, so long as the Consultant has no active participation in the business of such company.

 

8.           Non-Solicitation.

8.1           During the Non-compete Period, the Consultant shall not directly or indirectly through any other entity (i) induce or attempt to induce any employee of the Company or any subsidiary to leave the employ of the Company or such subsidiary, or in any way interfere with the relationship between the Company or any Subsidiary and any employee thereof, (ii) hire any person who was an employee of the Company or any Subsidiary at any time during the twenty-four (24) months preceding the date of termination of the Consultant, or (iii) induce or attempt to induce any customer, developer, client, member, supplier, licensee, licensor,
franchisee or other business relation of the Company or any Subsidiary to cease doing business with the Company or such Subsidiary, or in any way interfere with the relationship between any such customer, developer, client, member, supplier, licensee or business relation and the Company or any Subsidiary (including, without limitation, making any negative statements or communications about the Company or any Subsidiary).

  

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9.   Notices

9.1    Any notice required to be given under this Agreement may be given by sending same by first class registered post addressed to the registered office of the Company, or addressed to the last known address of the Consultant. Notice may also be given via facsimile. Any notice given pursuant to this clause other than by facsimile, shall be deemed to have been received 120 hours after the time of posting and service thereof shall be sufficiently proved by providing that the notice was duly dispatched through the post in a prepaid envelope addressed as aforesaid.

10.     Public Disclosure

10.1           In carrying out the duties of Chairman, the Consultant shall at all times ensure that all representations and information provided to third parties do not violate the internal disclosure policies of the Company, and comply at all times with the rules and regulations of applicable regulatory authorities, including, without limitation, the Securities and Exchange Commission.

11.   Indemnity

11.1           The Consultant agrees to indemnify and hold harmless the Company, against all losses, claims and expenses (including reasonable legal expenses) incurred by the Company as a result of the gross negligence for professional or consulting services performed for the Company, excepting therefrom his activities as a member of the board of directors and as chairman of the board of directors, or breach of fiduciary duty of the Consultant.

12.   Settlement and Release; Termination of Employment Agreement

12.1            In consideration of the provisions and undertakings contained in this Agreement, including specifically the option grant award contemplated by Section 5.4.2, each Party to this Agreement hereby fully, finally, unconditionally and forever releases and discharges the other Party from any and all claims, demands, losses, damages, causes of action, debts, liabilities, obligations, liens, costs, expenses, attorneys’ fees, indemnities, duties, of any nature, arising from, or relating to the Employment Agreement (including all amendments, supplements, addenda or
other understandings or arrangements thereto) or to the Consultant’s employment by or services to the Company that arise from any occurrence prior to the date of this Agreement. Consultant acknowledges and agrees that the Employment Agreement is null and void and of no further force or effect as of the Effective Date upon signing this Agreement, including amounts owed or due, or construed to be owed or due, under the terms of the Employment Agreement.

  

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12.2           Consultant acknowledges having read, had the opportunity to be advised by legal counsel and is familiar with the provisions of this Agreement and the general release provisions of Section 12.1, which extends to any claims, demands, losses, damages, causes of action, debts, liabilities, obligations, liens, costs, expenses, attorneys’ fees, indemnities or duties of any nature whether now known or unknown, and understand that to the extent any applicable law provides that a general release does not extend to such claims which the Consultant does
not know or suspect to exist Consultant’s favor at the time of executing the release, the Consultant hereby expressly waives any and all rights thereunder. Consultant understands and acknowledges the significance and consequence of the specific waiver of any such statutory provisions available, and hereby assumes full responsibility for any damage, losses or liabilities that hereafter may be discovered.

	__________________________________
	
Consultant

	
(initials)

13.   Entire Understanding

13.1           This Agreement contains the entire understanding between the parties in connection with the matters contained and supersedes any previous agreements and undertakings relating thereto.  For the sake of clarity, this Agreement shall supersede the Employment Agreement, as amended, and the Debt Settlement Agreement.

14.   No Waiver

14.1            No waiver delay time or other indulgence granted by either party hereto or the other in respect of any breach of this Agreement shall in any way prejudice or affect the rights or remedies of the granting party in relation to such breach.

