OPTION AGREEMENT
BETWEEN
XX XXXXX TRUST, A NEVADA TRUST
AND
GOLDEN PHOENIX MINERALS, INC.,
A MINNESOTA CORPORATION
TABLE OF CONTENTS
Page
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RECITALS...................................................................... 1
SECTION ONE - Option to Purchase Stock................................. 2
1.1 - Grant of Option.......................................... 2
1.2 - Option Payment........................................... 2
1.3 - Purchase Price........................................... 2
1.4 - Exercise of Option....................................... 2
SECTION TWO - Agreements Affecting Real Property....................... 3
2.1 - Existing Agreements...................................... 3
2.2 - Lease Revenues........................................... 4
2.3 - New Agreements........................................... 4
SECTION THREE - Warranties and Representations........................... 5
3.1 - Warranties and Representations as to Real Property....... 5
3.2 - Warranties and Representations as to Personal Property... 7
3.3 - No Warranties or Representations as to Value............. 9
3.4 - Environmental Liabilities................................10
3.5 - Liability and Insurance..................................11
SECTION FOUR - Miscellaneous Provisions.................................11
4.1 - Binding Effect...........................................11
4.2 - Applicable Law...........................................12
4.3 - Entire Agreement.........................................12
4.4 - Void or Invalid Provisions...............................12
4.5 - Time of the Essence......................................12
4.6 - No Partnership...........................................12
4.7 - Resolutions and Further Assurances.......................12
EXHIBITS
A - Description of Real Property
B - Description of Personal Property
C - Hycroft Lease
X - Xxxxxxx Mine Agreement
E - Wonder Mine Agreement
OPTION AGREEMENT
THIS OPTION AGREEMENT is made this ____ day of September, 1997 by and
between the XX XXXXX TRUST, a Nevada trust ("Xxxxx"); and GOLDEN PHOENIX
MINERALS, INC., a Minnesota corporation ("Golden Phoenix").
RECITALS
X. Xxxxx owns and possesses one hundred percent (100%) of the issued
shares of stock in X. X. Xxxxx, Inc., a Nevada corporation and Xxxx Xxxx Mine,
Inc., a Nevada corporation (referred to as the "Stock"). Xxxxx and its
subsidiary corporations are private companies, and none are listed or traded.
B. F. W. Xxxxx, Inc. and Xxxx Xxxx Mine, Inc. together own various
patented and unpatented mining claims situated in Nevada and Colorado and oil
and gas interests in California (the "Real Property"). The Real Property is more
particularly described on Exhibit A attached hereto.
C. F. W. Xxxxx, Inc. and Xxxx Xxxx Mine, Inc. also own various items of
mining equipment and structures situated on the Real Property, including ball
and xxx xxxxx, motors, crushers, dust collectors, tanks, drills, trailers,
trucks, and buildings (referred to collectively as the "Personal Property"). The
Personal Property will be inventoried by Golden Phoenix pursuant to Section 3.2
below, and the list prepared by Golden Phoenix (subject to Xxxxx' review and
approval) will become Exhibit B to this Agreement.
X. Xxxxxx Phoenix wishes to acquire the Stock (and thereby ownership of
the Real Property and Personal Property). Xxxxx is willing to xxxxx Xxxxxx
Phoenix an exclusive and irrevocable option to purchase the Stock on the terms
and conditions set forth below.
THEREFORE, the parties have agreed as follows:
SECTION ONE
Option to Purchase Stock
1.1 Grant of Option. Xxxxx grants to Golden Phoenix the exclusive and
irrevocable right and option to purchase the Stock (the "Option"). The Option
shall commence upon execution of this Agreement by both parties, and the Option
shall terminate at 11:59 p.m. PST on December 31, 1997.
1.2 Option Payment. Golden Phoenix shall pay Xxxxx the sum of TWO
HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) in cash upon execution of this
Agreement.
1.3 Purchase Price. The purchase price for the Stock shall be TWENTY
MILLION DOLLARS ($20,000,000.00). The option payment described in Section 1.2
above shall not be applied to the purchase price.
