-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VSVsV/iMDv9cvXcC+pruRaJewOCD6qD3sstfKqxcqnXfbwOI9RThl2PnpVM3CS5l 090DoB/XLm4dSxhOURXHXA== 0000950147-01-501086.txt : 20010611 0000950147-01-501086.hdr.sgml : 20010611 ACCESSION NUMBER: 0000950147-01-501086 CONFORMED SUBMISSION TYPE: 10-K CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20010608 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLD & MINERALS CO INC/AZ CENTRAL INDEX KEY: 0000042037 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 002-50918 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: C/O IMPERIAL FINANCIAL PRINTING STREET 2: 7100 EAST LINCOLN DR. # D-230 CITY: SCOTTSDALE STATE: AZ ZIP: 85253 MAIL ADDRESS: STREET 1: C/O IMPERIAL FINANCIAL PRINTING STREET 2: 7100 EAST LINCOLN DR. # D-230 CITY: SCOTTSDALE STATE: AZ ZIP: 85253 10-K 1 e-6617.txt ANNUAL REPORT FOR YEAR ENDED 12/31/1999 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended -- December 31, 1999 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission file number 2-50918 GOLD AND MINERALS COMPANY, INC. ---------------------------------------------- (Name of small business issuer in its charter) Nevada 52-0983735 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or organization) 115900 N. 78th St., Suite 101, Scottsdale, AZ 85260 - -------------------------------------------------------------- --------- (Address of principal executive offices) (as of date of filing) (Zip Code) Issuer's telephone number (480) 998-0967 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: None Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] ================================================================================ GOLD AND MINERALS COMPANY, INC. FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 Page ---- PART I Item 1. Business Development..................................... 1 Item 2. Description of Property.................................. 2 Item 3. Legal Proceedings........................................ 4 Item 4. Submission of Matters to a Vote of Security Holders...... 4 PART II Item 5. Market for Registrant's Common Equity and Related Stockholders Matters.................................... 5 Item 6. Management's Discussion and Analysis or Plan of Operation............................................... 6 Item 7. Financial Statements..................................... 7 Item 8. Changes In and Disagreement with Accountants on Accounting and Financial disclosure..................... 7 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons' Compliance with Section 16(a) of the Exchange Act............................................ 7 Item 10. Executive Compensation................................... 8 Item 11. Security Ownership of Certain Beneficial Owners and Management.......................................... 8 Item 12. Certain Relationships and Related Transactions........... 8 PART IV Item 13. Exhibits, Financial Statements, Schedules and Reports on Form 8-K............................................. 9 SIGNATURES................................................................ 10 SUPPLEMENTAL INFORMATION AND EXHIBITS..................................... ? PART I ITEM 1. BUSINESS DEVELOPMENT The Registrant was incorporated under the laws of the State of Delaware in 1973. The Registrant conducted a public offering of its common stock in 1974. Registrant's stock ceased active trading in approximately 1986. Registrant's business operations were inactive from 1986 to 1993. In 1993 new management took over control on Registrant and Registrant began acquiring new mineral leases in 1993. In 1994 Registrant was re-capitalized by means of a 2-for-1 reverse stock split. All share numbers used in this document have been adjusted for that reverse stock split. In August 1999 Registrant merged into its wholly-owned subsidiary, a Nevada corporation of the same name, on the basis of a share-for-share exchange with its shareholders. From 1994 to present Registrant's operations have been involved in the exploration and testing of several mining properties and the development of two El Capitan mine sites. Registrant currently has rights to over 6,000,000 tons of mineralized ore in both Arizona and New Mexico. Registrant believes its current properties have mineable and possible mineralized ore reserves that are expected to provide Registrant with all of the ore it needs for the foreseeable future. However, most of the reserves on Registrant's properties are not proven reserves. Most of the ores on these properties contain gold, silver, and some have platinum group metals as well. With equipment installed at one El Capitan site, Registrant commenced milling production at this site in August 1999. At its main El Capitan site ore is crushed to 3/4 inch and deposited into an impact mill that grinds it down to -100 mesh. In the next phase the ore is run across a large concentrating table which separates the light ore from the heavy ore. The light ore is piped to a tailings pond and the heavy ore is forced into an attrition mill which grinds it down to -1000 mesh. This mill then empties onto two finishing concentration tables which result in the precious metals from 40 tons now concentrated into 1 ton ready for processing and the separation of the different metals. Registrant has installed over $700,000 in equipment including a blast furnace and support equipment which will hopefully be used to produce dore bars from the concentrated ore in the future. The dore bars could then be readily sold at market value to any domestic refinery. Registrant's primary El Capitan property has been developed as a separate unique production operation where the entire activity of mining, crushing, concentrating and processing will result in a product to be sold directly to a metal refinery. With an additional concentrating system Registrant will be able to generate concentrates for sale to a private processing facility. Registrant has a second group of properties in the El Capitan mining district of New Mexico which it purchased in 1995. In 1997 a joint venture was formed with a third party to fund $107,000 of development of these El Capitan claims. The joint venture agreement provides for all revenues from the operation of or the ore from these El Capitan claims will be distributed pursuant to the terms of the joint venture agreement until year 2007, after which time the joint venture agreement terminates. See "Item 2. Description of Properties" below. All of Registrant's El Capitan properties are operated under the name of El Capitan Ltd., a wholly owned subsidiary of Registrant. C.O.D. MINE ACQUISITION AND TRANSFER On September 1, 1999 Registrant acquired the C.O.D. Mine from Alanco Environmental Resources Corporation ("Alanco") in exchange for 4,500,000 shares of Registrant's 10% Class A Preferred Stock (the "Class A Stock"). The C.O.D. Mine has 13 BLM mining claims on approximately 268 acres in Mohave County, Arizona and has been appraised at $4.9 Million. This transaction was amended on December 20, 2000. (See Item 2. Description of Property.") The $4,500,000 of Class A Stock will convert into Registrant's common stock on September 1, 2001 on the basis of the average bid price of Registrant's common stock during the prior 10 days. In the event Registrant's common stock is not trading on September 1, 2001, the conversion price shall be $.40 per share. In the event Registrant's common stock trades at a price of $10.00 or more 1 before September 1, 2001, the Class A Stock may be converted at that time. Alanco has been granted certain demand and "piggy-back" registration and certain anti-dilutive rights. The 15% annual dividend rate on the Class A Stock is cumulative, payable annually and may be paid in additional shares of Class A Stock. The Class A Stockholders are entitled to vote on all matters on which common stockholders are entitled to vote, in addition to voting rights as a class. The holders of the Class A Stock will receive a preference upon liquidation of Registrant to the extent of the $4,500,000 face value of the Class A Stock. Registrant transferred the C.O.D. Mine to Wilshire Guaranty Funding, L.P. in January 2001, in exchange for $5,000,000 of limited partnership interests. See "Item 2. Description of Property." SALE OF ORE CONCENTRATES On September 19, 2000 the Registrant executed an ore processing agreement with Rainbow Precious Metals, Inc. of Gold Point, Nevada ("Rainbow"). This agreement was amended on March 22, 2001. Under the terms of this agreement Rainbow will refine Registrant's concentrate from the El Capitan Mine to the point of .999 purity and bear all costs of such refinement. Registrant shall bear all costs of transporting concentrated ore to the Gold Point refinery site. Registrant will receive 60% of all sums received from the sale of the refined minerals and Rainbow will receive 40%. Rainbow paid Registrant $25,000 on April 3, 2001 as a binder on this agreement. Rainbow shall pay to Registrant upon delivery 25% of the mutually agreed upon assay value (which Registrant believes will be at least $20,000 per ton) on the first 20 tons of concentrate, with such concentrate delivery required by July 1, 2001. This agreement provides for the parties to negotiate a more definitive agreement for the refinement of El Capitan Mine concentrate after the first 20-ton shipment is refined. Registrant is hopeful, without assurance, of executing a more definitive agreement with Rainbow and shipping substantial tons of concentrate during the second half of 2001. COMPETITION The mining and metal extraction industries are highly competitive. When Registrant is required to locate and acquire additional mineral deposits Registrant may face severe competition for those assets. Most of the Company's competition will have greater personnel and financial resources than Registrant. For the foreseeable future Registrant will not be required to locate and acquire additional mineral deposits form which to extract minerals. GOVERNMENTAL REGULATION The mining and metal extraction industries are highly regulated industries. This regulation generally takes one of two forms: governmental regulation of access to mineral deposits on government land and regulation of environmental pollution. A substantial percentage of the mineral deposits in the Western United States are located on U.S. government property. In order to mine such property one must lease, not purchase, the mineral rights from the U.S. Bureau Of Land Management (the "BLM") and comply with governmental regulations concerning the lease payments and use of the land. At times the U.S. government can be more difficult to deal with than a private landowner. The U.S. environmental protection laws dramatically impact the mining and mineral extraction industries, both from a standpoint of the use of hazardous materials in the mining and extraction process and the standpoint of returning the land to a natural look after the mining process is completed. Compliance with EPA regulations can be expensive and time consuming for a company. Thus far, Registrant has not had any complaints filed against it by the EPA or the BLM. See "Item 2. Description of Property" below. 2 EMPLOYEES The Registrant only employs its two officers on a full-time basis. Registrant contracts out the labor required at its plant and mines. ITEM 2. DESCRIPTION OF PROPERTY The Registrant's executive offices are located at 115900 N. 78th Street, Suite 101, Scottsdale, Arizona 85260, and these offices are provided free of charge to Registrant by Mr. Mottley, Registrant's Chairman. Registrant's operating offices are located at 10115 E. Mountain View Road, Unit 1008, Scottsdale, Arizona 85258, which is the home of Mr. Lozensky, Registrant's President. Registrant is currently paying Mr. Lozensky monthly rent of $400 for the use of this space. EL CAPITAN MINE This property contains four patented claims on 80 acres and three unpatented claims on 60 acres in the Capitan Mountains in Lincoln County, New Mexico. This property is located approximately 1 mile from Highway 246 approximately 6 miles north of the town of Capitan, New Mexico. Egress to the property is over dirt road. This property has only been mined for iron ore in the past, with the last active mining occurring during World War II. It has no proven reserves at this time and Registrant's plan of development is to continue mining the open pit on the property. Management believes, without assurance, the ore on the property contains gold, silver, iridium and other platinum group metals deposits which can be profitably mined and milled. Registrant has no knowledge of the rock formations on this property. Registrant has placed $1,000,000 of new and used equipment on this site for processing and milling ore on this property. Registrant uses a generator for power at this site. In October 1994 Registrant entered into an agreement with third parties (which was amended in September 1995 and again December 1996) to mine and acquire up to 6,000,000 tons of ore from the four patented claims in exchange for a 8% net smelter royalty to those parties ("El Capitan I"). "Net Smelter" is defined as all revenues resulting from payments after smelting minus the cost of smelting. Registrant has already paid $65,000 to the parties which is to be applied to the 8% smelter royalty. The owners may assign their rights under the agreement, but Registrant has a right of first refusal to purchase these claims. The one claim and the building at the El Capitan property were purchased in May 1999 for the sum of $25,000 from a third party ("El Capitan II"). Approximately $900,000 of equipment and development expense has been spent by Registrant on the El Capitan II site in 1999. In January 1997 Registrant through its subsidiary, El Capitan Ltd., entered into a joint venture agreement with JMJ Partners, a non-affiliated party, to fund and operate the claims of El Capitan I. JMJ Partners contributed $107,000 to the joint venture and managed the joint venture until April 1997 after which El Capitan Ltd. managed the joint venture. The joint venture has not yet produced any revenues. However, in the near future ore from the El Capitan I claims may be moved to the El Capitan II site and processed as part of Registrant's 20 year contract of sale. The joint venture agreement with JMJ Partners will control the distribution of all revenues received by Registrant from the sale of all ore from the El Capitan I claims until January 2007 when the joint venture agreement terminates. With respect to all revenues from ore from the El Capitan I claims the joint venture agreement provides that all direct costs of producing the ore and revenues be reimbursed to Registrant, after reserving two months of future operations expenses. Therefore, the costs of moving the ore to the El Capitan II site and the depreciation expense of the use of the equipment at the El Capitan II site will be reimbursed to Registrant. Next the joint venture agreement provides that monthly: (i) 25% of the remaining revenues be distributed to JMJ 3 Partners until a total of $428,000 is paid to it; (ii) 18.75% of the remaining revenues be distributed to certain named debtors of Registrant who are owed $____________ until they are paid in full; and (iii) the remaining 56.25% of the revenues be distributed to Registrant. After JMJ Partners receives its full $428,000, its distribution percentage decreases to 3.6% monthly revenues until the joint venture terminates in January 2007. After the named debtors of Registrant are paid in full, Registrant will receive the 18.75% allocated to them. WEAVER-RICH HILL The Weaver-Rich Hill property contains one claim on BLM land, covering approximately 40 acres located near Congress, Yavapai County, Arizona. Access to this property is by means of a dirt road and a generator will be needed at the property for power. This site has no proven reserves at this time and Registrant's plan of development is to continue mining the placer mine on the property. The Weaver Mining Company spend over $3,000,000 in developing this property from 1982 through 1984. Management believes, without assurance, the ore on the property contains gold, silver, iridium and other platinum group metals deposits which can be profitably mined and milled. Production on this property is not currently scheduled to commence until Registrant's cash flow position substantially improves. This property was acquired from Black Sands, LLC, an affiliated party, in a series of transactions between 1994 and 1996 in exchange for 15,000,000 shares of Registrant common stock valued at $15,000. See "Part I - Item 7. Certain Relationships and Related Transactions." LOGAN MINE The Logan property contains one claim on BLM land, covering over 160 acres located near Wickenburg, Maricopa County, Arizona. Access to this property is by means of a dirt road and a generator will be needed at the property for power. This site has no proven reserves at this time and Registrant's plan of development is to continue mining the open pit on the property. Management has no knowledge of the rock formations on this property nor knowledge of the last time this property was commercially mined. Management believes, without assurance, the ore on the property contains gold, silver, iridium and other platinum group metals deposits which can be profitably mined and milled. Registrant has completed the construction of a 50-ton per hour dry concentrator, which involves electrostatic and pneumatic separation at this site. Production on this property is not currently scheduled to commence until Registrant's cash flow position substantially improves. The Logan Mine was acquired in June 1996 by filing a claim with the BLM, which can be renewed annually upon payment of a $100 fee. WIKIEUP MINE The Wikieup property contains 20 acres of one claim on a placer desert deposit consisting of decomposed quartz and granite. The property is located in an area northwest of Wikieup, Arizona, in Mojave County. Access to this property is by means of a dirt road and a generator will be needed at the property for power. This site has no proven reserves at this time and Registrant's plan of development is to continue mining the open pit on the property. Management has no knowledge of the rock formations on this property nor knowledge of the last time this property was commercially mined. Management believes, without assurance, the ore on the property contains gold, silver, iridium and other platinum group metals deposits which can be profitably mined and milled. Production on this property is not currently scheduled to commence until Registrant's cash flow position substantially improves. This property was acquired by Registrant in November 1996 from a third party in exchange for $1,000 paid and $9,000 to be paid upon commencement of a concentration plant on the site. The prior owners shall also receive a monthly production bonus of $10 per ton of ore removed from the property, if the ore produces mineral values of $3.00 per ton. C.O.D. MINE The C.O.D. Mine is an underground mine located in the Cerbat Mountains approximately 10 miles north, northwest of Kingman, Arizona in Mohave County, Arizona and has 13 claims. Entry to this mine is along a gravel farm road, but the last three-fourths of a mile of road will need to be improved prior to the commencement of mining activities by Registrant. The rock structures on the property is precambrian granites with oxide ores being prevalent at upper levels of the mine and sulfide ores being prevalent at the lowest levels of the mine. This property has been mined through 2 underground shafts leading to seven levels. 4 The C.O.D. Mine was appraised to have a net present value of $4,938,411 in 1999, based upon $2,000,000 of initial working capital for working the underground mine and a six month delay between commencing mining operation and beginning the milling operation. This appraisal was provided by Donald A. Zimmerman and is based upon 89,900 tons of proven reserves. This property was last mined in the mid-1980's by Alanco. Registrant's independent certified auditors have disclaimed an opinion on the 1999 financial statements because they "were unable to obtain sufficient competent and timely evidential matter to support the value" of the C.O.D. Mine. See "Financial Statements." In January 2001, Registrant transferred the C.O.D. Mine to Wilshire Guaranty Funding, L.P., a newly formed Oklahoma limited partnership (the "Wilshire Partnership"), in exchange for $5,000,000 of limited partnership interests in the Wilshire Partnership. Registrant is hopeful, without assurance, that it will receive substantial cash distributions from Wilshire Partnership during 2001. ITEM 3. LEGAL PROCEEDINGS There were no legal proceedings involving the Registrant pending or threatened at December 31, 1999 or at March 15, 2001. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. During the fiscal years 1999 and 2000 no matters were submitted to a vote of the Registrant's security holders. 5 PART II ITEM 5. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER STOCKHOLDER MATTERS MARKET INFORMATION. Registrant's common stock has not been actively traded since approximately 1986. The principal market in which the Registrant's common shares will be trading is the over-the-counter market commonly known as the Pink Sheets. Registrant does not know what its trading symbol will be at this time. Such over-the-counter market quotations reflect inter-dealer prices without retail markup, markdown or commission and may not necessarily represent actual transactions. HOLDERS. The Registrant has approximately 1,244 stockholders of record, including nominee firms for securities dealers. DIVIDENDS. The Registrant has not paid or declared any dividends upon its common shares since its inception and, by reason of its present financial status and its contemplated financial requirements, does not intend to pay or declare any dividends upon its common shares for some time. However, if Registrant's financial condition improves over the next year Registrant may be in a financial position to pay dividends in the future. RECENT SALES OF UNREGISTERED SECURITIES. On September 1, 1999 Registrant acquired the C.O.D. Mine from Alanco Environmental Resources Corporation ("Alanco") in exchange for 4,500,000 shares of Registrant's 10% Class A Preferred Stock (the "Class A Stock"). The C.O.D. Mine has 13 BLM mining claims on approximately 268 acres in Mohave County, Arizona and has been appraised at $4.9 Million. (See Item 2. Description of Property.") The $4,500,000 of Class A Stock will convert into Registrant's common stock on September 1, 2001 on the basis of the average bid price of Registrant's common stock during the prior 10 days. In the event Registrant's common stock is not trading on September 1, 2001, the conversion price shall be $.40 per share. In the event Registrant's common stock trades at a price of $10.00 or more before September 1, 2001, the Class A Stock may be converted at that time. Alanco has been granted certain demand and "piggy-back" registration and certain anti-dilutive rights. The 15% annual dividend rate on the Class A Stock is cumulative, payable annually and may be paid in additional shares of Class A Stock. The Class A Stockholders are entitled to vote on all matters on which common stockholders are entitles to vote, in addition to voting rights as a class. The holders of the Class A Stock will receive a preference upon liquidation of Registrant to the extent of the $4,500,000 face value of the Class A Stock. This transaction did not involve a public offering and, therefore, the Registrant believes this transaction was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. In December 1999 Registrant issued 680,000 restricted shares of its common stock to eight sophisticated investors in conversion of $310,000 of debt and interest. This transaction did not involve a public offering and, therefore, the Registrant believes this transaction was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. POTENTIAL RULE 144 SALES. As of March 31, 2001 there were 48,643,660 shares of Registrant's common stock outstanding. Of these outstanding shares, approximately 31,995,665 shares were restricted from resale by SEC Rule 144. Under Rule 144 restricted securities cannot be resold in the public trading market for the first year of ownership (unless registered by the issuer) and can only be resold in the public trading market during the second year of ownership after filing a notice of intention to sell, but such sale volume is limited generally for each 90 day period to 1% of the total number of outstanding shares. 25,600,265 of Registrant's "restricted" shares are controlled by Registrant's two officers (see "Item 11. Security Ownership of Certain Beneficial Owners and Management"). Sales of restricted shares by Registrant's affiliates are always controlled by Rule 144 (unless registered), regardless of the time of ownership. Future sales of restricted shares by Registrant's shareholders in the public market are likely to have a depressing impact on the market price of Registrant's common stock. 6 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION OPERATIONS YEAR ENDING DECEMBER 31, 1999. During the fiscal year ended December 31, 1999 Registrant's net loss increased to $917,578 from $362,258 for the prior fiscal year. This increase resulted primarily from an asset impairment of $180,275, the preferred stock dividend of $150,000, and increased mining, general and administrative and interest expenses. The asset which became impaired during fiscal year 1999 was concentration and refining equipment from Registrant's pilot refining project which was moved to the El Capitan Mine where it was determined that the equipment was unsuited to the El Capitan processing. Unfortunately, additional write downs on equipment may be taken in 2000 if equipment proves not useful in Registrant's current operations and not sellable in the used mining equipment market. The preferred stock dividend accrues at the rate of $450,000 per year through September 2000 and then increases to an annual rate of $675,000 until the preferred stock is converted into common stock, which will be September 2001 at the latest. Direct mining development costs increased in 1999 by $39,462 over the prior year as a result of increased activity at the El Capitan Mine. Registrant expects its mining activities to remain at approximately the same level in the future until an ore refining contract is executed, after which time these expenses will increase as more ore at the El Capitan Mine is concentrated and shipped to the refinery. Registrant's general and administrative expenses increased by $102,279 in 1999 over 1998, as a result of increased management travel to the El Capitan Mine and to discuss refinery contracts. Accounting expenses also increased in 1999. Registrant expects its general and administrative expenses to remain at the same level in the future until an ore refining contract is executed, after which time these expenses will increase as new accounting and administrative personnel are hired. Registrant's interest expense increased by $67,014 during 1999 over the prior year as Registrant incurred approximately $750,000 more debt during 1999. Registrant anticipates incurring substantially more debt in 2000 in order to purchase more equipment and maintain its current level of operations. Therefore, Registrant's interest expense will likely dramatically increase in the future until Registrant's revenues reach a level where the debt can be repaid or the debt is converted into equity. LIQUIDITY AND CAPITAL RESOURCES With respect to capital resources, Registrant has approximately 5 different promissory notes which aggregate a total of $286,834 at December 31, 1999. These promissory notes are demand notes and only 3 bear interest. Registrant is hopeful of re-structuring these promissory notes into installment notes or convert into common stock in the near future. During the year Registrant converted approximately $310,000 of debt and interest into equity. 7 Registrant obtained a working capital loan in May 1999 initially for $365,947 which has increased to $551,206 at December 31, 1999. This loan bears annual interest at the rate of 18%. Registrant expects it will enter into additional working capital loans in year 2000 as its seeks to expand its ore processing operations. Registrant is hopeful it will be able to negotiate a lower interest rate in the future as its operations prove profitable. However, at this time Registrant has no written commitments from anyone to finance its future operations; therefore, there is no assurance Registrant will be able to secure future equipment financing or, if obtained, the interest rate will be lower. At December 31, 1999 Registrant had capitalized leases for a total of $620,036 of monthly payments due over the next 3 years with an average annualized interest rate of approximately 7%. Registrant expects it will increase its capitalized lease during 2000 as its expands its operations at its El Capitan and possibly other properties. Registrant presently has no written commitments from anyone to finance its future equipment leases; therefore, there is no assurance Registrant will be able to secure future equipment financing or, if obtained, the interest rate will be lower. At March 31, 2001 Registrant was in default with respect to its required payments under one of its leases; however, the lessor had not yet issued a default notice to Registrant. Registrant is presently hopeful, without assurance, of being able to make all of its required lease and loan payments on a timely basis from the cashflow generated from the sale of its concentrated ore during year 2001 and beyond. The short-term and long-term liquidity of Registrant is dependent on the future sales of processed ore from its El Capitan and other properties. ITEM 7. FINANCIAL STATEMENTS. See Financial Statements starting on page F-1 for this information. ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS Registrant has not changed its accountants or had any disagreements with its accountants since Semple & Cooper, LP, was engaged in 1996. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The directors and executive officers of the Registrant as of January 1, 2000 were as follows: NAME AND ADDRESS POSITION ---------------- -------- Charles C. Mottley Director and Chairman (Chief 10115 E. Mountain View, Unit 1008 Executive Officer) and Secretary Scottsdale, AZ 85258 Larry L. Lozensky Director, President (Chief 10115 E. Mountain View, Unit 1008 Operating Officer) and Treasurer Scottsdale, AZ 85258 (Chief Accounting Officer) The Registrant presently has three vacancies on its Board of Directors. Mr. Mottley, age 66, has been a Director and Chairman of Registrant since 1977. He was also President of Registrant from 1993 to November 1996. Mr. Mottley has thirty-five years of experience in the mining industry in the U.S. and abroad, primarily with smaller companies and as a consultant. Mr. Lozensky, age 51, has been a Director, Treasurer and Secretary of Registrant since August 1994. From August 1994 he was Executive Vice President of Registrant until November 1996 when he became President. 8 ITEM 10. EXECUTIVE COMPENSATION As of November 1, 1999 there are no outstanding employment contracts and no salaries are currently being paid to Registrant's officers or Directors. As Registrant's revenues increase in the future, these officers may receive monthly salaries and as Registrant's earnings increase in the future their salaries will increase. The Registrant currently has no pension, retirement, annuity, stock option, savings or similar benefit plan which provides compensation to its executive officers or directors. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of March 31, 2001 there were 48,643,660 outstanding shares of Registrant's common stock. The following table sets forth the name, address, number of shares beneficially owned, and the percentage of the Registrant's total outstanding common stock shares owned by: (i) each of the Registrant's Officers and Directors; (ii) the Registrant's Officers and Directors as a group; and (iii) other shareholders of 5% or more of the Registrant's total outstanding common stock shares. NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS - -------------- ---------------- -------------------- -------- Common Stock Charles C. Mottley 12,210,000(1) 25.1% 10115 E. Mountain View, Unit 1008 Scottsdale, AZ 85258 Common Stock Larry L. Lozensky 11,104,056(2) 22.8% 10115 E. Mountain View, Unit 1008 Scottsdale, AZ 85258 Common Stock Officers and Directors, as a 23,314,056(1)(2) 47.9% Group (2 People) - ---------- (1) Includes 1,000,000 shares owned by four trusts of which Mr. Mottley was the trustor, but is neither a trustee or a beneficiary. (2) Includes 3,000,000 shares owned by a trust of which Mr. Lozensky was the trustor and retained voting rights on the shares and a corporation (of which Mr. Lozensky is an officer) that owns 4,000,000 shares. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In August 1994 Black Sands LLC, an Arizona limited liability company of which Mr. Mottley and Mr. Lozensky (Registrant's officers and Directors) assigned minerals rights in the El Capitan Mine valued at $4,000 to Registrant in exchange for 4,000,000 shares of Registrant's common stock. In November 1994 Black Sands LLC assigned 20% of the profits to be received from the sale of 50,000 tons of concentrates in the Weaver-Rich Hill Mining District to Registrant in exchange for 15,000,000 shares of Registrant common stock. In January 1996 Black Sands LLC agreed to increase the percentage of profits to be received by Registrant from the sale of concentrates at the Weaver Mine to 50% for no additional consideration from Registrant. In May 1996 the percentage was increased to 100% of the profits for no additional consideration. Black Sands LLC had paid $25,000 for its rights to this Weaver-Rich Hill property. 9 In June 1995 Black Sands LLC assigned 100% of the income from a test plant and the equipment located in Tempe, Arizona in exchange for 15,000,000 shares of Registrant common stock. Subsequently, the ownership of the test plant was transferred to Registrant. Black Sands LLC had paid $300,000 to construct the test plant and most of the equipment from the test plant is still being used by Registrant. On September 30, 1999 Mr. Mottley and Mr. Lozensky were each issued 4,000,000 shares of Registrant restricted stock in conversion of a total of $1,058,936 of debt (without interest) owed to Messrs. Mottley and Lozensky and Black Sands LLC. Mr. Lozensky personally guaranteed the line of credit which was received by Registrant in March 1999 and now has $750,000 of principal outstanding, as well as over $200,000 of equipment leases. Mr. Lozensky has received nothing from Registrant for such guarantees. Mr. Mottley has personally guaranteed a $30,000 debt of Registrant and received nothing from Registrant for such guarantee. PART IV ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K. (c) Exhibits Exhibit Number Description -------------- ----------- 2.1 Merger Agreement 3.1 Articles of Incorporation 3.2 Bylaws 4.1 Certificate of Designation for Preferred Stock 10.1 Agreement with Alanco Envrionmental Resources Corporation 10.2 Equipment Lease 10.3 Promissory Note and Guaranty 10.4 JMJ Partners Joint Venture Agreement 10.5 El Capitan I Purchase Agreement 10.6 El Capitan II Purchase Agreement 10.7 Weaver-Rich Hill Purchase Agreement 10.8 Logan Mine Assignment 10.9 Wikieup Mine Lease Assignment 21.1 Subsidiaries 10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf on April 6, 2001 by the undersigned, thereunto authorized. GOLD AND MINERALS COMPANY, INC. By: /s/ Larry L. Lozensky ------------------------------------ Larry L. Lozensky, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities on the date(s) indicated. /s/ Charles C. Mottley Director and Chairman (Chief April 6, 2001 - ----------------------------- Executive Officer) and Secretary Charles C. Mottley /s/ Larry L. Lozensky Director, President (Chief April 6, 2001 - ----------------------------- Operating Officer) and Treasurer Larry L. Lozenski (Chief Accounting Officer) 11 INDEPENDENT AUDITORS' REPORT To The Stockholders' and Board of Directors of Gold & Minerals Company, Inc. and Subsidiary We were engaged to audit the accompanying consolidated balance sheet of Gold & Minerals Company, Inc. and Subsidiary as of December 31, 1999, and the related consolidated statements of operations, changes in stockholders' equity (deficit), and cash flows for the years ended December 31, 1999 and 1998. These consolidated financial statements are the responsibility of the Company's management. During the year ended December 31, 1999, the Company acquired a mining property in exchange for the issuance of convertible preferred stock. The carrying value of the mining property is stated in the accompanying consolidated financial statements at $4,500,000. This valuation was derived in part from an appraisal performed in 1997 and updated in September, 1999. The aforementioned mining property has been inactive with no cash flow generated since prior to the time of the appraisal. In addition no updated appraisal is available and the previous appraiser has since retired. Since we were unable to obtain sufficient competent and timely evidential matter to support the value of the mining property in the consolidated financial statements, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the consolidated financial statements referred to in the first paragraph. Certified Public Accountants /s/ Semple & Cooper, LLP Phoenix, Arizona April 5, 2001 F-1 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET DECEMBER 31, 1999 ASSETS Current Assets: Cash and cash equivalents $ 11,270 ----------- Total Current Assets 11,270 ----------- Property and Equipment, at Cost: Mining equipment 738,028 Office furniture and equipment 15,784 ----------- 753,812 Less: accumulated depreciation (68,978) ----------- 684,834 ----------- Other Assets: Mining property 4,500,000 Assets held for sale, net 222,979 Mining claim 25,000 Deferred financing costs, net 25,000 Ore inventory 78,000 Deposits 13,908 ----------- 4,864,887 ----------- Total Assets $ 5,560,991 =========== The Accompanying Notes are an Integral Part of the Consolidated Financial Statements F-2 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET (CONTINUED) DECEMBER 31, 1999 LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities: Notes payable - current portion $ 286,834 Capital leases - current portion 177,576 Accounts payable - trade 93,281 Accrued interest 149,409 Accrued liabilities 132,188 Accrued declared dividends 150,000 ----------- Total Current Liabilities 989,288 Long-Term Debt, Net of Current Portion: Notes Payable 551,206 Capital leases 313,347 Deferred gain 33,951 ----------- Total Liabilities 1,887,792 ----------- Stockholders' Equity: Series A Convertible preferred stock - $.001 par value; (aggregate liquidation preference of $4,500,000) 10,000,000 shares authorized, 4,500,000 shares issued and outstanding 4,500 Common stock - $.001 par value; 60,000,000 shares authorized, 48,613,660 shares issued and outstanding 48,614 Additional paid-in capital 6,835,967 Accumulated deficit (3,215,882) ----------- Total Stockholders' Equity 3,673,199 ----------- Total Liabilities and Stockholders' Equity $ 5,560,991 =========== The Accompanying Notes are an Integral Part of the Consolidated Financial Statements F-3 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 and 1998 1999 1998 ------------ ------------ Revenues $ -- $ -- ------------ ------------ Operating Costs and Expenses: Direct mining development costs 194,623 155,161 General and administration 259,379 157,100 Depreciation 41,935 23,302 ------------ ------------ Loss From Operations (495,937) (335,563) Other Income (Expenses): Asset impairment (180,275) -- Gain on sale/leaseback of equipment 2,751 408 Interest expense (94,117) (27,103) ------------ ------------ Net Loss (767,578) (362,258) Dividend on preferred stock (150,000) -- ------------ ------------ Net loss Available to Common Shareholders $ (917,578) $ (362,258) ============ ============ Basic Loss per Share $ (0.02) $ (0.01) ============ ============ Weighted Average Number of Shares Outstanding 44,187,578 39,933,660 ============ ============ The Accompanying Notes are an Integral Part of the Consolidated Financial Statements F-4 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Preferred Stock Common Stock ------------------ -------------------- Additional Shares Shares Paid In Accumulated Issued Amount Issued Amount Capital (Deficit) Total --------- ------ ---------- ------- ---------- ----------- ----------- Balance, December 31, 1997 -- $ -- 39,933,660 $39,934 $ 964,174 $(1,936,046) $ (931,938) Net loss for the year ended December 31, 1998 -- -- -- -- -- (362,258) (362,258) --------- ------ ---------- ------- ---------- ----------- ----------- Balance, December 31, 1998 -- -- 39,933,660 39,934 964,174 (2,298,304) (1,294,196) Preferred stock issued for mine purchase 4,500,000 4,500 -- -- 4,495,500 -- 4,500,000 Common stock issued for payment of debt and interest -- -- 8,680,000 8,680 1,376,293 -- 1,384,973 Accrued declared preferred dividends -- -- -- -- -- (150,000) (150,000) Net loss for the year ended December 31, 1999 -- -- -- -- -- (767,578) (767,578) --------- ------ ---------- ------- ---------- ----------- ----------- Balance, December 31, 1999 4,500,000 $4,500 48,613,660 $48,614 $6,835,967 $(3,215,882) $ 3,673,199 ========= ====== ========== ======= ========== =========== ===========