15.   Assignment

15.1           This Agreement may not be assigned by the Consultant.

16.   Regulatory Approval

16.1           Certain provisions of this Agreement may be subject to Board, shareholder, lender and/or regulatory approvals related to the Company, as necessary.

17.  Applicable Law

17.1           This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada.

[SIGNATURE PAGE IMMEDIATELY FOLLOWS]

  

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IN WITNES WHEREOF, the parties have signed this Agreement as of the dates set forth below.

Signed and Accepted

COMPANY

____________________________            ____/____/2011

Thomas Klein, Chief Executive Officer                                                                Dated

CONSULTANT

______________________________        ____/_____/2011

Robert P. Martin                                                                 Dated

  

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Appendix I

	
BOARD CHAIR PERSON (DIRECTOR)

 

AUTHORITY/RESPONSIBILITY:

The Board of Directors is the legal authority for the Company

The Chair Person is also responsible and accountable to the membership.

As a member of the Board, a Director acts in a position of trust for the community and is responsible for the effective governance of the organization.

REQUIREMENTS:

·Commitment to the work of the organization

·Knowledge and skills in one or more areas of Board governance: policy, finance, programs, and/or personnel

·Willingness to serve on at least one committee

·Attendance at regular  Board Meetings

·A time commitment as necessary to fulfill such role, (includes Board preparation, meeting, committee and meeting time)

·Attendance at Annual General Meeting

·Be informed of the services provided by the Company and publicly support them

·Prepare for and participate in the discussions and the deliberations of the Board

·To foster a positive working relationship with other Board members, and the Company’s  staff

·Be aware and abstain from any conflict of interest

MAJOR DUTIES:

·Preside over and Address Annual General Meeting

·Chair the Board meeting and any other committees as directed by the Board

·Represent the Company at community and business functions

·In conjunction with the Executive Committee, if one exists, set regular Board meeting agenda

·Ensure Board members receive agenda and minutes in a timely manner

·Adhere to general duties outlined in the board member job description

 

  

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Appendix 2

Outside Directorships, Consulting or Other Positions:

	
  

	
-

	
Rainbow Management Group, Ltd

	
  

	
-

	
Waikiki Beach Activities, Inc.

	
  

	
-

	
Pacific Marine Research (501(c)(3) Non-profit organization)

  

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Amendment to Consulting Agreement

Golden Phoenix Minerals, Inc. (“Company”) and Robert P. Martin (“Consultant”) hereby agree, as of this 28th day of September 2011, to amend that certain Consulting Agreement dated September 1, 2011, as follows:

1.           This Amendment and the Consulting Agreement shall be consummated and become effective upon receipt by Consultant of $23,000.00 via direct deposit into Consultant’s bank account on September 30, 2011, which payment represents the consulting fee of $21,000.00 accrued from March of 2011 through September 2011 plus a one-time payment of $2,000.00 for Consultant’s legal expenses associated with preparation of the Consulting Agreement.

2.           § 4.5 is amended by adding the following:  Before the Company may request the Consultant’s voluntary resignation, all compensation obligations to the Consultant set forth in Section 5 must first be satisfied as evidenced by a signed statement confirming such from Consultant.

3.           § 5.3 is amended as follows:

(a)           Interest shall continue to accrue at the rate of 6% per annum on the balance of the Note from the Effective Date forward until the Note has been paid in full.

(b)           The first Debt Settlement payment shall be due and paid to Consultant via direct deposit into Consultant’s bank account on November 29, 2011 in the amount of $123,971.66.

(c)           The second Debt Settlement payment shall be due and paid to Consultant via direct deposit into Consultant’s bank account on February 27, 2012 in the amount of $115,933.90, which, in the absence of any outstanding unpaid amounts, penalties or Fees, shall retire the Note in full.

(d)           In the event of a breach of performance to pay any sums owed when due as called for in the Agreement, Consultant may declare at his election, all sums owed to be due and payable together with legal costs incurred by Consultant in their collection.

4.            The Board has approved the grant of all options to Consultant as of September 1, 2011.

5.           §  5 is amended by adding thereto the following clarifying language:

(a)           in § 5.4.3 - In the event that the Consultant is terminated or resigns, with or without cause, all options granted by the Company shall become immediately vested in the Consultant in accordance with the provisions of this Agreement.