1.4 Exercise of Option. At any time during the term of this Agreement,
Golden Phoenix may give written notice to Xxxxx of its intent to exercise the
Option and purchase the Stock. Following delivery of the notice to Xxxxx, the
parties shall open an escrow with Xxxxxxx X. Xxxxxx, Esq. of Reno, Nevada or
another mutually-agreeable party. The escrow shall close (the "Closing") within
thirty (30) days following delivery of the notice to Xxxxx. Upon Closing, Golden
Phoenix shall deliver a cashier's check drawn on a mutually-acceptable bank in
Nevada in the amount of TWENTY MILLION DOLLARS ($20,000,000.00) to Xxxxx. Xxxxx
shall deliver to Golden Phoenix all share certificates of X. X. Xxxxx, Inc. and
Xxxx Xxxx Mine, Inc., together with all corporate books and records of the two
subsidiary corporations. Xxxxx shall also deliver to Golden Phoenix such bills
of sale and deeds as may be necessary to effect a complete transfer of the Real
Property and Personal Property to Golden Phoenix. All taxes with respect to the
Real Property and Personal Property shall be pro rated between the parties as of
the date of closing.
SECTION TWO
Agreements Affecting Real Property
2.1 Existing Agreements. There exist the following agreements affecting
portions of the Real Property:
a. A "Mining Lease" dated January 1, 1983 between Xxxxx X.
Xxxxx as Lessor and the
Standard Slag Company as Lessee, which has been assigned to Hycroft
Xxxxx Mine, Inc., a Nevada corporation (the "Hycroft Lease"). A copy of
the Hycroft Lease is attached hereto as Exhibit C.
b. An "Exploration Permit with Option to Purchase" dated May
1, 1996 between X. X. Xxxxx, Inc. as Optionor and Nighthawk North
Explorations Inc. as Optionee, which has been assigned to United
Tex-Sol (U.S.) Inc. (the "Xxxxxxx Mine Agreement"). A copy of the
Xxxxxxx Mine Agreement is attached hereto as Exhibit D.
c. An "Exploration Permit with Option to Purchase" dated July
1, 1996 between X. X. Xxxxx, Inc. as Optionor and 1160232 Ontario
Limited and Xxxx Xxxxxxx as Optionee, which has been assigned to
Arizuma Silver, Inc. (the "Wonder Mine Agreement"). A copy of the
Wonder Mine Agreement is attached hereto as Exhibit E.
The foregoing agreements shall be referred to collectively as the
"Leases".
2.2 Lease Revenues. All cash and other consideration derived from the
Leases during the term of this Agreement, except property purchase payments,
shall become the property of Xxxxx and will not be included in the Personal
Property transferred to Golden Phoenix upon Closing. In addition, all office
equipment and supplies at 000 Xxxxxxxxxx Xxxxx, Xxxx, Xxxxxx shall likewise
remain with Xxxxx.
A block of 500,000 shares of United Tex-Sol Mines, Inc. is being held
by the Montreal Trust Company of Canada in escrow for benefit of X. X. Xxxxx,
Inc. This stock, if and when released from escrow, will be the property of Xxxxx
and will not pass to Golden Phoenix.
2.3 New Agreements. Xxxxx, acting through its subsidiary corporations,
X. X. Xxxxx, Inc. and Xxxx Xxxx Mines, Inc., shall have the right to negotiate
and enter into additional agreements ("New Agreements") affecting the Real
Property and Personal Property during the term of this Agreement, provided that
the following conditions are satisfied:
x. Xxxxx shall submit any New Agreements to Golden Phoenix for
review and approval prior to execution of the New Agreements.
b. Any cash or other revenues derived from the new agreement(s)
shall remain in the subsidiary corporations and shall be transferred to Golden
Phoenix upon closing.
