Preview | Settlement Agreement |

SETTLEMENT AGREEMENT

THIS SETTLEMENT AGREEMENT (the Settlement Agreement) is made as of March ____, 2005, by and between GoldSpring, Inc., a Florida corporation, with its principal executive offices at 8585 East Hartford Drive, Suite 400, Scottsdale, AZ 85255 (GoldSpring), and certain investors of GoldSpring as set forth on the signature page hereto (collectively, Winfield). (GoldSpring and Winfield may hereinafter be referred to singularly as a party, and collectively as the parties.)

PREAMBLES:

WHEREAS, as of March 22, 2004, Winfield, in addition to certain other investors of GoldSpring (collectively, the GoldSpring Investors), purchased an aggregate of approximately 21.8 million shares of common stock of GoldSpring (the Original Shares), and warrants to purchase approximately 21.8 million additional shares of common stock of GoldSpring (collectively, the Original Warrants), pursuant to a Subscription Agreement between GoldSpring and the GoldSpring Investors, and related documents, entered into as of such date (collectively, the Original Transaction Documents); and

WHEREAS, GoldSpring defaulted on certain of its obligations under the Original Transaction Documents, and, as a result of such default, entered into an additional Subscription Agreement with the GoldSpring Investors (the Additional Subscription Agreement), and related documents, as of November 30, 2004 (collectively, the Additional Transaction Documents), pursuant to which the Original Shares and Original Warrants were exchanged for 8% convertible promissory notes of GoldSpring (the Convertible Notes) in the aggregate principal amount of approximately $11.1 million (the Principal), and warrants to purchase approximately 27.8 million shares of common stock of GoldSpring, as further set forth in the Additional Transaction Documents; and

WHEREAS, as of December 20, 2004, Winfield delivered a Notice of Conversion to GoldSpring (the Notice of Conversion), electing to convert its portion of the Principal, and accrued and unpaid interest thereon, into shares of common stock of GoldSpring (the Winfield Conversion Shares), pursuant to the terms of the Additional Transaction Documents; and

WHEREAS, GoldSpring failed to timely deliver the Winfield Conversion Shares to Winfield, and, as a result of such failure, as of March 7, 2005, Winfield elected to exercise its right to receive the mandatory redemption payment pursuant to Section 7.2 of the Additional Subscription Agreement (the Mandatory Redemption Payment); and

WHEREAS, GoldSpring is currently unable to pay the Mandatory Redemption Payment to Winfield, which, as of March 23, 2005, was an aggregate of $6,885,184; and

WHEREAS, the parties are desirous of settling the claims Winfield has against GoldSpring for the Mandatory Redemption Payment (the Winfield Claim) (assuming full and complete performance by GoldSpring of its obligations hereunder and under the New Transaction Documents) without resorting to litigation.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. Default. GoldSpring hereby acknowledges that it is in default of the Convertible Notes, for, among other things, the failure to timely deliver the Winfield Conversion Shares to Winfield, upon receipt of the Notice of Conversion. In addition, GoldSpring hereby acknowledges that it currently owes but is unable to pay to Winfield the Mandatory Redemption Payment. GoldSpring further acknowledges and agrees that it has no offset, defense or counterclaim of any kind, nature or description with respect to any of its defaults and the unpaid monies due to Winfield, as set forth herein.

2. Settlement. In settlement of the Winfield Claim, GoldSpring and Winfield hereby agree as follows:

(a) Issuance of Debenture. As of even date herewith (the Closing Date), GoldSpring will issue to Winfield, one or more of the 12% Secured Convertible Debentures of GoldSpring, in the aggregate principal amount of $6,855,184, in substantially the form attached hereto as Exhibit A (collectively the Debenture). The Debenture shall provide for, among other things:

(i) An interest rate of 12% per annum (the Interest), such Interest to be payable on a monthly basis, on the first day of each month, commencing April 1, 2005;

(ii) A conversion price (the Conversion Price) equal to the lesser of: (A) 85% of the average of the five (5) lowest closing bid prices of the common stock of GoldSpring for the twenty (20) trading days immediately preceding the date GoldSpring was required to pay the Mandatory Redemption Payment to Winfield, and (B) 85% of the average of the five (5) lowest closing bid prices of the common stock of GoldSpring for the twenty (20) trading days immediately preceding the date of conversion by Winfield; provided, however, that, until the effective date of a registration statement (the Registration Statement) GoldSpring is required to file, to register, among other things, the shares of common stock of GoldSpring underlying the Debenture (together with any other shares issuable pursuant to the Debenture, the Debenture Shares), in addition to the Conversion Shares (as defined in Section 2(b) hereof) (collectively, the GoldSpring Shares), the conversion price shall be 50% of the average of the five (5) lowest closing bid prices of the common stock of GoldSpring for the twenty (20) trading days immediately preceding the date of conversion by Winfield. In no event shall the conversion price of the Debenture be greater than the lesser of: (A) $0.1131, and (B) the conversion price of the Convertible Notes (as adjusted from time to time);

(iii) Mandatory registration rights with respect to the GoldSpring Shares;

(iv) Normal and customary anti-dilution provisions;

(v) Negative covenants precluding actions outside of GoldSprings ordinary course of business without the prior written consent of Winfield; and

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