  

  

  

 

(b)           in § 5.5 - Such fringe benefits shall include use of Company cell phone and computer, and reimbursement of expense reports for Company-related business expenses.

(c)           in § 5.6 - “Fees” are defined as the Monthly Consulting Fee and Director’s Fee, and do not include the Debt Settlement obligation defined in Section 5.3.  The Company shall not claim it does not have funds to pay a Fee if the combined total of all Company accounts and cash on hand exceeds the Fee owed. Company shall pay past due Fees as soon as funds are restored.

6.           Except as stated herein, all other terms of the Consulting Agreement shall remain as set forth in Exhibit “A” attached hereto.

COMPANY

_________________________________        9/29/2011

Thomas Klein, Chief Executive Officer

CONSULTANT

________________________________         9/29/2011

Robert P. Martinex10-14.htm

 

Exhibit 10.14

MEMBERSHIP INTEREST PURCHASE AGREEMENT 

 

This Membership Interest Purchase Agreement (the “Agreement”) is made as of March 7, 2011 (the “Effective Date”) by and among Golden Phoenix Minerals, Inc., a Nevada corporation (“Golden Phoenix”), Pinnacle Minerals Corporation, a Florida corporation (“Pinnacle”), Molyco, LLC, a Nevada limited liability company (the
“Company”), and Salwell International, LLC, a Nevada limited liability company (“Salwell”).

 

RECITALS

 

A.           Membership Interest.  Pinnacle is the owner of thirty-two and one-half percent (32.5%) of the Membership Interests (as defined in Section 1.1 below) in the Company, and Salwell is the only other member of the Company (the “Remaining Member”).  As used in this Agreement, Golden Phoenix, Pinnacle, the Remaining Member and the Company are sometimes referred to collectively as the
“Parties” or individually as a “Party.”

 

B.           Transfer of all Rights in the Company.  Golden Phoenix desires to purchase and acquire from Pinnacle and Pinnacle desires to sell, transfer, and convey to Golden Phoenix the Membership Interests pursuant to the terms and conditions set forth in this Agreement.

 

AGREEMENT

 

1.           Purchase and Sale of the Membership Interests.

 

1.1           Purchase and Sale.  On the Closing Date (as defined below) and subject to the terms and conditions of this Agreement, Golden Phoenix shall purchase and acquire from Pinnacle and Pinnacle shall sell, convey, and transfer to Golden Phoenix its Membership Interests in the Company, together with any and all other rights, title, and interest of Pinnacle in and to the assets used in the Company business (the
“Membership Interests”). Pinnacle agrees and acknowledges that the Membership Interests comprise all of its rights to distributions of profits and assets, net income, and net loss of the Company, and any and all of its rights to vote or participate in management, and to obtain information concerning the business and affairs of the Company.

 

1.2           Purchase Price.  In consideration for Pinnacle’s sale, conveyance, and transfer of the Membership Interests to Golden Phoenix, Golden Phoenix shall pay to Pinnacle, the aggregate purchase price of (i) Seven Hundred Fifty Thousand Dollars ($750,000), and (ii) other good and valuable consideration, the receipt and sufficiency of which is hereby confirmed and acknowledged by Pinnacle (the
“Purchase Price”).

 

1.3             Closing.  The Closing of the purchase of the Membership Interests will take place on the date that the closing deliverables set forth in Section 1.5 below have been delivered and the closing conditions set forth in Section 1.6 below have been satisfied or duly waived (the “Closing”).  In no event shall the Closing be later than March 21, 2011 (the
“Outside Closing Date”).  Notwithstanding the foregoing, in consideration for a non-refundable deposit of Fifty Thousand Dollars ($50,000), the Outside Closing Date may be extended until March 31, 2011, such amount to be applied to the Purchase Price as set forth below (the “Extension Payment”).