SECTION THREE
Warranties and Representations
3.1 Warranties and Representations as to Real Property. In conveying
the Stock to Golden Phoenix, Xxxxx makes the following limited warranties and
representations with respect to the Real Property:
x. Xxxxx owns 100% of the legal and equitable interests in the
Stock and possesses the Stock; Xxxxx has the right to convey the Stock to Golden
Phoenix pursuant to this Agreement; and Xxxxx has not granted any first rights
of refusal or other limitations with respect to the Stock.
b. At the time of closing, the Real Property shall be free of all
leases, liens, and encumbrances other than the Leases described in Section 2.1
above and any New Agreements created in accordance with Section 2.3 above.
c. The Real Property is subject to the following legal actions:
(1) An action for partition affecting certain properties in
Eureka County, Nevada (X. X. Xxxxx, Inc. x. Xxxxxxxxx, et al., Case No. 3313,
affecting the Blue Bird, Clipper, Golden Rule, Dug Out, Dump, Trail, Xxxx and
Piantoni, Killington, and Water Jacket patented lode claims). Golden Phoenix
will pay the costs of concluding this litigation and the purchase price of the
property.
(2) An action for partition affecting certain properties in
White Pine County, Nevada (X. X. Xxxxx x. Xxxxxxxxx et al., Case No. CV-1440692,
affecting the Xxxxxx, Roanoke, and Wipperwill patented lode claims). Golden
Phoenix will pay the costs of concluding this litigation and the purchase price
of the property.
(3) An action to quiet title affecting certain properties in
the Wonder Mining District, Xxxxxxxxx County, Nevada [action to be commenced in
September 1997]. Xxxxx will pay all costs of this litigation.
Other than the foregoing actions, Xxxxx is not aware of any claims,
demands, legal actions, or liabilities affecting the Real Property.
x. Xxxxx has advised Golden Phoenix that certain properties have
poor or non-existent title, such as the Empire Mine (MS 49) at Xxxxxxxx.
Some of the mining properties at Hamilton, Nevada do not have oil
rights, which were reserved by a previous owner.
e. To the best of Xxxxx' knowledge, information, and belief, Xxxxx
is not aware of any environmental violations, claims, or liabilities affecting
the Real Property, and Xxxxx has not received notice of any environmental
violations or problems from any local, state, or federal agency, except for the
following:
(1) X. X. Xxxxx, Inc. may be obligated to reclaim
approximately one-third of a mile of road in the Xxxxx Mining District, Lander
County, Nevada.
(2) X. X. Xxxxx, Inc. may be obligated to reclaim drill sites
in the Contact Mining District, Elko County, Nevada.
(3) X. X. Xxxxx, Inc. may be obligated to perform certain
reclama- tion activities in the Xxxxxxx Mine area in Lander County, Nevada,
should the current Optionee fail to perform such work.
Should the Bureau of Land Management require that these reclamation
activities be completed, Golden Phoenix shall assume responsibility for the
reclamation work.
f. Other than the foregoing representations and warranties, Xxxxx
will convey the Stock (and Real Property) to Golden Phoenix in an "as is and
where is" condition with no warranty of ownership or possession. During the
Option, Golden Phoenix shall have the right and obligation to conduct such
examinations of title as it
deems appropriate, at its sole cost, in order to verify Xxxxx' ownership and
possession. In addition, Xxxxx shall allow Golden Phoenix to have full access to
all books and records of the subsidiary corporations during its due diligence
examination. If Golden Phoenix discovers any defect in title, Golden Phoenix
shall have the choice of (1) accepting such defects or (2) terminating this
Agreement without further obligation to Xxxxx. Under no circumstance will the
purchase price be reduced or pro rated to account for any defects in title.
3.2 Warranties and Representations as to Personal Property. During the
term of this Option, Golden Phoenix shall conduct an inventory of all Personal
Property situated on the Real Property. The list of equipment and structures
compiled by Golden Phoenix shall be attached to this Agreement as Exhibit X.
Xxxxx shall have the right to review and approve the list of Personal Property.