The Accompanying Notes are an Integral Part of the Consolidated Financial Statements F-5 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998 --------- --------- Increase (Decrease) in Cash and Cash Equivalents: Cash Flows From Operating Activities: Net loss $(767,578) $(362,258) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 46,935 23,302 Asset impairment and gain on sale 177,524 (408) Changes in Operating Assets and Liabilities: Prepaid expenses 454 (454) Deposits (12,015) -- Mining claim (25,000) -- Capitalized interest (29,120) -- Deferred financing costs (30,000) -- Accounts payable (40,460) 53,233 Accrued interest 115,085 81,575 --------- --------- Net cash used by operating activities (564,175) (205,010) --------- --------- Cash Flows From Investing Activities: Purchase of plant and equipment (111,858) (98,992) --------- --------- Net cash provided (used) by investing activities (111,858) (98,992) --------- --------- Cash Flows From Financing Activities: Proceeds from notes payable 48,000 324,209 Advances on revolving line of credit 551,206 -- Proceeds from capital leases 145,125 4,200 Principal payments on capital equipment leases (28,654) (9,587) Principal payments on notes payable (31,500) (13,500) --------- --------- Net cash provided by financing activities 684,177 305,322 --------- --------- Net Increase In Cash 8,144 1,320 Cash at Beginning of Year 3,126 1,806 --------- --------- Cash at End of Year $ 11,270 $ 3,126 ========= =========
The Accompanying Notes are an Integral Part of the Consolidated Financial Statements F-6 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash Paid For: Interest expense $ 33,201 $16,945 Income taxes $ -- $ -- Non-cash Investing and Financing Activities: Mining property acquired with preferred stock $4,500,000 $ -- Debt and interest paid with common stock $1,384,973 $ -- Capital expenditures financed through capital leases $ 455,747 $ -- Asset impairment $ 180,275 $ -- Gain on sale recognized $ (2,751) $ -- Deferred gain on sale - leaseback of assets $ 33,951 $ -- The Accompanying Notes are an Integral Part of the Consolidated Financial Statements F-7 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF ESTIMATES - -------------------------------------------------------------------------------- OPERATIONS: Gold & Minerals Company, Inc. and Subsidiary (the "Company") is a Corporation which was duly organized under the laws of the State of Delaware on July 13, 1973. El Capitan, Ltd. (A wholly-owned subsidiary) was incorporated under the laws of the State of Arizona on January 13, 1998. Prior to incorporation, El Capitan, Ltd. had been operating as a joint venture partnership. In July, 1999, Gold & Minerals Company, Inc., was redomociled as a Nevada corporation. The principal business purpose of the Company is to prospect and explore for ores and minerals, and to stake mining claims, principally in the southwest region of the United States. The Company's wholly-owned subsidiary, El Capitan, Ltd. operates in New Mexico. The Company has been in the development stage since its formation. Effective September 1, 1999, the Company purchased the COD Mine in Mohave County, Arizona together with various items of personal property and buildings from Alanco Environmental Resources Corporation in exchange for 4,500,000 shares of the Company's Series A Cumulative Convertible Preferred Stock. The COD Mine was inactive prior to the purchase, therefore, neither prior period or pro forma financial statements are shown for the COD Mine. The value of the transaction was recorded at $4,500,000, based upon a prior appraisal and negotiations between the companies. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the activity of Gold & Minerals Company, Inc., together with its wholly-owned subsidiary, El Capitan, Ltd. All significant intercompany accounts and transactions have been eliminated in consolidation. F-8 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICES, NATURE OF OPERATIONS AND USE OF ESTIMATES (CONTINUED) - -------------------------------------------------------------------------------- FAIR VALUE OF FINANCIAL INSTRUMENTS: Current assets and current liabilities - The amounts reported in the balance sheet approximate fair value due to the short-term maturities of these items. Long-term liabilities - The terms of the Company's long-term liabilities approximate the terms in the market place at which they could be replaced. Therefore, the fair value approximates the carrying value of these financial instruments. CASH AND CASH EQUIVALENTS: Cash and cash equivalents are considered to be all highly liquid investments purchased with an initial maturity of three (3) months or less. ORE INVENTORIES: Ore inventory consists of unprocessed ore at the El Capitan mining site in New Mexico. The unprocessed ore is stated at cost which approximates its fair value. PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost. Depreciation is provided for on the straight-line method over the estimated useful lives of the assets. Maintenance and repairs are charged to operations when incurred. Betterments or renewals are capitalized when incurred. For the years ended December 31, 1999 and 1998, depreciation expense was $41,935 and $23,302, respectively. The assets and liabilities under the capital lease agreements are recorded at the lower of the present value of the minimum lease payments, or the fair market value of the assets. The assets are depreciated over their estimated productive lives. Depreciation of the assets under the capital lease agreements is included in the depreciation expense above for the years ended December 31, 1999 and 1998. Interest was capitalized in connection with the installation of a furnace facility. The capitalized interest is recorded as part of the asset to which it relates and amortized over the asset's estimated useful life. For the year ended December 31, 1999, $29,120 of interest cost was capitalized. The useful lives of property and equipment are as follows: Years ----- Office furniture and equipment 5-8 Mining equipment 5-10 F-9 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICES, NATURE OF OPERATIONS AND USE OF ESTIMATES (CONTINUED) - -------------------------------------------------------------------------------- MINING PROPERTY: Included in other assets is $4,500,000 for a mining property. This represents the acquisition cost of a mining site whose value was determined pursuant to an independent appraisal. Amortization of the mining claim will be computed using the units-of-production method beginning upon the initial excavation at the mine site. Mine exploration costs and development costs to maintain production of operating mines are charged to operations as incurred. The Company periodically reviews the carrying value of claims, and impairments are recognized when the expected future cash flows derived from such mine sites are less than their carrying values. (See Subsequent Event, Note 7) DEFERRED FINANCING COSTS: Deferred financing costs are amortized to expense on a straight-line basis over the term of the related indebtedness. BASIC LOSS PER COMMON SHARE: Basic net loss per common share is computed based on weighted average common shares outstanding and excludes any potential dilution from stock options, warrants and other common stock equivalents. Basic net loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net loss per common share reflects potential dilution from the exercise or conversion of securities into common stock or from other contracts to issue common stock. As the company has a net loss available to common shareholders for all periods presented, the calculation of diluted net loss per share has been excluded from the financial statements, as it is antidilutive. As of December 31, 1999, there were 4,500,000 possible dilutive shares from the potential conversion of the Series A Preferred Stock. DEFERRED INCOME TAXES: Deferred income taxes are provided on an asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. F-10 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- NOTE 2 ASSETS HELD FOR SALE - -------------------------------------------------------------------------------- During the year ended December 31, 1999, assets held for sale consists principally of idle mining equipment located at one of the Company's mine sites. In the opinion of management, the equipment may not be sold within one year and therefore, is classified as non-current. The carrying value is based upon management's estimates of the net realizable value of these assets. The impairment recognized during the year ended December 31, 1999 was $180,275. - -------------------------------------------------------------------------------- NOTE 3 SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK - -------------------------------------------------------------------------------- On August 31, 1999, the Company authorized 10,000,000 shares of preferred stock having a par value of $.001 per share. These shares, designated as Series A Cumulative Convertible Preferred Stock, shall be entitled to one (1) vote per share on all matters upon which common stockholders are entitled to vote, and have a redemption price of $1.00 per share, together with accrued and unpaid dividends thereon. Redemption of the Series A Preferred Stock is at the option of the Company. In the event of any liquidation, dissolution or winding up of the affairs of the Company, holders of the Series A Preferred Stock shall be paid the redemption price plus all accrued dividends to the date of liquidation, dissolution or winding up of affairs before any payment to other stockholders. During the year ended December 31, 1999 the company issued 4,500,000 shares of its Series A Preferred Stock in exchange for the COD Mine in Mohave County, Arizona. At December 31, 1999 accrued declared dividends on the Series A Cumulative Convertible Preferred Stock were $150,000, with a yield of 10% per annum. Effective September 1, 2000 the dividend yield was increased to 15% per annum. The $150,000 of accrued dividends is to be paid through the issuance of 150,000 shares of Series A Cumulative Convertible Preferred Stock. The conversion ratio through September 1, 2001 is on a dollar for dollar basis, using the average trading price of the stock for the ten trading days prior to the conversion. If the stock is not trading by September 1, 2001, the conversion ratio will be 2.5 shares of common stock for each share of preferred stock. - -------------------------------------------------------------------------------- NOTE 4 PROVISION FOR INCOME TAXES - -------------------------------------------------------------------------------- At December 31, 1999, the deferred tax asset consists of the following: 1999 ----------- Net operating loss carryforwards $ 1,020,000 Less: valuation allowance (1,020,000) ----------- $ -- =========== F-11 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) At December 31, 1999, the Company had federal net operating loss carryforwards in the approximate amount of $3,050,000, available to offset future taxable income through various years from 2010 to 2020. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods. - -------------------------------------------------------------------------------- NOTE 5 NOTES PAYABLE - -------------------------------------------------------------------------------- As of December 31, 1999, notes payable consists of the following: Note payable to an individual, with principal and interest at 49.1%, due on demand, unsecured $ 18,634 Note payable to an individual, with principal and interest at various rates, due on demand; unsecured 91,500 Note payable to an individual, with principal and interest at 12%, due on demand, unsecured 15,000 Non-interest bearing notes payable to individuals, due on demand; unsecured 54,700 Non-interest bearing note payable to an individual, due on demand; secured by equipment of company 107,000 Line of credit and interim advances with TLD Funding Group, interest at 18%, due on demand; secured by various financial instruments. Due May, 2002, with certain call provisions $ 551,206 --------- Less: current portion of long-term notes payable 838,040 (286,834) --------- $ 551,206 ========= F-12 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- NOTE 6 CAPITAL LEASE OBLIGATIONS - -------------------------------------------------------------------------------- At December 31, 1999, the Company was the lessee of mining and office equipment, with an original cost of $475,747 under various capital lease agreements expiring through December, 2002. Included in the capital leases are two sale-leaseback arrangements the Company entered into in 1999. Under the arrangements, the Company sold field equipment and leased it back for a period of three (3) years. The leasebacks have been accounted for as capital leases. The gain of $36,702 on these transactions has been deferred and will be amortized to income in proportion to the depreciation to be taken on the leased assets over the term of the leases. Minimum future lease payments under the capital leases for each of the next three (3) years, are as follows: Year Ended December 31, - ------------ 2000 $ 276,895 2001 215,306 2002 127,835 --------- Total minimum lease payments 620,036 Less: amount representing interest (129,113) --------- Present value of net minimum lease payments 490,923 Less: current maturities of current lease obligations (177,576) --------- $ 313,347 ========= Interest on the capital leases is imputed based on the lessor's implicit rate of return at the inception date of the lease. As of the date of the auditors report, the Company is in default on the payments to one of the leasing companies. F-13 GOLD AND MINERALS COMPANY, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- NOTE 7 SUBSEQUENT EVENTS - -------------------------------------------------------------------------------- C.O.D. MINE Subsequent to December 31, 1999, the Company entered into negotiations with the Wilshire Guaranty Fund, LLP wherein the Company intends to, either exchange its ownership in the C.O.D. Mine for a limited partnership interest in the fund, or use the property as collateral for a note payable to purchase a limited partnership interest. PROCESSING AGREEMENT: On September 19, 1999, the Company entered into a Processing Agreement with a Nevada based refinery. Under the terms of the Agreement, the Company is to provide ore concentrates from its El Capitan Mine in New Mexico for processing at the Nevada refinery. The cost of shipping is the responsibility of the Company, while the processing costs are borne by the refinery. Proceeds from the sale of any precious metals will be allocated, 60% to Gold and Minerals Company, Inc. and 40% to the refinery. On April 3, 2001, the refinery paid a $25,000 deposit to Gold and Minerals Company, Inc. to bind the contract. The Agreement provides for the refining of a 20-ton test shipment on a best efforts basis. Management believes this process should occur in May, 2001. F-14 EX-2.1 2 ex2-1.txt MERGER AGREEMENT Exhibit 2.1 MERGER AGREEMENT This agreement (the "Agreement") is entered into this ____ day of August, 1999 by and between Gold and Minerals Company, Inc., a Nevada corporation ("GAM-N"), and Gold and Minerals Company, Inc., a Delaware corporation ("GAM-D"). The parties hereto agree as follows: 1. GAM-N is a Nevada corporation in good standing and is a wholly-owned subsidiary of GAM-D, with all 1,000 shares of GAM-N's outstanding common stock owned by GAM-D. 2. GAM-D is a Delaware corporation in good standing and has 39,933,660 common stock shares outstanding in the hands of over 1,000 shareholders and has issued no preferred common stock. 3. GAM-N has authorized 60,000,000 common stock shares and 10,000,000 preferred shares for issuance. 4. GAM-D shall merge into and with GAM-N by issuing 39,933,660 common stock shares on the basis of one (1) share of common stock of GAM-N common stock being issued for each one (1) share of GAM-D common stock outstanding (the "Merger") of the effective date of the Merger. 5. GAM-N shall be the surviving corporation after the Merger. 6. GAM-D shareholders shall not be required to return their GAM-D stock certificates to GAM-N's stock transfer agent to receive GAM-N stock certificates: GAM-N shall arrange for the outstanding GAM-D stock certificates to be treated as outstanding GAM-N stock certificates for trading purposes. 7. The 1,000 shares of GAM-N common stock previously issued to GAM-D shall be acquired by GAM-N as an asset of GAM-D and shall be canceled by GAM-N. 8. The approval of the Merger by the shareholders of the constituent corporations shall be received by written consent of a majority of such shareholders, pursuant to the applicable corporate law of each state. 9. The Merger shall be conducted in compliance with the requirements of the various laws of the States of Delaware and Nevada. 10. GAM-N agrees that it may be served with process in the State of Delaware in any action or special proceeding for the enforcement of any liability or obligation of any constituent corporation, previously amenable to suit in the State of Delaware, and for the enforcement under the Delaware corporate law, of the right of shareholders of any constituent corporation to receive payment for their shares against GAM-N, the surviving corporation; and it designates the Secretary of State of Delaware as its agent upon whom process may be served. The post office address to which the Delaware Secretary of State shall mail a copy of any process against GAM-N served upon him is 10115 East Mountain View Road, Suite 1008, Scottsdale, Arizona 85258. 11. GAM-N agrees that, subject to the provisions of Delaware corporation law, it will promptly pay to the shareholders of GAM-D the amount, if any, to which they shall be entitled under the provisions of the Delaware corporation law, relating to the right of shareholders to receive payment for their shares. 12. The Merger shall be effective on the date upon which the Certificate of Merger is filed by the constituent corporations with the Secretary of State of Delaware and Nevada, subject to acceptance by such states. IN WITNESS WHEREOF, duly authorized officers of the constituent corporations have executed this Agreement on the ____th day of August, 1999. GOLD AND MINERALS COMPANY, INC. By: ------------------------------------ Authorized Officer GOLD AND MINERALS COMPANY, INC. By: ------------------------------------ Authorized Officer EX-3.1 3 ex3-1.txt ARTICLES OF INCORPORATION Exhibit 3.1 ARTICLES OF INCORPORATION OF GOLD AND MINERALS COMPANY, INC. The undersigned, a natural person, over the age of twenty-one (21) years, in order to form a corporation for the purposes hereinafter stated, under and pursuant to the provisions of the laws of the State of Nevada, does hereby certify as follows: ARTICLE I NAME The name of the Corporation, hereinafter called the "Corporation" is: Gold And Minerals Company, Inc. ARTICLE II EXISTENCE The Corporation shall have perpetual existence. ARTICLE III OBJECTS AND PURPOSES The purpose for which this Corporation is created is to conduct any lawful business or businesses for which corporations may be incorporated pursuant to the Nevada Corporation Code. ARTICLE IV CAPITAL STOCK 1. NUMBER OF SHARES. The aggregate number of capital stock shares which the Corporation shall have authority to issue is Seventy Million (70,000,000) shares, of which Sixty Million (60,000,000) shares shall be common stock, $.001 par value, and Ten Million (10,000,000) shares shall be preferred stock, $.001 par value. 2. VOTING RIGHTS OF SHAREHOLDERS. Each voting shareholder of record shall have one vote for each share of stock standing in his name on the books of the Corporation and entitled to vote. Cumulative voting shall NOT be allowed in the election of directors or for any other purpose. 