 

  

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1.4           Payment of the Purchase Price. The Purchase Price shall be paid to Pinnacle as follows:  (i) a non-refundable deposit of Seventy-Five Thousand Dollars ($75,000) (“Deposit”) shall be paid on, or no later than two (2) business days after, the Effective Date via wire transfer of same day available funds; (ii) an initial payment of One Hundred Seventy-five Thousand
Dollars ($175,000) (subject to a corresponding reduction in the event the Extension Payment is made) shall be paid on, or no later than two (2) business days after, the Closing via wire transfer of same day available funds (the “Initial Payment”); and (iii) upon Closing, issuance of a promissory note in the principal amount of Five Hundred Thousand Dollars ($500,000), with payments to be made in twelve (12) equal monthly installments on the first of each month commencing on May 1, 2011 and ending with a final payment on April 1, 2012, in substantially the form attached hereto as Exhibit A and incorporated herein by reference (the “Note”).  The Parties
acknowledge and agree that payments under the Note may be suspended for such period or periods as Golden Phoenix, or its affiliates, agents, successors or assigns, experience any manner of work stoppage with respect to the Ore (as such term is defined in that certain LLC Operating Agreement of the Company between the Members thereof, dated October 21, 2009, as amended (the “Operating Agreement”)), such period(s) not to exceed ninety (90) days, in the aggregate, during the terms of the Note (“Allowed Delay”).  Notwithstanding the foregoing, monthly payments under the Note will resume upon the sooner of: (i) the first of the month following the termination of any such event causing an Allowed Delay; or (ii) the first of the
month following the expiration of the maximum period of an Allowed Delay, regardless of the status of any such work stoppage, with the maturity date of the Note to be extended for such corresponding period of time.  Golden Phoenix shall promptly (and in no event later than five (5) business days) provide Pinnacle with copies of all documents, reports, receipts, written correspondence or such other evidence of a work stoppage as may be reasonably produced, in the event that any manner of work stoppage or such other similar event giving rise to an Allowed Delay occurs.  The Parties further acknowledge and agree that payment of the Purchase Price, including payments under the Note, shall be made irrespective of the results of any recovery or sale of the Ore.

 

1.5           Closing Deliverables.  On or prior to the Closing, Pinnacle shall have delivered to Golden Phoenix: (i) an executed copy of this Agreement; and (ii) any and all such instruments, documents or agreements as may be necessary or convenient to effect the transfer of the Membership Interest.  On or prior to the Closing, Golden Phoenix shall have delivered to Pinnacle: (i) an executed copy of this Agreement; (ii) the Initial Payment; and
(iii) an executed copy of the Note.

 

1.6           Closing Conditions.  On or prior to the Closing, the following conditions shall have been satisfied by each Party or duly waived: (i) the representations and warranties of each of Pinnacle and Golden Phoenix shall be true and correct as of the Effective Date and as of Closing; and (ii) any and all corporate approvals of Pinnacle and Golden Phoenix as may be necessary shall have been obtained.

 

2.           Transfer of Membership Interest.

 

  

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2.1           Taxable Profit and Loss Allocation.   Pinnacle acknowledges and agrees that it shall be allocated the distributive shares of the taxable income, gain, loss, deductions and credits of the Company, if any, with respect to the Membership Interests for the period prior to the Effective Date.  Golden Phoenix acknowledges and agrees that the distributive shares of the taxable income, gain, loss, deductions and credits of the Company with respect to the Membership Interests for the period after the Effective Date shall be
allocated to it and the Remaining Member on a pro-rata basis according to their respective pro-rata membership interests.

 

 

 

2.2           Transfer Pursuant to LLC Operating Agreement.   The Company, Pinnacle, and the Remaining Member of the Company agree and acknowledge that the transfers executed by the execution of this Agreement satisfy the requirements of the Company’s Operating Agreement for such transfers, including, but not limited to, any such waiver of preemptive rights as may be required by Section 9, any consent as may be required by Section 10.

3.           Mutual Release and Satisfaction of the Prior Notes.  In consideration for the undertakings described in this Agreement, and upon Pinnacle’s receipt of the Purchase Price as provided for herein, Pinnacle, the Company and the Remaining Member, and their respective family members, partners, associates, successors, affiliates, co-venturers, heirs, executors, administrators, officers, directors, shareholders and assigns, mutually fully,
finally, unconditionally and forever release and discharge each other from any and all claims, demands, losses, damages, causes of action, debts, liabilities, obligations, liens, costs, expenses, attorneys’ fees, indemnities, duties, of any nature, arising from, or relating to, the Prior Notes.