With respect to the Personal Property listed on Exhibit B, Xxxxx makes only the
following representations and warranties:
a. To the best of Xxxxx' knowledge, information, and belief, Xxxxx
owns and possesses the Personal Property free of any liens, encumbrances, or
outstanding claims; Xxxxx has the right to convey the Personal Property to
Golden Phoenix pursuant to this Agreement; and Xxxxx has not granted any first
rights of refusal or other limitations with respect to the Personal Property.
x. Xxxxx is not aware of any claim, demand, liability, or
litigation affecting the Personal Property.
x. Xxxxx will execute a Xxxx of Sale or other documents necessary
to convey the Personal Property to the subsidiary companies or to Golden
Phoenix.
d. Except for the warranties set forth above, Xxxxx xxxxx and
conveys the Personal Property to Golden Phoenix in an "as is and where is"
condition. During the term of the Option, Golden Phoenix will undertake such
examination of title to the Personal Property as it deems appropriate. Xxxxx
will not be responsible for theft or damage to the Personal Property during the
Option period. Xxxxx will make available to Golden Phoenix
all titles, bills of sale, or agreements relating to the Personal Property.
e. Other than the foregoing representations and warranties, Xxxxx
will convey the Personal Property to Golden Phoenix in an "as is and where is"
condition with no warranty of ownership or possession. During the Option, Golden
Phoenix shall have the right and obligation to conduct such examinations of
title as it deems appropriate, at its sole cost, in order to verify Xxxxx'
ownership and possession. If Golden Phoenix discovers any defect in title,
Golden Phoenix shall have the choice of (1) accepting such defects or (2)
terminating this Agreement without further obligation to Xxxxx. Under no
circumstance will the purchase price be reduced or pro rated to account for any
defects in title to the Personal Property.
3.3 No Warranties or Representations as to Value. From time to time,
Xxxxx and other parties have prepared estimates of cash flow and mineral value
with respect to portions of the Real Property and Personal Property. This
information shall be made available to Golden Phoenix during the Option period,
and all files, maps, and other information pertaining to the Real Property and
Personal Property shall be delivered to Golden Phoenix upon closing.
WITH RESPECT TO SUCH INFORMATION AND DATA, GOLDEN PHOENIX ACKNOWLEDGES
AND AGREES, AS A CONDITION OF THIS AGREEMENT, THAT:
X. XXXXX MAKES NO WARRANTY OR REPRESENTATION WHATSOEVER AS TO THE
COMPLETENESS OR ACCURACY OF THE INFORMATION AND DATA PERTAINING TO THE REAL
PROPERTY AND PERSONAL PROPERTY.
B. GOLDEN PHOENIX AND ANY THIRD PARTIES SHALL MAKE THEIR OWN
INDEPENDENT ASSESSMENT AND EVALUATION REGARDING
ASSAYS, ORE VALUES, ECONOMIC PROJECTIONS REGARDING THE REAL PROPERTY AND
PERSONAL PROPERTY.
X. XXXXXX PHOENIX AND ANY THIRD PARTIES SHALL NOT RELY UPON INFORMATION
SUPPLIED BY XXXXX OR AVAILABLE IN THE XXXXX FILES.
D. ANY INFORMATION FURNISHED BY GOLDEN PHOENIX TO THIRD PARTIES,
INCLUDING PROSPECTIVE INVESTORS AND STOCK EXCHANGES, SHALL INCLUDE THE FOLLOWING
EXPRESS LIMITATION WITH REGARD TO XXXXX, WHICH SHALL BE IN THE FORM OF A SHEET
ATTACHED TO EACH DOCUMENT, MAP, ASSAY REPORT, AND OTHER INFORMATION:
CAUTION: THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE ANY
REPRESENTATION OF ECONOMIC VALUE OR DEVELOPMENT POTENTIAL BY X. X.
XXXXX, INC., XXXX XXXX MINES, INC., XXXXX X. XXXXX, XXXXXX XXXXX, OR
THE XX XXXXX TRUST.
X. XXXXXX PHOENIX WILL DEFEND, INDEMNIFY, AND HOLD XXXXX HARMLESS FROM
ANY CLAIMS, DEMAND, OR LIABILITIES ARISING FROM USE OF THE INFORMATION.
3.4 Environmental Liabilities. Golden Phoenix accepts the Stock and
Real Property with the knowledge and understanding that there may exist waste
dumps, mine tailings, and other conditions which may be categorized as
"hazardous waste" by local, state, or federal agencies. To the best of Xxxxx'
knowledge, information, and belief, Xxxxx is not presently aware of any
environmental violation, claim, or liability affecting the Real Property.