3. QUORUM. At all meetings of shareholders, one-half of the shares entitled to vote at such meeting, represented in person or by proxy, shall constitute a quorum. Except as otherwise provided by these Articles of Incorporation or the Nevada Corporation Code, if a quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders. When, with respect to any action to be taken by shareholders of this Corporation, the laws of Nevada require the vote or concurrence of the holders of two-thirds of the outstanding shares, of the shares entitled to vote thereon, or of any class or series, such action may be taken by the vote or concurrence of a majority of such shares or class or series thereof. 4. NO PREEMPTIVE RIGHTS. No shareholder of the Corporation shall have any preemptive or other rights to subscribe for any additional shares of stock, or for other securities of any class, or for rights, warrants or options to purchase stock or for scrip, or for securities of any kind convertible into stock or carrying stock purchase warrants or privileges. 5. SHAREHOLDER DISTRIBUTIONS. The Board of Directors may from time to time distribute to the shareholders in partial liquidation, out of stated capital or capital surplus of the Corporation, a portion of its assets, in cash or property, subject to the limitations contained in the statutes of the State of Nevada. 6. PREFERRED STOCK RIGHTS. The Board of Directors shall have the authority to divide the preferred shares into series and to fix by resolution the voting powers, designation, preference, and relative participating, option or other special rights, and the qualifications, limitations or restrictions of the shares of any series so established. ARTICLE V DIRECTORS AND OFFICERS 1. NUMBER OF DIRECTORS. The Board of Directors shall consist of as many members as the By-Laws shall prescribe, but in no event shall the number of directors be more than thirteen (13). 2 2. INITIAL BOARD OF DIRECTORS. The names of those persons who shall constitute the Board of Directors of the Corporation for the first year of its existence or until their successors are duly elected and qualified are: Name Address ---- ------- Charles Mottley 7900 E. Princess Drive, No. 1238 Scottsdale, Arizona 85255 ARTICLE VI RESIDENT AGENT AND PRINCIPAL OFFICE The address of the initial principal office of the Corporation is 4790 Caughlin Parkway, No. 527, Reno, Nevada 89509. The name of its initial resident agent at such address is Michael K. Hair. The Corporation may conduct all or part of its business in any other part of the State of Nevada, or any other State in the United States. ARTICLE VII INDEMNIFICATION OF DIRECTORS 1. ACTIONS, SUITES OR PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any person who was or is party or is threatened to be made a party to any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a Director, Officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, office, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and, in the case of conduct in his official capacity with the Corporation, in a manner he reasonably believed to be in the best interest of the Corporation, or, in all other cases, that his conduct was at least not opposed to the Corporation's best interests. In the case of any criminal proceeding, he must have had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, determine that the individual did not meet the standard of conduct set forth in this paragraph. 3 2. ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a Director, Officer, employee or agent of the Corporation or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorney's fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and, in the case of conduct in his official capacity with the Corporation, in a manner he reasonably believed to be in the best interests of the Corporation and, in all other cases, that his conduct was at least not opposed to the Corporation's best interests; but no indemnification shall be made in respect of any claim, issue or matter as to which such person has been adjudged to be liable for negligence or misconduct in the performance of this duty to the Corporation or where such person was adjudged liable on the basis that personal benefit was improperly received by him, unless and only to the extent that the court in which such action or suit was brought determines upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses which such court deems proper. 3. INDEMNIFICATION OF SUCCESSFUL PARTY. To the extent that a Director, Officer, employee or agent of the Corporation has been successful on the merits or otherwise (including, without limitation, dismissal without prejudice) in defense of any action, suit, or proceeding referred to in this Article VII or in defense of any claim, issue, or matter therein, he shall be indemnified against all expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. 4. DETERMINATION OF RIGHT TO INDEMNIFICATION. Any indemnification under (1) or (2) of the Article VII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, Officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (1) or (2) of this Article VII. Such determination shall be made by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or, if such a quorum is 4 not obtainable and a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or by the shareholders. 5. ADVANCE OF COSTS, CHARGES AND EXPENSES. Cost, charges and expenses (including attorney's fees) incurred in defending a civil or criminal action, suit, or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors as provided in paragraph (4) of this Article VII upon receipt of a written affirmation by the Director, Officer, employee or agent of his good faith belief that he has met the standard of conduct described in paragraphs (1) or (2) of this Article VII, and an undertaking by or on behalf of the Director, Officer, employee or agent to repay such amount unless it is ultimately determined that he is entitled to be indemnified by the Corporation as authorized in this Article VII. The majority of the Directors may, in the manner set forth above, and upon approval of such Director, Officer, employee or agent of the Corporation, authorize the Corporation's counsel to represent such person in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. 6. SETTLEMENT. If in any action, suit or proceeding, including any appeal, within the scope of (1) or (2) of this Article VII, the person to be indemnified shall have unreasonably failed to enter into a settlement thereof, then, notwithstanding any other provision hereof, the indemnification obligation of the Corporation to such person in connection with such action, suit or proceeding shall not exceed the total of the amount at which settlement could have been made and the expenses by such person prior to the time such settlement could reasonably have been effected. 7. OTHER RIGHTS; CONTINUATION OF RIGHT TO INDEMNIFICATION. The indemnification provided by this Article VII shall not be deemed exclusive of any other rights to which those indemnified may be entitled under these Articles of Incorporation, any bylaw, agreement, vote of shareholders or disinterested Directors, or otherwise, and any procedure provided for by any of the foregoing, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to person who has ceased to be a Director, Officer, employee or agent and shall inure to the benefit of heirs, executors, and administrators of such a person. All rights to indemnification under this Article VII shall be deemed to be a contract between the Corporation and each director or officer of the Corporation who serves or served in such capacity at any time while this Article VII is in effect. Any repeal or modification of this Article VII or any repeal or modification of relevant provisions of the Nevada Corporation Code or any other applicable laws shall not in any way diminish any rights to indemnification of such Director, Office, employee or agent or the obligations of the Corporation arising hereunder. This Article VII shall be binding upon any successor corporation to this Corporation, whether by way of acquisition, merger, consolidation or otherwise. 5 8. INSURANCE. The Corporation may purchase and maintain insurance on behalf of any person who is or was a Director, Officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provision of this Article VII; provided, however, that such insurance is available on acceptable terms, which determination shall be made by a vote of a majority of the Directors. 9. SAVINGS CLAUSE. If this Article VII or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Director, Officer, employee and agent of the Corporation as to any cost, charge and expense (including attorney's fees), judgment, fine and amount paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by an applicable portion of this Article VII that shall not have been invalidated and to the full extent permitted by applicable law. 10. AMENDMENT. The affirmative vote of at least two-thirds of the total votes eligible to be cast shall be required to amend, repeal, or adopt any provision inconsistent with, this Article VII. No amendment, termination or repeal of this Article VII shall affect or impair in any way the rights of any Director, Officer, employee or agent of the Corporation to indemnification under the provisions hereof with respect to any action, suit or proceeding arising out of, or relating to, any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or appeal. 11. SUBSEQUENT LEGISLATION. If the Nevada Corporation Code is amended after adoption of these Articles to further expand the indemnification permitted to Directors, Officers, employees or agents of the Corporation, then the Corporation shall indemnify such persons to the fullest extent permitted by the Nevada Corporation Code, as so amended. 6 ARTICLE VIII INCORPORATOR The name and address of the incorporator is: Michael K. Hair 7407 E. Ironwood Court Scottsdale, Arizona 85258 IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of June, 1999. --------------------------- Michael K. Hair VERIFICATION STATE OF ARIZONA ) ) ss. COUNTY OF MARICOPA ) I, _____________________, a Notary Public, hereby certify that on the 30th day of June, 1999, personally appeared before me Michael K. Hair, who, being by me first duly sworn, declared that he was the person who signed the foregoing document as incorporator and that the statements therein contained are true. My commission expires: ___________________ Witness my hand and official seal. ---------------------------------- Notary Public (SEAL) 7 EX-3.2 4 ex3-2.txt BYLAWS Exhibit 3.2 BYLAWS OF GOLD AND MINERALS COMPANY, INC. ARTICLE I OFFICES Section 1.01. REGISTERED OFFICE AND AGENT. The principal office and resident agent of the Gold And Minerals Company, Inc. (the "Corporation") in Nevada shall be as designated by the Board of Directors from time to time. Section 1.02. OTHER OFFICES. The Corporation may establish and maintain such other offices at such other places of business both within and without the State of Nevada as the Board of Directors may from time to time determine. ARTICLE II STOCKHOLDERS Section 2.01. ANNUAL MEETINGS. The annual stockholders' meeting for electing Directors and transacting other business shall be held at such time and place within or without the State of Nevada as may be designated by the Board of Directors in a Resolution and set forth in the notice of the meeting. Failure to hold any annual stockholders' meeting at the designated time shall not work a forfeiture or dissolution of the Corporation. Section 2.02. SPECIAL MEETINGS. Special meetings of the stockholders may be called by the Board of Director or by the Chairman of the Board, if one be elected, or by the President, and shall be called by the President or Secretary at the request in writing of stockholders owning not less a majority of all the shares entitled to vote at the proposed meeting. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice thereof. Section 2.03. PLACE OF MEETING. All stockholders' meetings shall be held at such place, within or without the State of Nevada as shall be fixed from time to time by resolution of the Board of Directors. Section 2.04. NOTICE OF MEETINGS. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten or more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary or the officer or persons calling the meeting, to each stockholder of record entitled to vote at such meeting, except that if the authorized shares are to be increased, at least thirty days' notice shall be given. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the stockholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. Section 2.05. WAIVER OF NOTICE. Whenever any notice is required to be given to any stockholder of the Corporation under the provisions of any statute or under the provisions of the Articles of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before, at or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when such stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 2.06. ORGANIZATION. Meetings of the stockholders shall be presided over by the Chairman of the Board, or if he is not present or one has not been elected, by the President, or if neither the Chairman of the Board nor the President is present, by a chairman pro tempore to be chosen by a majority of the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, or if neither the Secretary nor any Assistant Secretary is present, by a secretary pro tempore to be chosen by a majority of the stockholders entitled to vote who are present in person or by proxy at the meeting. Section 2.07. VOTING. Except as otherwise specifically provided by the Articles of Incorporation or by these Bylaws or by statute, all matters coming before any meeting of stockholders shall be decided by a vote of the majority of the votes cast. The vote upon any question shall be by ballot whenever requested by any person entitled to vote, but, unless such a request is made, voting may be conducted in any way approved at the meeting. Section 2.08. STOCKHOLDERS ENTITLED TO VOTE. Each stockholder of the Corporation shall be entitled to vote, in person or by proxy, each share of 2 stock standing in his name on the books of the Corporation on the record date fixed or determined pursuant to Section 6.06 hereof. Section 2.09. PROXIES. The right to vote by proxy shall exist only if the instrument authorizing such proxy to act shall have been executed in writing by the stockholder himself or by his attorney-in-fact duly authorized in writing. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Section 2.10. QUORUM. The presence at any stockholders' meeting, in person or by proxy, of the record holders of shares aggregating the number of shares entitled to vote at the meeting as indicated in the Articles of Incorporation shall be necessary and sufficient to constitute a quorum for the transaction of business. The stockholders present at the stockholders meeting for which a quorum exists, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Section 2.11. ABSENCE OF QUORUM. In the absence of a quorum at any stockholders' meeting, a majority of the total number of shares entitled to vote at the meeting and present there at, in person or by proxy, may adjourn the meeting for a period not to exceed sixty days at any one adjournment. Any business that might have been transacted at the meeting originally called may be transacted at any such adjourned meetings at which a quorum is present. Section 2.12. LIST OF STOCKHOLDERS. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make, at least ten days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, which the address of and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the principal office of the Corporation, whether within or without the State of Nevada, and shall be subject to the inspection of any stockholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the stockholders entitled to examine such list or transfer books or to vote at any meeting of stockholders. Failure to comply with the requirements of this Section 2.12 shall not affect the validity of any action taken at such meeting of stockholders. 3 Section 2.13. ACTION BY STOCKHOLDERS WITHOUT A MEETING. Any action required to be taken at a meeting of the stockholders of the Corporation or any action which may be taken at such a meeting, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by a majority of the stockholders entitled to vote with respect to the subject matter thereof, except that if a different proportion of voting power is required for such action at a meeting, then that proportion of written consents is required. Such consents shall have the same force and effect as a vote in person of the stockholders of the Corporation. A consent shall be sufficient for this Section 2.13 if it is executed in counterparts, in which event all of such counterparts, when taken together, shall constitute one and the same consent. ARTICLE III BOARD OF DIRECTORS Section 3.01. NUMBER AND TERM OF OFFICE. The Board of Directors of the Corporation shall consist of one or more Directors, as determined by the Board of Directors of the Corporation. Each Director (whenever elected) shall hold office until his successor shall have been elected and qualified unless he shall resign or his office shall become vacant by his death or removal. Directors need not be residents of the State of Nevada or stockholders of the Corporation. Section 3.02. ELECTION OF DIRECTORS. Except as otherwise provided in Sections 3.03 and 3.04 hereof and except as otherwise provided in the Articles of Incorporation, the Directors shall be elected annually at the annual stockholders' meeting for the election of Directors. The persons elected as Directors shall be those nominees, equal to the number then constituting the Board of Directors, who shall receive the largest number of affirmative votes validly cast at such election by the holders of shares entitled to vote therefor. Failure to annually re-elect Directors of the Corporation shall not affect the validity of any action taken by a Director who shall have been duly elected and qualified and who shall not, at the time of such action, have resigned, died, or been removed from his position as a Director of the Corporation. Section 3.03. REMOVAL OF DIRECTORS. At a meeting called expressly for that purpose, the entire Board of Directors or any lesser number may be removed, with or without cause, by a vote of the holders of the majority of the shares then entitled to vote at an election of Directors. 4 Section 3.04. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining Directors though less than a quorum of the Board of Directors. A Director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office and until his successor shall have been elected and qualified. Any number of Directors shall be filled by the affirmative vote of a majority of the Directors then in office or by an election at an annual meeting of a special meeting of the stockholders called for that purpose. A Director chosen to fill a position resulting from an increase in the number of directors shall hold such position until the next annual meeting of stockholders and until his successor shall have been elected and qualified. Section 3.05. RESIGNATIONS. Any Director may resign at any time by mailing or delivering or by transmitting by telegram or cable written notice of his resignation to the Board of Directors of the Corporation at the Corporation's principal office or its registered office in the State of Nevada or to the President, the Secretary, or any Assistant Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or if no time be specified, then at the time of receipt thereof. Section 3.06. GENERAL POWERS. The business of the Corporation shall be managed by the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders. Section 3.07. ANNUAL MEETINGS. The annual meeting of the Board of Directors for electing officers and transacting other business shall be held immediately after the annual stockholders' meeting at the place of such meeting. Failure to hold any annual meeting of the Board of Directors of the Corporation at the designated time shall not work a forfeiture or dissolution of the Corporation. Section 3.08. REGULAR MEETINGS. The Board of Directors from time to time may provide by resolution for the holding of regular meetings and fix the time and place of such meetings. Regular meetings may be held within or without the State of Nevada. Notice of regular meetings need not be given, provided that notice of any change in the time or place of such meetings shall be sent promptly to each Director not present at the meeting at which such change was made. 5 Section 3.09. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board, if one be elected, or by the President on two days' notice to each Director specifying the time and place (within or without the State of Nevada) of the meeting, and shall be called by the President or Secretary in like manner and on like notice on the written request of two or more Directors. Section 3.10. NOTICE. All notices to a Director required by Sections 3.07 or 3.09 hereof shall be addressed to him at his residence or usual place of business and may be given by mail, telegram, radiogram, cable or by personal delivery. No notice need be given of any adjourned meeting. Section 3.11. WAIVER OF NOTICE. Whenever any notice is required to be given to any Director of the Corporation under the provisions of any statute or under the provisions of the Articles of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before, at or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a Director at a meeting of the Board of Directors shall constitute a waiver of notice of such meeting, except where a Director attends such a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 3.12. QUORUM. At all meetings of the Board of Directors a majority of the whole Board of Directors shall constitute a quorum for the transaction of business and, except as may be otherwise specifically provided by statute or by the Articles of Incorporation or these Bylaws, the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. In the absence of a quorum the Directors present there may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum be present. Section 3.13. ACTION BY DIRECTORS OR COMMITTEE WITHOUT MEETING. Any action required to be taken at a meeting of the Directors of the Corporation or any committee thereof or any action which may be taken at such a meeting, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the Directors or members of the committee, as the case may be, entitled to vote with respect to the subject matter thereof. Such consent shall have the same force and effect as a unanimous vote of the 6 Board of Directors or of the committee, as the case may be, of the Corporation. A consent shall be sufficient for this Section 3.13 if it is executed in counterparts, in which event all of such counterparts, when taken together, shall constitute one and the same consent. Section 3.14. MEETINGS BY CONFERENCE TELEPHONE. Any Director or any member of a committee may participate in a meeting of the Board of Directors or a committee, as the case may be, by means of a conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and such participation shall constitute the presence of such person at such meeting. Section 3.15. COMPENSATION. By resolution of the Board of Directors, any Director may be paid any one or more of the following: his expenses, if any, of attendance at meetings; a fixed sum for attendance at meetings; or a stated salary as Director. Nothing herein contained shall be construed to preclude any Director from serving the Corporation in any capacity as an officer, employee, agent or otherwise, and receiving compensation therefor. Section 3.16. RELIANCE ON ACCOUNTS AND REPORTS, ETC. A Director, or a member of any committee designated by the Board of Directors, in the performance of his duties, shall be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officers, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Corporation. Section 3.17. PRESUMPTION OF ASSENT. A Director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof, or shall forward such dissent by registered or certified mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favor of such action. 7 ARTICLE IV COMMITTEES Section 4.01. HOW CONSTITUTED. By resolution adopted by a majority of the whole Board of Directors, the Board may designate one or more committee, including an Executive Committee, each consisting of two or more Directors. The Board of Directors may designate one or more Directors as alternate members of any such committee, who may replace any absent or disqualified member at any meeting of such committee. Any such committee, to the extent provided in the resolution and except as may otherwise be provided by statute, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it; but the designation of such committee and the delegation thereto of the authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. In the absence or disqualification of any member of any such committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Section 4.02. PROCEEDINGS, QUORUM AND MANNER OF ACTING. Except as otherwise prescribed by the Board of Directors, each committee may adopt such rules and regulations governing its proceedings, quorum, and manner of acting as it shall deem proper and desirable, provided that the quorum shall not be less than two members. ARTICLE V OFFICERS AND AGENTS Section 5.01. OFFICERS. The officers of the Corporation shall consist of a President, one or more Vice-President, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. The Board of Directors may elect and appoint a Chairman of the Board and may elect and appoint such other officers, assistant officers, and agents as may be deemed necessary and may delegate to one or more officers or agents the power to appoint such other officers, assistant officers and agents and to prescribe their respective rights, terms of office, authorities and duties. Any two or more offices of the Corporation may be held by the same person. An officer of the Corporation need not be a Director of the Corporation nor a resident of the State of Nevada. Section 5.02. TERM OF OFFICE. Except as provided in Sections 5.03, 5.04 and 5.05 hereof, each officer appointed by the Board of Directors shall hold office until his successor shall have been appointed and qualified. 8 Section 5.03. RESIGNATION. Any officer or agent of the Corporation may resign at any time by mailing or delivering or by transmitting by telegram or cable written notice of his resignation to the Board of Directors of the Corporation at the Corporation's principal office or its registered office in the State of Nevada or to the President, the Secretary or any Assistant Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or if no time be specified, then at the time of receipt thereof. Section 5.04. REMOVAL. Any officer or agent may be removed by the Board of Directors, or by the Executive Committee, if any, either with or without cause, whenever in its judgment, the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. In addition, any other officer, assistant officer or agent appointed in accordance with the delegation provisions of Section 5.01 hereof may be removed, either with or without cause, by any such officer or agent upon whom such power of delegation shall have been conferred by the Board of Directors. Section 5.05. VACANCIES AND NEWLY CREATED OFFICES. If any vacancy shall occur in any office by reason of death, resignation, removal, disqualification or other cause, or if any new office shall be created, such vacancies or newly created offices may be filled by the Board of Directors at any regular or special meeting or may be filled by any officer or agent to whom the power is delegated in accordance with the delegation provisions of Section 5.01 hereof. Section 5.06. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one be elected, shall preside at all stockholders' meetings and at all meetings of the Board of Directors. Subject to the supervision of the Board of Directors, he shall have general charge of the business, affairs and property of the Corporation. Except as the Board of Director may otherwise order, he may sign in the name and on behalf of the Corporation all deeds, bonds, contracts and agreements. He shall exercise such other powers and perform such other duties as from time to time may be assigned to him by the Board of Directors. Section 5.07. PRESIDENT. The President shall be the chief operating officer of the Corporation and shall, in the absence of the Chairman of the Board, 9 preside at all stockholders' meetings and at all meetings of the Board of Directors. Subject to the supervision of the Board of Directors and such direction and control as the Chairman of the Board, if one be elected, may exercise on matters of general policy, he shall have general supervision over its operating officers, employees and agents. He shall sign (unless a Vice-President shall have signed) certificates representing the stock of the Corporation authorized for issuance by the Board of Directors, and except as the Board of Directors may otherwise order, he may sign in the name and on behalf of the Corporation all deeds, bonds, contracts or agreements. He shall exercise such other powers and perform such other duties as from time to time may be assigned to him by the Board of Directors. Section 5.08. EXECUTIVE VICE-PRESIDENT AND VICE-PRESIDENTS. The Executive Vice-President, if one be elected, and any Vice- Presidents, if one or more be elected, shall have such powers and perform such duties as may be assigned to them by the Board of Directors or by the President. At the request of or in the absence or disability of the President, the Executive Vice-President (or the Vice-President, if there is no duly appointed Executive Vice- President, and if there are two or more Vice-Presidents, then the senior of the Vice-Presidents present are able to act) may perform all the duties of the President and, when so acting, shall have the powers of and be subject to all the restrictions upon the President. The Executive Vice-President or any Vice-President may sign (unless the President or another Vice-President shall have signed) certificates representing stock of the Corporation authorized for issuance by the Board of Directors. Section 5.09 TREASURER AND ASSISTANT TREASURERS. The Treasurer shall have general charge of, and general responsibility for, all funds, securities and receipts of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies, or other depositories as shall from time to time be designed by the Board of Directors. He shall have all powers and perform all duties incident to the office of a treasurer of a corporation and as are provided for him in these Bylaws, and shall exercise such other powers and perform such other duties as may be assigned to him by the Board of Directors. Any Assistant Treasurer may perform such duties of the Treasurer as the Treasurer or the Board of Directors may assign, and, in the absence of the Treasurer, any Assistant Treasurer may perform all the duties of the Treasurer. Section 5.10. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall attend to the giving and serving of all notice of the Corporation and shall record all the proceedings of all meetings of the stockholders and of the Board 10 of Directors in a book to be kept for that purpose. He shall keep in safe custody the seal of the Corporation, and shall have charge of the records of the Corporation, including the stock books and such other books and papers as the Board of Directors may direct and such books, reports, certificates and other documents required by law to be kept, all of which shall at all reasonable times be open to inspection by any Director. He shall sign (unless an Assistant Secretary shall have signed) certificates representing stock of the Corporation authorized for issuance by the Board of Directors. He shall perform such other duties as pertain to his office or as may be required by the Board of Directors. Any Assistant Secretary may perform such duties of the Secretary as the Secretary or the Board of Directors may assign, and, in the absence of the Secretary, Assistant Secretary may perform all the duties of the Secretary. Section 5.11. COMPTROLLER. The Comptroller, if one be elected, shall have general charge and supervision of financial reports. He shall maintain adequate records of all assets, liabilities and transactions of the Corporation and shall keep the books and accounts and cause adequate audits thereof to be made regularly and shall exercise a general check upon the disbursements of funds of the Corporation. In general, he shall perform all duties incident to the office of a comptroller of a corporation, and shall exercise such other powers and perform such other duties as may be assigned to him by the Board of Directors. Section 5.12. REMUNERATION. The salaries or other compensation of the officers of the Corporation shall be determined by the Board of Directors, except that the Board of Directors may by resolution delegate to any officer or agent the power to fix salaries or other compensation of any other officer, assistant officer or agent appointed in accordance with the delegation provisions of Section 5.01 hereof. Section 5.13. SURETY BONDS. The Board of Directors may require any officer or agent of the Corporation to execute a bond to the Corporation in such sum and with such surety or sureties as the Board of Directors may determine, conditioned upon the faithful performance of his duties to the Corporation, including responsibility for negligence and for the accounting of any of the Corporation's property, funds or securities that may come into his hands. 11 ARTICLE VI CAPITAL STOCK Section 6.01. SIGNATURES. The shares of the Corporation's capital stock shall be represented by certificates signed by the president or a Vice-President and the Secretary or an Assistant Secretary of the Corporation, any may be sealed with the seal of the Corporation, or a facsimile thereof. The signatures of the President or a Vice-President and of the Secretary or an Assistant Secretary upon certificates may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. Section 6.02. CERTIFICATES. Each certificate representing shares of the Corporation shall state upon the face thereof: (a) that the Corporation is organized under the laws of the State of Nevada; (b) the name of the person to whom such certificate is issue; (c) the number and class of shares which such certificate represents; and (d) the par value of each share represented by such certificate, or a statement that the shares are without par value. Each certificate shall also set forth conspicuously on the face or back thereof such restrictions upon transfer, or a reference thereto, as shall be adopted by the Board of Directors and stockholders. No certificate shall be issued for any shares until such share is fully paid. Section 6.03. CLASSES OF STOCK. If the Corporation is or shall become authorized to issue shares of more than one class, then, in addition to the provisions of Section 6.02 hereof, every certificate representing shares issued by the Corporation shall also set forth upon the face or back of the certificate, or shall state that the Corporation will furnish to any stockholder upon request and without charge, a full statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued and, if the Corporation is or shall become authorized to issue any preferred or special class in series, the variations in the relative rights and preferences between the shares of each such series so far as the same have been fixed and determined and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series. Section 6.04. CONSIDERATION FOR SHARES. Shares having a par value may be issued for such consideration expressed in dollars, not less than the par value thereof, as shall be fixed from time to time by the Board of Directors. Shares 12 without par value may be issued for such consideration expressed in dollars as may be fixed from time to time by the Board of Directors. Treasury shares may be disposed of by the Corporation for such consideration expressed in dollars as may be fixed from time to time by the Board of Directors. The consideration for the issuance of shares may be paid, in whole or in part, in money, in other property, tangible or intangible, or in labor or services actually performed for the Corporation. Neither promissory notes nor future services shall constitute payment or part payment for shares of the Corporation. Section 6.05. TRANSFER OF CAPITAL STOCK. Transfers of shares of stock of the Corporation shall be made on the books of the Corporation upon surrender of the certificate or certificates, properly endorsed or accompanied by proper instruments of transfer, representing such shares, subject to the terms of any agreements among the Corporation and shareholders. Section 6.06. REGISTERED STOCKHOLDERS. Prior to due presentment for registration or transfer of shares of stock, the Corporation may treat the person registered on its books as the absolute owner of such shares of stock for all purposes, and accordingly shall not be bound to recognize any legal, equitable or other claim or interest in such shares on the part of any other person, whether or not it shall have the express or other notice thereof, except as otherwise expressly provided by statute; provided, however, that whenever any transfer of shares shall be made for collateral security and not absolute, it shall be so expressed in the entry of the transfer if, when the certificates are presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so. Section 6.07. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may, from time to time, appoint or remove one or more transfer agents or one or more registrars of transfers of shares of stock of the Corporation, and it may appoint the same person as both transfer agent and registrar. Upon any such appointment being made all certificates representing shares of stock of the Corporation, and it may appoint the same person as both transfer agent and registrar. Upon any such appointment being made all certificates representing shares of capital stock thereafter issued shall be countersigned by one of such transfer agents or one of such registrars of transfers and shall not be valid unless so countersigned. If the same person shall be both transfer agent and registrar, only one countersignature by such person shall be required. 13 Section 6.08. FIXING OR DETERMINATION OF RECORD DATE. The Board of Directors may fix, in advance, a date as a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting of stockholders and any adjournment thereof, or entitled to receive payment of any dividend or any other distribution, allotment of rights, or entitled to exercise rights in respect of any change, conversion, or exchange of capital stock, or entitled to give any consent for any purpose, or in order to make a determination of stockholders for any other proper purpose; provided, however, that such record date shall be a date not more than fifty days nor less than ten days before the date of such meeting of stockholders or the date of such other action. If no record date is so fixed, the record date for determining stockholders entitled to notice of or to vote at any stockholders' meeting shall be at the close of the business on the date next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. The record date for determining stockholders for any other purpose shall, unless otherwise specified by the Board of Directors, be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting, provided, however that the Board of Directors may fix a new record date for the adjourned meeting. Only such stockholders as shall be stockholders of record on the record date so fixed shall be entitled to such notice of, and to vote at, such meetings and any adjournments thereof, or to receive payment of such dividend, or other distribution, or to receive such consent, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after any such record date. Section 6.09. LOST OR DESTROYED CERTIFICATES. The Board of Directors may direct that a new certificate or certificates of stock issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate or certificates to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, at its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost, stolen or destroyed. 14 ARTICLE VII FINANCE Section 7.01. CHECKS, DRAFTS, ETC. All checks, drafts or order for the payment of money shall be signed by one or more of officers or other persons as may be designated by resolution of the Board of Directors. Section 7.02. FISCAL YEAR. The fiscal year of the Corporation shall be such as may from time to time be established by the Board of Directors. ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 8.01. EXCULPATION. No Director or officer of the Corporation shall be liable for the acts, defaults or neglects of any other Director of officer, or for any loss sustained by the Corporation, unless the same has resulted from his own willful misconduct, willful neglect or negligence. ARTICLE IX MISCELLANEOUS Section 9.01. SEAL. The corporate seal of the Corporation shall be circular in form and shall bear the name of the Corporation. The form of seal shall be subject to alteration by the Board of Directors and the seal may be used by causing it or a facsimile to be impressed or affixed or printed or otherwise reproduced. Any Officer or Director of the Corporation shall have the authority to affix the corporate seal of the Corporation to any document requiring the same. Section 9.02. BOOKS AND RECORDS. The Board of Directors shall have power from time to time to determine whether and to what extent, and at what times and places and under what conditions and regulations, the accounts and books of the Corporation (other than stock ledger), or any of them, shall be open to the inspection of the stockholders. No stockholder shall have any right to inspect any account, book or document of the Corporation except at a time conferred by statute, unless authorized by a resolution of the stockholders or the Board of Directors. 15 Section 9.03. WAIVERS OF NOTICE. Whenever any notice is required to be given by law, or under the provisions of the Articles of Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or person entitled to such notice, whether before, at or after the time stated therein, shall be deemed equivalent of notice. Section 9.04. AMENDMENTS. The Board of Directors shall have the power to make, alter or repeal these Bylaws, in whole or in part, at any time and from time to time. These Bylaws may be altered or repealed, and new Bylaws made, by the stockholders at any annual or special meeting if notice of the proposed alteration or repeal or new Bylaws is included in the notice or waiver of notice of such meeting. APPROVED AND ADOPTED as of this 3rd day of July, 1999. ------------------------------ Charles Mottley, Secretary 16 EX-4.1 5 ex4-1.txt CERTIFICATE OF DESIGNATION FOR PREFERRED STOCK Exhibit 4.1 CERTIFICATE OF DESIGNATION ESTABLISHING THE RIGHTS AND PREFERENCES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK GOLD AND MINERALS COMPANY, INC. A NEVADA CORPORATION I, the undersigned, LARRY L. LOZENSKY, do hereby certify: (1) I am the Chairman and Secretary of GOLD AND MINERALS COMPANY, INC., a Nevada corporation (the "Corporation"). (2) Pursuant to the authority granted under the Corporation's Articles of Incorporation, the Board of Directors of said Corporation, by unanimous consent in writing effective as of August 31, 1999 has duly adopted the following recitals and resolutions: "WHEREAS, this Corporation is authorized by its Articles of Incorporation to issue 10,000,000 shares of preferred stock, par value $0.001 per share (the "Preferred Stock"); and "WHEREAS, this Corporation has not previously designated any series of its Preferred Stock; and "WHEREAS, the Board of Directors of this Corporation is authorized, as to the Preferred Stock, within the limitations and restrictions stated in the Articles of Incorporation, to fix by resolution or resolutions the designation of each series of Preferred Stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, such provisions as may be desired concerning dividends, redemption, voting, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors; and "WHEREAS, the Board of Directors of this Corporation desires, pursuant to its authority granted under the Articles of Incorporation, to determine and fix the rights, preferences, privileges and restrictions relating to a first series of said Preferred Stock, and to fix the number of shares constituting and the designation of such series; "NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized a series of Preferred Stock on the terms and with the provisions herein set forth: 1 SECTION 1. DESIGNATION, NUMBER AND RESTRICTIONS ON ISSUANCE. The designation of the series of Preferred Stock authorized by these resolutions shall be "10% Series A Cumulative Convertible Preferred Stock" (the "Series A Preferred Stock"). The authorized number of shares constituting the Series A Preferred Stock shall be Five Million (5,000,000) shares. The Board of Directors is further authorized, within the limitations and restrictions set forth in the Articles of Incorporation or stated in any resolution or resolutions of the Board of Directors, to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of Series A Preferred Stock subsequent to the issuance of shares of such series. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of these or any subsequent resolutions originally fixing the number of shares of such series. SECTION 2. CONVERSION RIGHTS. 2.1. As used herein, the term "Common Stock" shall mean and include the Corporation's Common Stock, $.001 par value, as constituted on August 31, 1999, and as the same shall be constituted thereafter including adjustments required for any capital reorganization or reclassification thereof subsequent to August 31, 1999. On September 1, 2000 if the Common Stock of the Corporation is publicly traded as described below in Section 2.3 and without the election of the holders of Series A Preferred Stock (except as permitted by Section 2.4 below) and up to the close of business on the second business day immediately preceding a date fixed for redemption of Series A Preferred Stock in accordance with Section 7 below at the election of the respective holders of Series A Preferred Stock, subject to the terms and conditions set forth herein, issued and outstanding shares of the Series A Preferred Stock and any accrued and unpaid dividends thereon shall be converted into fully paid and nonassessable shares of Common Stock of the Corporation at the conversion ratio as defined in Section 2.2 below, subject to adjustment as provided in Section 2.7 below (herein called the "Conversion Ratio"). 2.2. The Conversion Ratio shall be equal to the quotient of $1.00 divided by the Market Value of the Common Stock. The Market Value of the Common Stock shall be determined as the average of the closing bid price of the Common Stock on any securities exchange or as reported by the National Association of Securities Dealers Automated Quotation System on the last ten (10) trading days prior to the date of conversion. Upon conversion the number of Common Stock shares to be issued to each Series A Preferred Stockholder shall be equal to the number of Series A Preferred Stock shares held by such Shareholder multiplied by the Conversion Ratio. 2.3 In the event the Common Stock is not trading on September 1, 2000, then the Series A Preferred Stock shall be converted into Common Stock without the election of the holders of the Series A Preferred Stock at the Conversion Ratio of 2.5 (2.5 shares of Common Stock upon conversion of 1.0 share of Series A 2 Preferred Stock), subject to adjustment as provided in Section 2.7 below. "Not trading" as used in the preceding sentence shall mean if there is no closing bid price for the Common Stock on any securities exchange or reported by the National Association of Securities Dealers Automated Quotation System on any of the last ten (10) trading days prior to September 1, 2000. 2.4. In the event the Market Value of the Common Stock shall equal or exceed Ten Dollars ($10.00) per share before September 1, 2000 and continues above said price, the respective holders of the Series A Preferred Stock may convert their respective Series A Preferred Shares into Common Stock at the Conversion Ratio. 2.5. In order to exercise the conversion privilege, a holder of outstanding shares of Series A Preferred Stock shall surrender certificates for the Series A Preferred Stock to be converted and exchanged at the principal office of the Corporation, and shall give written notice to the Corporation at said office that the holder elects to convert such Series A Preferred Stock into shares of the Corporation's Common Stock. Such notice shall also state the name or names (with addresses) in which certificates for shares of Common Stock issuable on such conversion shall be issued, subject to compliance with applicable securities laws. 2.6. The Corporation shall not issue fractions of shares of Common Stock upon conversions of shares of Series A Preferred Stock. If more than one certificate representing shares of the Series A Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. If any fractional interest in a share of Common Stock would otherwise be deliverable upon the conversion of any shares of Series A Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to the Market Value of such fractional interest. So long as there is outstanding any Series A Preferred Stock, there shall be reserved unissued, out of the authorized but unissued shares of Common Stock, at least TEN MILLION (10,000,000) shares of Common Stock to provide for conversion of Series A Preferred Stock in accordance with the provisions of this Section 2. 2.7. The Conversion Ratio shall be subject to adjustment from time to time hereafter as follows: (A) In the event the Corporation at any time after August 31, 1999 shall issue a stock dividend on its outstanding shares of Common Stock or shall subdivide or combine the outstanding shares of Common Stock issuable upon conversion of the Series A Preferred Stock, the Conversion Ratio and number of shares issuable upon conversion of the Series A Preferred Stock shall be proportionately and equitably adjusted as if the holder of record of Series A Preferred Stock had converted shares of Series A Preferred Stock into Common Stock immediately prior to such event. Any such adjustment shall become 3 effective at the close of business on the date that such stock dividend, subdivision or combination relating to the Common Stock shall become effective. For the purposes of such adjustment, the Conversion Ratio in effect immediately prior to such stock dividend, subdivision or combination shall forthwith be changed to a Conversion Ratio determined by: (i) dividing the total number of shares of Common Stock outstanding immediately after the stock dividend, subdivision or combination, by an amount equal to the total number of shares of Common Stock outstanding immediately prior to such stock dividend, subdivision or combination; and (ii) multiplying the result of clause (i) above by the actual Conversion Ratio in effect immediately prior to such stock dividend, subdivision or combination. and the total of shares of Common Stock thereafter issuable and deliverable on conversion of the Series A Preferred Stock shall be the number of shares obtained by applying the Conversion Ratio as so adjusted. (B) In case of any capital reorganization or any reclassification of the shares of Common Stock of the Corporation (other than as a result of a stock dividend, subdivision or combination, as aforesaid), or in case of any consolidation with or merger of the Corporation into or with another corporation, or the sale, lease or other disposition of the properties of the Corporation as an entirety or substantially as an entirety, then as a part of such reorganization, reclassification, consolidation, merger, sale, lease or other disposition, as the case may be, lawful provision shall be made so that the holders of record of the Series A Preferred Stock shall have the right at that time to convert their respective Series A Preferred Stock at the Market Value and to receive upon such conversion thereof the kind and amount of shares of stock or other securities or property which such holders would have been entitled to receive if, immediately prior to such reorganization, reclassification, consolidation, merger, sale, lease or other disposition, such holders had held the number of shares of Common Stock which were then issuable upon the conversion of the Series A Preferred Stock then held by them. In any such case, appropriate adjustment shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the holders of record of the Series A Preferred Stock, to the end that the provisions set forth herein (including provisions with respect to adjustments of the Conversion Ratio) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of such Series A Preferred Stock. 2.8. Upon any conversion of Series A Preferred Stock in accordance with the foregoing, all of such shares of Series A Preferred Stock shall be canceled and revert to the status of authorized and unissued shares of Preferred Stock. 4 SECTION 3. REGISTRATION OF COMMON STOCK. 3.1.(a) If the Corporation proposes to register any of its Common Stock under the Securities Act of 1933, as amended (the "Securities Act"), on any registration statement, whether or not for its own account (other than by a registration statement on Form S-8 or other form which does not include substantially the same information as would be required in a form for the general registration of securities, would not be available for the Common Stock or relates to any employee benefit plan or reorganization of the Corporation), it shall as expeditiously as possible give written notice to all registered holders of Series A Preferred Stock of such holders' "Piggyback Registration Rights" as set forth in this Section 3. Upon the written request (which request shall, if applicable, specify that a holder shall be required to exercise the right to convert and the number of shares of Common Stock intended to be sold by such holder after exercise) of any holder made within 20 days after receipt of any such notice, the Corporation shall (subject to the additional terms of this Agreement) include in the registration statement the shares of Common Stock issuable upon conversion of the Series A Preferred Stock (the "Registrable Securities") which the Corporation has been so requested to register by the holder thereof and the Corporation shall keep such registration statement in effect and maintain compliance with each federal and state law or regulation for the period necessary for such holder to effect the proposed sale or other disposition (but in no event for a period greater than 120 days). (b) If, at any time after giving written notice of its intention to register Registrable Securities in a Piggyback Registration but prior to the effective date of the related registration statement, the Corporation shall determine for any reason not to register any Common Stock, the Corporation shall give notice of such determination to each holder and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such Piggyback Registration. All best efforts obligations of the Corporation shall cease if the Corporation determines to terminate prior to such effective date any registration pursuant to this Section 3.1. (c) If a Piggyback Registration involves an offering by or through underwriters, all holders requesting to have their Registrable Securities included in the Corporation's registration statement must sell their Registrable Securities to the underwriters selected by the Corporation on the same terms and conditions as apply to other selling shareholders, and any holder requesting to have its Registrable Securities included in such registration statement may elect in writing, not later than three business days prior to the effectiveness of the registration statement filed in connection with such registration, not to have its Registrable Securities so included in connection with such registration. (d) If a Piggyback Registration involves an offering by or through underwriters, the Corporation, except as otherwise provided herein, shall not be required to include Registrable Securities therein if and to the extent the underwriter managing the offering reasonably believes in good faith and advises each holder requesting to have Registrable Securities included in the Corporation's registration statement that such inclusion would materially adversely affect such offering, provided that if other selling shareholders who are employees, officers, directors or other affiliates of the Corporation have 5 requested registration of securities in the proposed offering, the Corporation will reduce or eliminate such other selling shareholders' securities before any reduction or elimination of Registrable Securities held by holders of the Series A Preferred Stock, and any such reduction or elimination (after taking into account the effect of preceding clause) shall be pro rata to all other holders of the securities of the Corporation exercising 'piggyback registration rights similar to those set forth herein in proportion to the respective number of shares of Registrable Securities they have requested to be registered. 3.2.(a) At any time after September 1, 2000 and provided the Registrable Securities, upon conversion, are not otherwise qualified for sale under an exemption available under the Securities Act, holders of an aggregate of 75% of all outstanding Series A Preferred Stock may exercise their "Demand Registration Rights" as described herein for registration covering the public sale of Registrable Securities hereunder. As soon as practicable thereafter, the Corporation shall use its best efforts to file a registration statement with respect to the Registrable Securities which holders have requested to be registered and obtain the effectiveness thereof, and to take all other action necessary under any federal or state law or regulation to permit such Registrable Securities to be sold or otherwise disposed of, and the Corporation shall maintain such compliance with each such federal and state law and regulation for the period necessary for such holders to effect the proposed sale or other disposition; PROVIDED THAT the Corporation shall have the right to delay such registration under certain circumstances for up to 90 days during any 12 month period. The Corporation shall be required to effect one registration or qualification pursuant to this Section 3.2, and shall not be obligated to effect a registration during the six month period commencing with the date of any other registration under the Securities Act in which Registrable Securities were registered. (b) The Corporation may delay any registration under this Section 3.2 for not more than 90 days if management determines in good faith that such delay is necessary to consummate a pending transaction. If the registration is delayed, management will notify the holders of Series A Preferred Stock within three weeks after receipt of notice specified in Section 3.2(a) of the delay but shall not be required to provide any information to any holder regarding the existence or the nature of any pending transactions. 3.3.