Exhibit 10.4
EL CAPITAN, LTD. - JMJ PARTNERS
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
This Amended and Restated Joint Venture Agreement is made and entered into
as of the 24th day of January, 1997 by and between EL CAPITAN, LTD., an Arizona
Corporation ("El Capitan"), a wholly owned subsidiary of Gold & Minerals
Company, Inc. ("G&MC") and JMJ Partners, an Arizona Limited Liability
Partnership ("JM").
RECITALS
A. El Capitan owns or has ownership rights in that certain mining
property known as the Capitan property consisting of four patented
mining claims on 80 acres of land in Lincoln County, New Mexico, as is
more particularly described on Exhibit "A" attached hereto and made a
part hereof, (the "Lincoln County properties") and certain permits,
agreements and equipment connected with the use and development of
such property.
B. JMJ desires to enter into this Joint Venture Agreement with El Capitan
in order to provide funds pursuant to the terms of this Agreement for
the further development, financing and operation of the Lincoln County
properties.
C. The parties memorialized their agreement concerning the use,
development, financing and operation of the Lincoln County properties
pursuant to the terms of a Joint Venture Agreement dated January 24,
1997 and wish to amend and restate their agreements pursuant to the
terms of this Agreement.
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NOW, THEREFORE, FOR AND in consideration of the mutual promises and
covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, El
Capitan, G&MC and JMJ agree as follows:
I. FORMATION OF THE JOINT VENTURE
El Capitan and JMJ hereby form a Joint Venture to be known as El Capitan,
Ltd.-JMJ Partners Joint Venture.
II. PURPOSE OF THE JOINT VENTURE
The purpose of the Joint Venture shall be to further develop and operate
certain processes and equipment on the Lincoln County properties in an attempt
to concentrate and extract gold, silver and platinum group metals from ore
deposits contained in and on the Lincoln County properties and to sell the same
to refiners, processors or other third parties.
III. CONTRIBUTIONS OF THE PARTIES
A. CONTRIBUTION OF EL CAPITAN
El Capitan shall contribute or allow the use of all permits,
agreements, equipment, processes and know-how as are particularly
described on Exhibit "B" attached hereto and made a part hereof.
Notwithstanding this contribution by El Capitan, all of the Exhibit
"B" assets shall remain titled in and the property of El Capitan and,
neither the Joint Venture nor JMJ shall have any ownership interest
therein except as is specifically provided pursuant to the terms of
this Agreement.
B. CONTRIBUTION OF JMJ
JMJ agrees that it shall loan to the Joint Venture the sum of
$107,000.00 in order to fund the initial capital and operating costs
required in order to further develop and place the Lincoln County
properties in production. In addition, JMJ will contribute its
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management expertise and personnel as IT DEEMS necessary in order to
manage all Joint Venture operations, with the advice and assistance of
El Capitan.
IV. USE, REPAYMENT AND COLLATERALIZATION OF JMJ LOAN
A. BUDGETS. Moneys loaned to the Joint Venture by JMJ shall be used
substantially in compliance with the budget and projection attached
hereto as Exhibit "C", subject to the rights of the managing Joint
Venture Partner, after consultation with El Capitan, to modify or
change the budget and operating projections.
B. REPAYMENT. All moneys loaned shall be repaid to JMJ out of future
revenues achieved by the Joint Venture, without the payment of
interest thereon, PURSUANT TO THE PROVISIONS OF ARTICLE VI BELOW and
El Capitan shall have no liability for repayment of any such loans and
no obligation or liability to contribute any moneys to the Joint
Venture.
C. COLLATERAL. El Capitan shall grant to JMJ a first priority UCC-1 lien
against all equipment owned by El Capitan and described in Exhibit "B"
which lien shall remain in place until such time as payments to JMJ
from the Joint Venture revenues have fully repaid the principal amount
of all loans made by JMJ.
D. GUARANTY OF REPAYMENT. G&MC hereby guarantees repayment of any
principal amounts loaned to the Joint Venture by JMJ.
V. ADDITIONAL CONSIDERATION PAYABLE TO JMJ
In addition to the percentage of net revenues to be distributed to JMJ
pursuant to the terms of this Agreement, El Capitan agrees that it shall cause
200,000 shares of stock of its parent corporation, G&MC (in the form of 40
certificates of 5,000 shares each), to be transferred and assigned to JMJ. JMJ
acknowledges that these shares will be TRANSFERRED TO IT OR ITS NOMINEES BY
existing shareholders and that the same may have no value and no market may
exist for such shares. Further, such shares are subject to dilution and have not
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been registered by El Capitan OR G&MC. JMJ acknowledges that these shares are
being obtained for investment purposes only and that JMJ has done all due
diligence that it deems appropriate and necessary and has HAD access to any and
all information concerning G&MC, and is a sophisticated investor capable of
writing off in total any of the investment it is making in the Joint Venture in
the event the G&MC stock is OR BECOMES valueless. The parties acknowledge that
they have been advised to obtain separate legal advice concerning Securities Law
issues ARISING FROM THE TERMS OF THIS AGREEMENT.