 

4.           Representations, Warranties, Acknowledgments and Covenants of Pinnacle to Golden Phoenix.  As a material inducement to Golden Phoenix to enter into this Agreement and consummate the transactions contemplated hereby, Pinnacle hereby represents, warrants, acknowledges and covenants to Golden Phoenix and the Remaining Member as follows:

 

4.1           Knowledge and Advice.  Pinnacle understands the economic implications of the transactions contemplated by this Agreement and have had full opportunity to seek advice of counsel and any other appropriate advice with respect to such transactions. 

 

4.2           Ownership of Membership Interest.  Pinnacle is the sole and absolute owner of the Membership Interests and holds, and is hereby transferring, good and full title to the Membership Interests, free and clear of any and all liens and encumbrances and Pinnacle will have no right, title or interest in the Membership Interests or the assets of the Company except pursuant to the Notes.  Pinnacle has not made any assignment, transfer, conveyance or other disposition to any
third party as to all or any portion of the Membership Interests, either voluntarily or involuntarily.

 

4.3           Good Standing.  Pinnacle represents and warrants that as of the Effective Date, both it and the Company are in good standing under the laws of the jurisdiction of its respective incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.

 

  

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4.4           Authority; Execution.  Pinnacle represents and warrants that it has all necessary power and authority to enter into this Agreement and has taken all action necessary to consummate the transactions contemplated hereby and to perform its obligations hereunder.  This Agreement constitutes the valid and legally binding obligation of Pinnacle,
enforceable in accordance with its terms, subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies.

 

4.5           No Conflict. Pinnacle will not breach any other agreement or arrangement by entering into or performing this Agreement.

4.6           Litigation.  There is no Action (as such term is defined below), which (i) adversely affects or challenges the validity or enforceability of this Agreement, the Membership Interests or the assets of the Company, or (ii) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a material adverse effect to Golden Phoenix, the Membership Interests, the Company or any assets of the Company.  Neither Pinnacle, nor any of
its subsidiaries, is or has been the subject of any Action, which has or could have a material adverse effect on Golden Phoenix, the Membership Interests, the Company or any assets of the Company.  For purposes of this Agreement, “Action” shall mean any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation, whether pending, threatened or resolved, in writing, against or affecting the Company or any of its properties or assets, before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign).

4.7           Indemnification for Clawbacks.  In the event of any Action, including an Action against or affecting any officer or director of Pinnacle, which directly or indirectly results in a clawback of any portion of the Membership Interests or any assets or properties of the Company, Pinnacle will indemnify Golden Phoenix to the full extent of the loss resulting from such clawback.

5.           Representations and Warranties of Golden Phoenix to Pinnacle.  As a material inducement to Pinnacle to enter into this Agreement and consummate the transactions contemplated hereby Golden Phoenix hereby represents, warrants, acknowledges, and covenants to Pinnacle as follows:

 

5.1           Knowledge and Advice.  Golden Phoenix understands the economic implications of the transactions contemplated by this Agreement and has had full opportunity to seek advice of counsel and any other appropriate advice with respect to such transactions.

 

5.2           Good Standing.  Golden Phoenix represents and warrants that as of the Effective Date, it is in good standing under the laws of the jurisdiction of its incorporation, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.

 

5.3           Authority; Execution. All action on the part of Golden Phoenix  necessary for the authorization, execution, delivery and performance of all of its obligations under this Agreement has been taken and this Agreement constitutes the valid and legally binding obligation of Golden Phoenix enforceable in accordance with its terms subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies.

 

  

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5.4           No Conflict.  Golden Phoenix will not breach any other agreement or arrangement by entering into or performing this Agreement.

6.           Consent and Waiver of the Company, Remaining Member and Pinnacle to Transfer.  The Company, the Remaining Member and Pinnacle hereby each provide their consent to the transfer of the Membership Interests as contemplated herein and further waive any such rights of first refusal or preemptive rights as may be applicable.

7.           Indemnification.  Pinnacle and Golden Phoenix each agree to indemnify, defend and hold the other and its directors, officers, shareholders, partners, employees, subsidiaries, affiliates and agents (each an “Indemnified Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation (collectively, “Losses”) that any such Indemnified Party may suffer or incur as a result of or relating to any misrepresentation, breach or inaccuracy of any representation, warranty, covenant or agreement made by such Party in this Agreement.