(a) Subject to paragraph (b) of this Section 3.3, the registration rights of the holders pursuant to this Agreement and the ability to offer and sell Registrable Securities pursuant to a registration statement are subject to the following conditions and limitations, and each holder agrees with the Corporation that: (i) If the Corporation determines in its good faith judgment that the filing of a registration statement under Section 3.1 or Section 3.2 hereof or the use of any prospectus would require the disclosure of important information which the Corporation has a bona fide business purpose for preserving as confidential or the disclosure of which would impede the Corporation's ability to consummate a significant transaction, upon written notice of such determination by the Corporation, the rights of the holders to offer, sell or distribute any securities pursuant to the registration 6 statement or to require the Corporation to take action with respect to the registration or sale of any securities pursuant to the registration statement (including any action contemplated by Section 3.4 hereof) will for up to 60 days in any 12 month period be suspended until the date upon which the Corporation notifies the holders in writing that suspension of such rights for the grounds set forth in this Section 3.3(a)(i) is no longer necessary. (ii) If all reports required to be filed by the Corporation pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), have not been filed by the required date without regard to any extension, or if consummation of any business combination by the Corporation has occurred or is probable for purposes of Rule 3-05 or Article 11 of Regulation S-X under the Securities Act, upon written notice thereof by the Corporation to the holders, the rights of the holders to offer, sell or distribute any securities pursuant to the registration statement or to require the Corporation to take action with respect to the registration or sale of any securities pursuant to the registration statement (including any action contemplated by Section 3.4 hereof) will for up to 60 days in any 12 month period be suspended until the date upon which the Corporation has filed such reports or obtained the financial information required by Rule 3-05 or Article 11 of Regulation S-X to be included in the registration statement. (iii) In the case of the registration of any underwritten primary equity offering initiated by the Corporation (other than any registration by the Corporation on Form S-8, or a successor or substantially similar form, of (A) an employee stock option, stock purchase or compensation plan or of securities issued or issuable pursuant to any such plan, or (B) a dividend reinvestment plan), each holder agrees, if requested in writing by the managing underwriter or underwriters administering such offering, not to effect any offer, sale or distribution of securities (or any option or right to acquire securities) during the period commencing on the 10th day prior to the effective date of the registration statement covering such underwritten primary equity offering and ending on the date specified by such managing underwriter in such written request to such holder, which period may be of a duration of 90 days or more. (iv) In the event that the Corporation plans to repurchase or bid for securities of the Corporation in the open market, on a private solicited basis or otherwise, and the Corporation determines, in its reasonable good faith judgment and based upon the advice of counsel to the Corporation (which counsel shall be experienced in securities laws matters), that any such repurchase or bid may not, under Rule 10b-6 under the Exchange Act, or any successor or similar rule ("Rule 10b-6"), be commenced or consummated due to the existence or the possible commencement of a "distribution" (within the meaning of Rule 10b-6) as a result of any offers or sales by holders of any Registrable Securities, as the case may be, under any registration statement filed pursuant to this Agreement, the Corporation shall be entitled, for a period of 90 days or more, to request that holders of Registrable Securities, to suspend or postpone such distribution pursuant to such registration statement (a "10b-6 Election"). The Corporation shall, as promptly as practicable, give such holder or holders written notice of such 10b-6 Election, stating the basis for the 7 Corporation's determination. As promptly as practicable following the determination by the Corporation that the holders or holders may commence or recommence their distribution pursuant to the registration statement without causing the Corporation to be in violation of Rule 10b-6, the Corporation shall give such holder or holders written notice of such determination. (b) Notwithstanding the provisions of Section 3.3(a) above, the aggregate number of days (whether or not consecutive) during which the Corporation may delay the effectiveness of a registration statement or prevent offerings, sales or distribution by the holders thereunder pursuant to Section 3.3(a) shall in no event exceed 180 days during any 12-month period. (c) The Corporation may require each selling holder of Registrable Securities, as a condition to the inclusion of the Registrable Securities of such selling holder in the registration statement or in any offering thereunder, as the case may be, to furnish to the Corporation such information regarding the holder and the distribution of such securities as the Corporation may from time to time reasonably request (which request shall be confirmed in writing if requested by the Corporation) in order to comply with applicable law and such other information as may be legally required in connection with such registration or offering, and the holder shall promptly provide such information and a written consent to the inclusion of such information in the registration statement or any prospectus or supplement thereto; provided that the failure of any holder to provide such information to the Corporation shall not in any way affect the obligations of the Corporation hereunder with respect to any other holder. 3.4. In connection with the obligations of the Corporation with respect to the registration statement pursuant to Section 3.1 or Section 3.2, hereof and subject to Section 3.3 hereof, the Corporation shall: (a) (i) prepare and file with the Commission a registration statement on the appropriate form under the Securities Act, (A) which form shall be selected by the Corporation and shall be available for the sale of the Registrable Securities in accordance with the intended method or methods of distribution by the selling holders thereof (provided that the Corporation shall not be required to use any form other than Form S-1, S-2 or S-3 or any successor form and shall not be required to file more than one registration statement with the Commission) and (B) which registration statement shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the Commission to be so included or incorporated by reference, FURTHER PROVIDED that subject to the registration statement and prospectus being in compliance with the requirements of the Securities Act and the Exchange Act (including all rules and regulations of the Commission thereunder), the Corporation has the sole discretion to determine the form, substance and presentation of any financial or other information included in any registration statement or prospectus, and whether such information should be included in such registration statement or prospectus; and (ii) use its reasonable best efforts to cause such registration statement to become effective and remain effective in accordance with Section 3.1 and Section 3.2 hereof; 8 (b) prepare and file with the Commission such amendments and post-effective amendments to the registration statement as may be necessary to keep such registration statement effective for the applicable period; and cause each prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; (c) in the event that any federal law or regulation binding on the Corporation and adopted after the date hereof so requires (and would also so require if the Registrable Securities were being offered in a primary offering by the Corporation rather than by the holders), use its reasonable best efforts to cause such Registrable Securities to be registered with or approved by such other federal governmental agencies or authorities in the United States, if any, as may be required by virtue of the business and operations of the Corporation to enable the selling holders to consummate the disposition of such Registrable Securities; (d) furnish to each holder of Registrable Securities and to each managing underwriter of an underwritten offering of Registrable Securities pursuant to Section 4(1) of the Securities Act, if any, without charge, as many copies of each prospectus, including each preliminary prospectus, and any amendment or supplement thereto as such holder or underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; (e) use its reasonable best efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions as any holder of Registrable Securities of such class covered by the registration statement shall, on 20 days prior written notice, reasonably request in writing. Such notice to be sent at any time prior to the applicable registration statement being declared effective by the Commission. The Corporation shall maintain such registration or qualification in effect during the applicable period provided in Section 3.1 or Section 3.2 hereof; PROVIDED, HOWEVER, that the Corporation shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.4(e); (ii) subject itself to taxation in any such jurisdiction; (iii) make any change to its Articles or Incorporation or Bylaws; or (iv) become subject to general service of process in any jurisdiction where it is not then so subject; (f) notify each holder of Registrable Securities as promptly as practicable after becoming aware thereof and (if requested by any such holder) confirm such notice in writing (i) when the registration statement has become effective and when any post-effective amendments and supplements thereto become effective; (ii) of any request by the Commission or any state securities authority for amendments and supplements to the registration statement and any prospectus or for additional information relating to the Registrable Securities or the registration or qualification thereof after the registration statement has become effective; (iii) of the issuance by the Commission or any state 9 securities authority of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose; (iv) if the representations and warranties of the Corporation contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the Registrable Securities cease to be true and correct in any material respect prior to the closing date specified in such agreement (PROVIDED such notice shall be given only to holders which are parties to the agreements pursuant to which such representations and warranties are made), or if the Corporation receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (v) of the happening of any event during the period (other than any suspension period referred to in Section 3.3(a)) during which the registration statement is required hereunder to be effective as a result of which the registration statement or any prospectus would contain an untrue statement of material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading; (g) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of the registration statement or the qualification of the Registrable Securities for sale in any jurisdiction as promptly as practicable; (h) furnish to each holder of Registrable Securities, without charge, at least one conformed copy of the registration statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested in writing); (i) cooperate with the holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to the registration statement and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the selling holders may reasonably request (in each case, provided such certificates are requested in writing at least three business days prior to any delivery thereof); (j) upon the occurrence of any event contemplated by Section 3.4(f)(v) hereof, use its reasonable best efforts as promptly as practicable to prepare and file with the Commission a supplement or post-effective amendment to the registration statement or the related prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (k) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of 10 the registration statement, which earnings statement shall satisfy the provisions of Section ll (a) of the Securities Act and Rule 158 under the Securities Act; (l) use its reasonable best efforts to (i) cause all Registrable Securities to be listed or quoted on any securities exchange or quotation system on which the Corporation's outstanding Common Stock is then listed or quoted; and (m) obtain a CUSIP number for all Registrable Securities not later than the effective date of the registration statement. Each holder agrees that, upon receipt of any notice from the Corporation of the happening of any event of the kind described in Section 3.4(f)(v) hereof, such holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.4(j) hereof, or until it is advised in writing by the Corporation that the use of such prospectus may be resumed and, if so directed by the Corporation, such holder will deliver to the Corporation (at the Corporation's expense) all copies, other than permanent file copies then in such holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice; provided, however, that the Corporation shall use its reasonable best efforts to promptly prepare and provide to the holders a supplemented or amended prospectus contemplated by such Section 3.4(j) hereof. In the event the Corporation shall give any such notice, the period during which such registration statement shall be maintained effective shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 3.4(f)(v) hereof to including the date when each holder of Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 3.4(j) hereof. 3.5(a) The Corporation will bear all reasonable expenses incident to the performance of or compliance with its obligations of a Piggyback Registration under this Agreement and the holders of the Series A Preferred stock will bear all reasonable expenses incident to the performance of or compliance with its obligations of a Demand Registration under this Agreement. The phrase "all reaonsable expenses" in the preceding sentence shall include without limitations, all registration and filing fees, all fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of one firm of counsel for the holders in connection with blue sky qualifications of the Registrable Securities), printing expenses, messenger and delivery expenses, internal expenses (including, without limitation, all salaries and expenses of the officers and employees of the Corporation performing legal or accounting duties), and reasonable fees and disbursement of 11 counsel for the Corporation and its independent certified public accountants (including the reasonable expenses of any special audit or comfort letters required by or incident to such performance), securities acts liability insurance (if the Corporation elects to obtain such insurance), the reasonable fees and expenses of any special experts retained by the Corporation in connection with such registration, reasonable fees and expenses of any other persons retained by the Corporation and the fees and expenses associated with any required filing with the National Association of Securities Dealers, Inc. ("NASD") (all such expenses being herein called "Registration Expenses"). Notwithstanding the foregoing, the Corporation is not required to pay any fees or expenses of holders, underwriters, the holder's or any underwriter's counsel (other than the blue sky counsel referred to above) or accountant or any other advisers, including any transfer taxes, underwriting, brokerage and other discounts and commissions and finders' and similar fees payable in the respect of Registrable Securities. (b) Each holder shall pay all costs and expenses incurred by such holder (including all transfer taxes, underwriting, brokerage and other discounts and commissions and finders' and similar fees payable in respect of Registrable Securities). To the extent that any Registration Expenses are incurred, assumed or paid by any holder or any placement or sales agent therefor or underwriter thereof with the Corporation's prior written consent, the Corporation shall reimburse such person for the full amount of the registration expenses so incurred, assumed or paid within a reasonable time after receipt of a written request therefor. Any registration expenses submitted by any holder, placement or sales agent or underwriter or on behalf of any such person for payment by the Corporation shall be itemized in detail and contain clear and accurate receipts of all expenditures made by such parties. SECTION 4. VOTING RIGHTS. The holders of Series A Preferred Stock shall be entitled to vote with one vote per share as holders of Common Stock on all matters on which Common Stockholders of the Corporation are entitled to vote, in addition to any voting rights required by law. SECTION 5. RANK AND PREFERENCE. Shares of Series A Preferred Stock shall, with respect to dividend rights, rights on redemption and rights on liquidation, winding up and dissolution, have preference over and rank prior to all classes of Common Stock and shall rank PARI PASSU with all other series of Preferred Stock. In case the stated dividends and the amounts payable on liquidation, distribution or sale of assets, dissolution or winding up of the Corporation are not paid in full, the shareholders of all series of Preferred Stock shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full and in any distribution of assets other than by way of dividends, in accordance with the sums which would be payable on such distribution if all sums payable were discharged and paid in full. SECTION 6. DIVIDENDS AND RESTRICTIONS ON CERTAIN REPURCHASES. 6.1. The holders of the shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, cumulative dividends at the annual rate of 10% per annum, or ten cents ($0.10) per share. Each of such 12 annual dividends shall be fully cumulative and shall accrue (whether or not declared or permitted to be paid), from the first day such shares were first issued. The Corporation shall declare annual dividends and any appropriate portion thereof prior to any conversion or redemption of the Series A Preferred Stock. 6.2. In the event any shares of Series A Preferred Stock shall be outstanding for more or less than the period covered by such dividend year, the amount of the dividend shall be prorated for such periods. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time the dividend is declared; PROVIDED, HOWEVER, that such record date shall be not more than 30 days nor less than 10 days prior to the respective dividend payment date. 6.3. All dividends paid with respect to shares of the Series A Preferred Stock shall be paid PRO RATA to the holders entitled thereto. 6.4. No dividends, other than dividends payable solely in Common Stock, shall be declared by the Board of Directors on any class or series of equity securities of the Corporation unless and until such time as all accrued and unpaid dividends on the Series A Preferred Stock have been paid in full or unless the Series A Preferred Stock has been redeemed in accordance with its terms or are fully converted into Common Stock of the Corporation or are otherwise reacquired and retired in full by the Corporation. The Corporation may not pay or set apart for payment, other than dividends or other distributions or payments payable solely in Common Stock, any other distributions on any shares of the Corporation's Common Stock, and may not purchase or otherwise redeem for cash or other tangible property, other than in shares of Common Stock, any shares of the Corporation's Common Stock or any warrants, rights or options exercisable for or convertible into any shares of Common Stock unless and until such time as the Series A Preferred Stock has been redeemed in accordance with its terms or are fully converted into Common Stock of the Corporation or are otherwise reacquired and retired in full by the Corporation. 6.5. (a) In event the Corporation shall have accrued the payment of dividends beyond a date on which dividends would otherwise be declared hereunder, the Corporation, at the election of its Board of Directors made at any time thereafter (so long as such dividends have not been paid in cash), may elect to pay all cumulative accrued dividends otherwise due and payable in shares of Series A Preferred Stock in lieu of cash. In such event, the Corporation shall advise each holder of record of Series A Preferred Stock in writing on the Record Date, not more than 30 days nor less than 10 days prior to the respective dividend payment date, of the Corporation's election to make such dividend payment in shares of the Series A Preferred Stock. (b) For any dividend payment to be made in Series A Preferred Stock as herein provided, the number of shares issuable for such dividend payment shall be determined by dividing the cumulative accrued dividend payments due on said dividend payment date by the $1.00 face value of the Series A Preferred Stock. 13 SECTION 7. LIQUIDATION, DISSOLUTION OR WINDING-UP. 7.1. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of Series A Preferred Stock then outstanding shall be entitled to receive ratably, prior and in preference to any distribution of any of the assets of the Corporation to the holders of any other equity securities of the Corporation other than Preferred Stock, by reason of their ownership thereof, the sum of ONE DOLLAR ($1.00) per share outstanding plus all accrued and unpaid dividends thereon, each payable in cash (which may be payable from either capital or surplus) or, if cash is not then available, in property of the Corporation. In the event it is necessary or advisable for the Corporation to determine the value of property for any purpose hereunder, the value of such property so received by holders of Series A Preferred Stock will be deemed to be its fair market value as determined in good faith by the Board of Directors of the Corporation unless a majority in interest of the holders of issued and outstanding Series A Preferred Stock shall demand an independent appraisal of such property. If, upon the occurrence of any such event, the assets thus distributed among the holders of the Series A Preferred Stock shall be insufficient to permit the payment to such holders of the full preferential amount due to them hereunder, then the entire assets of this Corporation legally available for distribution shall be distributed ratably among the holders of all series of the Preferred Stock. Except as provided above, holders of the Series A Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Corporation. 