VI. DIVISION OF REVENUES
A. Initial Division. Until such time as JMJ has received payments
equaling $428,000.00, or until the tenth anniversary of this
Agreement, whichever occurs sooner, net revenues (as defined below)
shall be divided and paid as follows:
1. 25% to JMJ;
2. 18.75% to those individuals listed on Exhibit "D" attached hereto
and made a part hereof, to be paid pro rata to the Exhibit "D"
individuals and entities; and,
3. 56.25% to El Capitan.
4. At such time as the obligations as listed on Exhibit "D" have
been fully paid, the 18.75% otherwise payable to such parties
shall thereafter be payable to El Capitan.
B. SUBSEQUENT DIVISION. IN THE EVENT JMJ has received payment of
$428,000.00 PRIOR TO THE TENTH ANNIVERSARY OF THE DATE HEREOF, all net
revenues thereafter available to the Joint Venture shall be payable as
follows:
1. 3.6% to JMJ;
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2. 18.75% to the Exhibit "D" parties, unless they have already
received the full amount as set forth on Exhibit "D" IN WHICH
EVENT THIS 18.75% SHALL BE PAID TO EL CAPITAN; and,
3. The remainder to El Capitan.
4. At such time as the Exhibit "D" parties have been paid in full,
El Capitan shall be entitled to receive 96.4% of all revenues.
5. ALL REVENUES ACCRUING FROM THE LINCOLN COUNTY PROPERTIES ON AND
AFTER JANUARY 23, 2007 SHALL BE PAID TO EL CAPITAN.
C. NET REVENUES DEFINED. Net revenues shall be defined to be all moneys
received by the Joint Venture from the operation of the Lincoln County
properties, after payment of all direct costs of operations, after
setting aside a reserve equal to two months of direct operating costs
for the Lincoln County properties, and before any provision for
payment of taxes.
D. MONTHLY PAYMENT. Payments of net revenues as provided for in this
Article shall be paid no less often than 15 days following the end of
each calendar month.
VII. DESIGNATION OF MANAGING PARTNER
Until such time as JMJ has received $428,000 of net revenues from the
operations of the Joint Venture, JMJ shall be the Managing Joint Venture
Partner. Following receipt by JMJ of $428,000.00, El Capitan shall thereafter be
the Managing Joint Venture Partner.
VIII. AUTHORITY AND RESPONSIBILITIES OF MANAGING JOINT VENTURE PARTNER
The Managing Joint Venture Partner shall have the following authorities and
responsibilities:
A. After full consultation with the non-managing Joint Venture Partner,
to develop and adopt budgets, hire and dismiss personnel, manage all
day-to-day operations, expend such funds as the Managing Joint Venture
Partner deems prudent and appropriate in its business judgment, keep
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accurate accounting records, establish and maintain bank accounts,
enter into additional contracts, leases and other agreements for the
operation of the Lincoln County properties, employ C.P.A.'s,
accountants, attorneys and other professionals, maintain, repair and
replace all equipment, obtain and comply with all applicable permits,
and to pay all taxes, except any taxes based on income to be
distributed to those parties identified in Article VI.
B. The Managing Joint Venture Partner shall provide all parties to this
Agreement with reports no less often than monthly concerning operation
of the Lincoln County properties and the financial results therefrom
and shall account to all parties to this Agreement regarding all
revenues received and available for distribution. In addition, the
Managing Joint Venture Partner may take any and all other actions,
even if not listed in subsection a. above as are reasonable and
prudent to properly manage the business of the Joint Venture.
C. The Managing Joint Venture Partner shall receive no management fee for
its operation and management of this Joint Venture but shall be
entitled to reimbursement of all direct expenses and costs incurred in
fulfilling its manage- ment duties.
D. Without the consent of the other party hereto, the Managing Joint
Venture Partner may not borrow any moneys or incur obligations in
excess of $200,000.00 for any single budget item during any calendar
year, BUT SHALL HAVE THE AUTHORITY TO ENTER into any contracts, leases
or other agreements OF ANY DURATION.
E. The parties hereto acknowledge that so long as JMJ is the Managing
Joint Venture Partner, that it will delegate management of the
day-to-day operations of the Joint Venture business to Mr. Jim Dalos,
President of El Capitan or such other person as the parties mutually
agree on. For the first three (3) months following the execution of
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this Agreement, and for so long thereafter as is necessary until the
Joint Venture achieves a positive cash flow, the Joint Venture shall
pay to Mr. Dalos a salary of $1,250.00 per week. Thereafter, any
compensation to be paid to Mr. Dalos shall be the obligation of El
Capitan. In addition, El Capitan and G&MC hereby agree to make
available on a full or part-time basis to the Joint Venture B.J.
Bouldin and Kent Bouldin and all compensation paid to these
individuals shall be the obligation of the Joint Venture.
IX. TERM OF AGREEMENT
This Joint Venture Agreement shall have a term of ten (10) years at which
time it shall automatically terminate and all assets of the Joint Venture
(except any net revenues available for distribution) shall thereafter revert and
be the sole and separate property of el Capitan.