8.          Miscellaneous. 

 

8.1           Entire Agreement; Successors and Assigns.  This Agreement constitutes the entire contract between the Parties relative to the purchase of the Membership Interests.  Any previous agreement between the Parties with regard to the subject matter is superseded by this Agreement.  Subject to the exceptions specifically set forth in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators,
heirs, successors and assigns of the Parties.

 

8.2           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada excluding those laws that direct the application of the laws of another jurisdiction.

 

8.3           Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

8.4           Headings.  The headings of the sections of this Agreement are for convenience and shall not by themselves determine the interpretation of this Agreement.

 

8.5           Notices.  Any notice required or permitted hereunder shall be given in writing and shall be conclusively deemed effectively given upon: (i) personal delivery or (ii) five (5) days after deposit in the United States mail for domestic delivery, by registered or certified mail, postage prepaid, addressed as set forth on the signature page to this Agreement, by registered or certified mail, postage prepaid, addressed as set forth herein or at such other address as a Party may designate by ten (10)
days’ advance written notice to the other Parties hereto.

 

  

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8.6           Attorneys Fees.  Should a Party institute any action or proceeding to enforce this Agreement, the prevailing Party shall be entitled to receive from the other Party all reasonable out-of-pocket costs and expenses, including, without limitation, attorneys’ fees.

 

8.7           Survival of Warranties, Representation, and Acknowledgments.  The warranties, representations, acknowledgments of the Parties contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement; provided, however, that such representations, warranties, and acknowledgments need only be accurate as of the date of such execution and delivery.

 

8.8           Waiver.  Any of the terms or conditions of this Agreement may be waived at any time by the Party entitled to the benefit thereof, but no such waiver shall affect or impair the right of the waiving Party to require observance, performance or satisfaction either of that term or condition as it applies on a subsequent occasion or of any other term or condition.

 

8.9           Representation by Counsel.  Each Party acknowledges that it has been represented by independent legal counsel of its own choice throughout all of the negotiations preceding execution of this Agreement.

 

8.10           Binding Arbitration. Any dispute between the Parties shall be submitted to, and conclusively determined by, binding arbitration under the commercial rules of the American Arbitration Association.  The provisions of this Section shall not preclude any Party from seeking injunctive or other provisional or equitable relief in order to preserve the status quo of the Parties pending resolution of the dispute, and the filing of an action seeking injunctive or other provisional relief shall not be construed as a waiver of that
Party’s arbitration rights.  In the case of any dispute between the Parties to this Agreement, a Party shall have the right to initiate the binding arbitration process provided for in this Section by serving upon the other Party or parties a demand for arbitration.  Notwithstanding any other provision of law, in order to be enforceable a demand for arbitration must be served within sixty (60) days of the date on which a Party discovers, or reasonably should have discovered, facts  giving rise to a dispute as defined above. Within thirty (30) days of service of a demand for arbitration by a Party to this Agreement, the Parties shall endeavor in good faith to select a single arbitrator.  Any arbitration hearing shall be conducted in Washoe County, Nevada.

 

8.11           Severability.  In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any Party.

8.12           Facsimile Signature.  Any Party may effect the execution and delivery of this Agreement by signing the same and sending a signed copy thereof via facsimile, e-mail, or other form of instantaneous electronic transmission, which shall be valid as an original signature.

 

  

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The Parties hereto have executed this Membership Interest Purchase Agreement as of the day and year first above written.

 

	  	
PINNACLE MINERALS CORPORATION

	  	  
	  	  
	  	
By:

	  	
Name:

	  	
Its:

	  	
Address for Notice:

	  	  
	  	  
	  	  
	  	
GOLDEN PHOENIX MINERALS, INC.

	  	  
	  	  
	  	
By:

	  	
Name:

	  	
Its:

	  	
Address for Notice:

	  	  
	  	  
	  	
MOLYCO, LLC

	  	  
	  	  
	  	
By:

	  	
Name:

	  	
Its:

	  	
Address for Notice:

	  	  
	  	  
	  	
SALWELL INTERNATIONAL, LLC

	  	  
	  	  
	  	
By:

	  	
Name:

	  	
Its:

	  	
Address for Notice:

	  	  

  

7

  

Exhibit A

 

Note

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