However, Golden Phoenix acknowledges that there exists the possibility that such
environmental claims may be
asserted in the future. As an express condition of this Agreement, Golden
Phoenix, upon exercising the Option, shall accept responsibility for all such
environmental conditions, and further agrees to defend, indemnify, and hold
Xxxxx harmless from all claims, demands, or liabilities arising in connection
with environmental conditions on the Real Property. However, such liability and
indemnification on the part of Golden Phoenix shall be secondary to the
responsibilities and liabilities of any Lessees or Optionees under the Leases.
3.5 Liability and Insurance. During the option period, Golden Phoenix
shall indemnify and hold Xxxxx harmless from any claims, demand, liabilities or
liens arising out of Golden Phoenix's activities on the Property. To that end,
Golden Phoenix shall, no later than October 15, 1997, obtain and carry a policy
of public liability insurance in the amount of $1,000,000.00 or more for
personal injury and $100,000.00 for property damage, protecting Xxxxx against
any claims for injury to persons or damage to property resulting from Golden
Phoenix's operations. The insurance policy shall name Xxxxx as a co-insured, and
Golden Phoenix shall require of the insurance company that it deliver a copy of
the policy to Xxxxx.
SECTION FOUR
Miscellaneous Provisions
4.1 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective heirs, executors,
administrators, successors, and assigns.
4.2 Applicable Law. The terms and provisions of this Agreement shall be
interpreted in accordance with the laws of the State of Nevada.
4.3 Entire Agreement. This Agreement terminates and replaces all prior
agreements, either written, oral or implied, between the parties hereto, and
constitutes the entire agreement between the parties.
4.4 Void or Invalid Provisions. If any term, provision, covenant or
condition of this
Agreement, or any application thereof, should be held by a court of competent
jurisdiction to be invalid, void or unenforceable, all provisions, covenants and
conditions of this Agreement, and all applications thereof not held invalid,
void or unenforceable, shall continue in full force and effect and shall in no
way be affected, impaired, or invalidated thereby.
4.5 Time of the Essence. Time is of the essence of this Agreement and
each and every part thereof.
4.6 No Partnership. Nothing in this Agreement shall create a
partnership between Xxxxx and Golden Phoenix.
4.7 Resolutions and Further Assurances. The actions and conveyances of
Xxxxx, X. X. Xxxxx, Inc. and Xxxx Xxxx Mines, Inc. shall be duly approved by
resolutions of the Trustees or Boards of Directors, as applicable. Xxxxx and its
subsidiary companies will cooperate in executing any additional documents needed
to effect the terms of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Option Agreement the
day and year first above written.
XX XXXXX TRUST, a Nevada trust
By
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XXXXX X. XXXXX, Trustee
By
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XXXXXX X. XXXXX, Trustee
GOLDEN PHOENIX MINERALS, INC.
a Minnesota corporation
By
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XXXXXXX X. XXXXXXXXXXX,
President
STATE OF NEVADA )
) ss
COUNTY OF WASHOE )
On the _____ day of ___________, 1997, personally appeared before me, a
Notary Public within and for said county, personally appeared XXXXX X. XXXXX,
Trustee of the XX Xxxxx Trust, who acknowledged that he executed the foregoing
Option Agreement, and to me known or proved to be the person described in and
who executed the same.
------------------------------------
NOTARY PUBLIC
STATE OF NEVADA )
) ss
COUNTY OF WASHOE )
On the _____ day of ___________, 1997, personally appeared before me, a
Notary Public within and for said county, personally appeared XXXXXX X. XXXXX,
Trustee of the XX Xxxxx Trust, who acknowledged that he executed the foregoing
Option Agreement, and to me known or proved to be the person described in and
who executed the same.
------------------------------------
NOTARY PUBLIC
STATE OF NEVADA )
) ss
COUNTY OF WASHOE )
On the _____ day of ___________, 1997, personally appeared before me, a
Notary Public within and for said county, personally appeared XXXXXXX
XXXXXXXXXXX, President of GOLDEN PHOENIX MINERALS INC., who acknowledged that he
executed the foregoing Option Agreement, and to me known or proved to be the
person described in and who executed the same.
------------------------------------
NOTARY PUBLIC