X. REPRESENTATIONS OF EL CAPITAN
El Capitan hereby represents and warrants to JMJ the following:
A. El Capitan has all permits and other legal authorizations necessary in
order to operate the Lincoln County properties in the manner
contemplated by the parties hereto and all such authorizations and
permits are valid. No violations, claims, or threats of revocations
exist concerning such authorizations and permits. All such permits are
attached hereto as Exhibit "E".
B. All assets listed on Exhibit "B", including the float cell unit owned
and operated by Magovitch, are in reasonable working order and are
capable of operating in a manner allowing the Joint Venture to conduct
its business operations.
C. The Lincoln County properties are subject to those agreements attached
hereto as Exhibit "F" and all Exhibit "F" agreements are currently in
full force and effect and no claims or liabilities exist which would
render such agreements to be void or voidable, or which would result
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in liability to the Joint Venture for actions or failures to act which
occurred prior to the execution of this Agreement.
D. El Capitan has good and valid title to or enforceable assignments or
rights to use all assets listed on Exhibit "B".
E. G&MC and El Capitan hereby represent that the values in the head ore
from the Lincoln County properties will, after concentration with
existing available equipment, result in a concentrate containing
sufficient values of precious metals to cause the concentrates to be
saleable to existing precious metals refineries.
F. JMJ hereby acknowledges that it has had full access to all information
the Lincoln County properties and all items referenced on the exhibits
attached hereto and has conducted all due diligence to its reasonable
satisfaction concerning the representations contained herein.
XI. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Arizona.
XII. ATTORNEY'S FEES
In the event of a dispute concerning the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees and costs.
XIII. ARBITRATION
In the event of any dispute arising under this Agreement, the parties agree
that such dispute, if it cannot be resolved BY MUTUAL AGREEMENT, shall be
subject to binding arbitration by the American Arbitration Association.
XIV. REPRESENTATION BY COUNSEL
Each party hereto acknowledges that it has retained legal counsel
concerning the negotiation and documentation of this Agreement or has had the
opportunity to obtain counsel. The parties further acknowledge that this
document was drafted by Hal W. Mack, P.C. and each party consents to that firm's
involvement and waives any conflicts of interest concerning that firm's
involvement. The parties further acknowledge that the firm of Hal W. Mack, P.C.
has advised them that any Securities Law issues regarding the terms and
provisions of this Agreement have not been reviewed or opined by Hal W. Mack,
P.C. and that the parties hereto will seek separate legal counsel concerning any
Securities Law issues.
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XV. RATIFICATION AND ASSUMPTION BY EL CAPITAN
THE PARTIES ACKNOWLEDGE THAT AT THE TIME OF THE ORIGINAL EXECUTION OF THIS
JOINT VENTURE AGREEMENT EL CAPITAN WAS IN THE PROCESS OF FORMATION UNDER THE
LAWS OF THE STATE OF NEW MEXICO AND THAT ITS FORMATION WAS INADVERTENTLY
NEGLECTED. SUBSEQUENTLY, ON JANUARY 14, 1998, EL CAPITAN WAS INCORPORATED UNDER
THE LAWS OF THE STATE OF ARIZONA AND ALL OF ITS ISSUED AND OUTSTANDING STOCK WAS
AND IS ISSUED BY G&MC, EL CAPITAN HEREBY ADOPTS, RATIFIES AND CONFIRMS: A) ALL
OF THE TERMS AND PROVISIONS OF THE ORIGINAL JOINT VENTURE AGREEMENT; B) ALL OF
THE TERMS AND PROVISIONS OF THIS AMENDED AND RESTATED JOINT VENTURE AGREEMENT;
AND C) ALL OF THE ACTIONS AND ACTIVITIES OF JMJ AS THE MANAGING JOINT VENTURE
PARTNER FROM THE DATE OF THE ORIGINAL JOINT VENTURE AGREEMENT TO THE PRESENT.
XVI. ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties hereto and
supersedes any and all prior written or oral understandings between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
JMJ PARTNERS, L.L.P.
By:
---------------------------------
Joe Hohmann,
Managing General Partner
EL CAPITAN, LTD.
By:
---------------------------------
GOLD & MINERALS COMPANY, INC.
By:
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JMJ PARTNERS, LLP
c/o 10082 E. San Salvador Drive
Scottsdale, AZ 85258-5668
El Capitan-JMJ Partners Joint Venture
c/o El Capitan, Ltd.
P.O. Box 5148
Scottsdale, AZ 85261
Gentlemen:
This letter is written to confirm the resignation of JMJ Partners, LLP
as the Managing Joint Venture Partner of El Capitan-JMJ Partners Joint Venture
effective as of April 3, 1997. It is JMJ's understanding that el Capitan, Ltd.
will assume the duties of the Managing Joint Venture Partner.
Very truly yours,
JMJ PARTNERS, L.L.P.
By: /s/ Joe Hohmann
---------------------------------
Joe Hohmann,
Managing General Partner
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