7.2. For the purposes of this Section 7, a sale of all or substantially all of the assets of this Corporation or a merger of the Corporation with or into any other corporation or corporations where the Corporation is not the surviving entity, shall not be deemed to be a liquidation, dissolution or winding-up of the Corporation within the meaning of Section 7.1 unless no provision has been made for the exchange of securities for Series A Preferred Stock in connection with the consummation of any such sale of assets or merger. 7.3. The liquidation payment with respect to each outstanding fractional share of Series A Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payment with respect to each outstanding share of Series A Preferred Stock. SECTION 8. REDEMPTION. 8.1. The Corporation shall have no mandatory obligation to redeem shares of Series A Preferred Stock; PROVIDED, HOWEVER, in the event of any liquidation, dissolution or winding-up of the Corporation, either voluntary or involuntary, or in the event or sale of all or substantially all of the assets of this Corporation or a merger of the Corporation with or into any other corporation or corporations where the Corporation is not the surviving entity and in which no provision has been made for the exchange of securities for Series A Preferred Stock, each share of Series A Preferred Stock then outstanding shall be entitled to receive the consideration specified in Section 7.1 above. 14 8.2. The Corporation at its option, at any time and from time to time, may redeem all or any portion of the Series A Preferred Stock (and if only a portion, in an amount equal to an even multiple of 10,000 shares) then outstanding at a redemption price of ONE DOLLAR ($1.00) per share plus the payment of all accrued and unpaid dividends on the shares so redeemed. 8.3. Upon any redemption of Series A Preferred Stock, written notice shall be given to the holders of the Series A Preferred Stock for shares to be purchased or redeemed at least thirty (30) days prior to the date fixed for redemption. The notice shall be addressed to each such stockholder at the address of such holder appearing on the books of the Corporation or given by such holder to the Corporation for the purpose of notice, or, if no such address appears or is so given, at the last known address of such shareholder. Such notice shall specify the date fixed for redemption, shall state that all shares of Series A Preferred Stock outstanding are to be redeemed and the number of shares of Series A Preferred Stock to be so redeemed, and shall call upon such holder to surrender to the Corporation on said date, at the place designated in the notice, such holder's certificate or certificates representing the shares to be redeemed on the date fixed for redemption stated in such notice. Unless such person shall elect to convert the same into Common Stock in accordance with Section 2 above, each holder of shares of Series A Preferred Stock called for redemption shall surrender the certificate or certificates evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the redemption price on the date fixed for redemption. 8.4. If, on or prior to any date fixed for redemption, the Corporation deposits, with any bank or trust company in the United States, as a trust fund, a sum sufficient to redeem all shares of Series A Preferred Stock called for redemption which have not theretofore been surrendered for conversion, with irrevocable instructions and authority to the bank or trust company to pay, on or after the date fixed for redemption, the redemption price of the shares to their respective holders upon the surrender of their share certificates, then from and after the date of redemption the shares to be redeemed shall be redeemed and dividends and other distributions on those shares shall cease to accrue after the date such shares were called for redemption. The deposit shall constitute full payment for the shares of Series A Preferred Stock to their holders and from and after the date of the deposit the shares of Series A Preferred Stock shall no longer be outstanding, and the holders thereof shall cease to be shareholders with respect to such shares, and shall have no rights with respect thereto except the right to receive from the bank or trust company payment of the redemption price of the shares without interest upon surrender of their certificates therefor and the right to receive from the Corporation any accrued dividends thereon through the date such shares were called for redemption. Any interest accrued on any funds so deposited shall be the property of, and paid to, the Corporation. 8.5. In the event that fewer than all the outstanding shares of Series A Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be selected by lot or pro rata as may be determined by the Board of Directors. In 15 case it shall designate by lot the shares so to be redeemed, the Board of Directors shall have full power and authority to prescribe the manner in which the drawings by lot shall be conducted. 8.6. Notwithstanding anything contained herein to the contrary, the Corporation may not redeem any shares of Series A Preferred Stock and no sums therefor shall be paid or set aside for payment by the Corporation if, at the time and after giving effect to such payment, the same is prohibited by the laws of the State of Nevada. 8.7. Upon any redemption of Series A Preferred Stock in accordance with the foregoing, all of such shares of Series A Preferred Stock shall be canceled and revert to the status of authorized and unissued shares of Preferred Stock. SECTION 9. REQUIRED NOTICES. In case at any time: (a) there shall be any capital reorganization or reclassification of the capital stock of the Corporation, or any consolidation or merger of the Corporation with, or sale of all or substantially all of its assets to, another corporation; or (b) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Corporation; then, in any one or more of such cases, the Corporation shall cause to be mailed to the holders of record of then outstanding shares of Series A Preferred Stock (i) at least 30 days' prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, as the case may be. SECTION 10. AMENDMENTS AND ADDITIONAL COVENANTS. 10.1. So long as any Series A Preferred Stock shall be outstanding, this Corporation shall not, without the prior approval of the holders of not less than a majority of the then issued and outstanding shares of Series A Preferred Stock voting as a class, permit the Corporation to amend or repeal any provision of, or add any provision to, this Certificate or the Corporation's Articles of Incorporation or bylaws, if such action would alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Series A Preferred Stock. 16 10.2. So long as any Series A Preferred Stock shall be outstanding, the Corporation shall: (a) maintain its books of account and financial statements and records in accordance with generally accepted accounting principles, and all determinations hereunder, if any, which are dependent upon a calculation of the Corporation's financial condition shall be determined in accordance with generally accepted accounting principles; (b) promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property, or business of the Corporation or any subsidiary, except where the Corporation is contesting any of the foregoing in good faith by appropriate proceedings; and (c) keep its properties in good repair, working order, and condition, reasonable wear and tear excepted, and from time to time make all needful and proper repairs, renewals, replacements, additions, and improvements thereto, and the Corporation shall at all times comply with the provisions of all material leases to which it is a party or under which it occupies property so as to prevent any loss or forfeiture thereof or thereunder. 10.3. So long as any Series A Preferred Stock shall be outstanding, the Corporation shall furnish to each holder of record of the Series A Preferred Stock as soon as practicable, but in any event within 150 days after the end of each fiscal year of the Corporation, an income statement, statement of cash flow and statement of changes in stockholders' equity for such fiscal year, and a balance sheet of the Corporation as of the end of such year, such year-end financial statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and audited and certified by independent public accountants selected by the Board of Directors of the Corporation. "RESOLVED FURTHER, that the President or any Vice President of this Corporation and the Secretary or any Assistant Secretary of the Corporation are hereby authorized and directed to prepare, sign, and file with the Secretary of the State of Nevada a Certificate of Designation of Series A Preferred Stock of the Corporation in accordance with the resolutions set forth herein." (3) We further certify that the authorized number of shares of Preferred Stock of this Corporation is 10,000,000 shares; and that the number of shares constituting the first series of Preferred Stock established by the foregoing resolutions, none of which have been issued, is 5,000,000 shares. [Signature Page Follows] 17 IN WITNESS WHEREOF, we have executed this instrument as of the dates set forth below. ------------------------------------- Larry L. Lozensky, President ------------------------------------- Larry L. Lozensky, Secretary State of Arizona ) ) ss.: County of Maricopa ) On September __, 1999, personally appeared before me, a Notary Public, Larry L. Lozensky, who acknowledged that he executed the above instrument. (Notary Stamp or Seal) ------------------------------------- Signature of Notary 18 EX-10.1 6 ex10-1.txt AGREEMENT WITH ALANCO ENVIROMENTAL RESOURCES CORP. Exhibit 10.1 AGREEMENT This agreement (the "Agreement") is entered into by and between Alanco Environmental Resources Corporation ("Alanco") and Gold And Minerals Company, Inc. ("GAM"), effective as of September 1, 1999. WHEREAS, Alanco leases 13 mining claims on approximately 268 acres in Mohave County, Arizona from the United States Bureau of Land Management (the "BLM") known as the COD Mine (the "COD Mine"). WHEREAS, Alanco also owns various personal property (the "Property") and buildings (the "Buildings") at the COD Mine. WHEREAS, GAM desires to purchase the COD Mine, the Property and the Buildings from Alanco and Alanco desires to sell said assets to GAM. (Hereinafter the COD Mine, the Property and the Building may be referred to as the "Assets.") NOW, THEREFORE, the parties hereto agree as follows: 1. Alanco hereby sells, transfers, assigns and grants unto GAM: (a) the COD Mine by way of the Quit Claim Deed set forth as Exhibit A attached hereto; and (b) the Buildings and the Property by way of the Bill of Sale set forth as Exhibit B attached hereto. 2. The purchase price for the Assets shall be Four Million Dollars ($4,000,000) (the "Purchase Price"). However, the Purchase Price shall be subject to adjustment if the results of the 1999 appraisal of the COD Mine (the "Appraisal") yield a value of less than $3,600,000 or more than $4,400,000. 3. The Purchase Price shall be paid by GAM by delivering to Alanco Four Million (4,000,000) shares of its Series A Convertible Preferred Stock as more fully described in Certificate of Designation set forth in Exhibit C attached hereto (the "Series A Preferred Stock"), subject to adjustment per the Appraisal. 4. GAM hereby represents and warrants to Alanco as follows: (a) GAM is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. (b) The authorized capital of GAM consists of, immediately prior to closing, of: (i) 10,000,000 shares of Preferred Stock, par value $.001, of which no shares have been issued; and (ii) 60,000,000 shares of Common Stock, $.001 par value, of which 39,933,660 shares are issued and outstanding, with up to an additional 10,000,000 shares may be issued to the Chairman and the President of GAM upon conversion of GAM's outstanding debt to them. (c) The issuance of the Series A Preferred Stock has been duly authorized by GAM's Board of Directors and the Certificate of Designation for the Preferred Stock shall be filed with and accepted by the Nevada Secretary Of State prior to the closing of the transaction contemplated by this Agreement. The Series A Preferred Stock when issued to Alanco will be duly validly issued, fully paid and non-assessable. 5. GAM shall not sell, transfer, assign or pledge any of the Assets without the prior written approval of Alanco, so long as any Series A Preferred Stock is owned by Alanco. However, in the event Alanco pledges the Series A Preferred Stock, the above-stated restriction on GAM's transfer of the Assets shall cease and terminate. 6. Alanco warrants that the Appraisal is the true and correct appraisal received from the appraiser. Alanco also warrants that its has full right, title and interest in the Assets and it has the right to sell and transfer the Assets, subject to the BLM owing the real estate at the COD Mine. Alanco further warrants that the Assets are free from any liens and are unencumbered by any debt. 7. Any controversy or claim arising out of or relating to this Agreement, except for a request for injunctive relief, shall be settled by arbitration in the Phoenix metropolitan area in accordance with the then governing rules of the American Arbitration Association. The party to whom the arbitrator or arbitration panel makes an award shall be entitled to receive as part of the award the reasonable cost of its attorney fees and litigation expenses. Judgment upon the award rendered in the arbitration may be enforced in court described in Paragraph 10 below of this Agreement. 8. The transaction contemplated by this Agreement shall be consummated as soon as reasonably possible, with Alanco holding the executed Exhibit A and executed Exhibit B until such time on or before September 15, 1999 that GAM delivers a duly authorized and executed Preferred Stock certificate representing 4,000,000 shares of Series A Preferred Stock to Alanco. 2 9. This rights and obligations upon the parties to this Agreement may not be assigned by one party without the prior written consent of the other party. 10. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Arizona, United States of America. The parties hereby expressly agree that the proper venue for any claim or cause of action by the parties shall be the Superior Court for Maricopa County, Arizona and the each party upon execution of this Agreement consents to the service of process from such court. 11. No modification or amendment of this Agreement shall be valid unless it is in writing and signed by both parties hereto. 12. This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings between the Company and Employee. 13. The waiver by either party of a breach of any term of this Agreement shall not operate as, or be construed as, a waiver of any subsequent breach. 14. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement, effective as of the date first above written. ALANCO ENVIRONMENTAL RESOURCES CORPORATION By: /s/ Robert R. Kauffman -------------------------------------- Robert R. Kauffman, Chairman GOLD AND MINERALS COMPANY, INC. By: /s/ Charles C. Mottley -------------------------------------- Charles C. Mottley, Chairman 3 EXHIBIT B BILL OF SALE Alanco Environmental Resources Corporation hereby sells, assigns, transfers and grants unto Gold And Minerals Company, Inc. all Buildings located on the COD Mine site in Mohave County, Arizona and the personal property set forth on the attached schedule. ALANCO ENVIRONMENTAL RESOURCES CORPORATION By: /s/ Robert R. Kauffman -------------------------------------- Robert R. Kauffman, Chairman EX-10.2 7 ex10-2.txt EQUIPMENT LEASE Exhibit 10.2 - -------------------------------------------------------------------------------- LESSOR TLD Funding Group, a division of Cee and Gee Funding, Lease Number Inc. 915601-001-15 8900 N. Central Ave., #214 Phoenix, AZ 85020 - -------------------------------------------------------------------------------- LESSEE VENDOR GOLD & MINERALS CO., INC. 10115 E. Mountain View Rd., #1008 Multiple Vendors Scottsdale, AZ 85258 Jointly and Severally Responsible - -------------------------------------------------------------------------------- Quantity DESCRIPTION MODEL #, CATALOG #, SERIAL # OR OTHER IDENTIFICATION - -------------------------------------------------------------------------------- **SEE EXHIBIT 'A' ATTACHED AND MADE A PART HEREOF** - -------------------------------------------------------------------------------- Amount of Each Payment Term of Lease No. of Monthly w/Use Tax in Months Payments Security Deposit - ---------------------- --------- -------- ---------------- 9,252.23 (EXEMPT) 36 36 - 0 - - -------------------------------------------------------------------------------- TERMS AND CONDITIONS OF LEASE 1. LEASE. Lessee hereby leases from Lessor, and Lessor leases to Lessee, the personal property described above, together with any replacement parts, additions, repairs or accessories now or hereafter in or affixed to it (hereinafter referred to as the "Equipment") 2. ACCEPTANCE OF EQUIPMENT. Lessee agrees to inspect the Equipment and to execute an Acknowledgment and Acceptance of Equipment by Lessee notice, as provided by Lessor, after the Equipment has been delivered and after Lessee is satisfied that the Equipment is satisfactory in every respect. Lessee hereby authorizes Lessor to insert in this Lease serial number or other identifying data with respect to the Equipment. - -------------------------------------------------------------------------------- 3. DISCLAIMER OF WARRANTIES AND CLAIMS; LIMITATION OF REMEDIES, THERE ARE NO WARRANTIES BY OR ON BEHALF OF LESSOR. Lessee acknowledges and agrees by this signature below as follows (a) LESSOR MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE CONDITION OF THE EQUIPMENT, IT'S MERCHANTIBILITY, ITS FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE, ITS DESIGN, ITS CAPACITY, ITS QUALITY, OR WITH RESPECT TO ANY CHARACTERISTICS OF THE EQUIPMENT. (b) Lessee has fully inspected the equipment which it has requested Lessor to acquired and lease to Lessee, and the Equipment is in good condition and to Lessee's complete satisfaction; (c) Lessee leases the Equipment "as is" and with all faults; (d) Lessee specifically acknowledges that the Equipment is leased to Lessee solely for commercial or business purposes and not for personal family household, or agricultural purposes; (e) If the Equipment is not properly installed does not operate as represented or warranted by the supplier or manufacturer, or is unsatisfactory for any reason regardless of cause or consequence, Lessee's only remedy, if any, shall be against the supplier or manufacturer of the equipment and not against Lessor; (f) Provided Lessee is not in default under this Lease, Lessor assigns to Lessee any warranties made by the supplier or manufacturer of the Equipment; (g) LESSEE SHALL HAVE NO REMEDY FOR CONSEQUENTLY OR INCIDENTAL DAMAGES AGAINST LESSOR; and (h) NO DEFECT, DAMAGE, OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR RELIEVE LESSEE OF ANY OTHER OBLIGATION UNDER THIS LEASE. - -------------------------------------------------------------------------------- 4. STATUTORY FINANCE LEASE. Lessee agrees and acknowledges that it qualify as a statutory finance lease under Article 2A of the Uniform Commercial Code Lessee acknowledges and agrees that lessee has selected both (1) the Equipment, and (2) the supplier from whom Lessor is to purchase the Equipment. Lessee acknowledges that Lessor has not participated in any way in Lessee's selection of the Equipment or of the supplier, and Lessor has not selected, manufactured or supplied the Equipment. LESSEE IS ADVISED THAT IT MAY HAVE RIGHTS UNDER THE CONTRACT EVIDENCING THE LESSOR'S PURCHASE OF THE EQUIPMENT FROM THE SUPPLIER CHOSEN BY LESSEE AND THAT LESSEE SHOULD CONTACT THE SUPPLIER OF THE EQUIPMENT FOR A DESCRIPTION OF ANY SUCH RIGHTS. 5. ASSIGNMENT BY LESSEE PROHIBITED. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, LESSEE SHALL NOT ASSIGN THIS LEASE OR SUBLEASE THE EQUIPMENT OR ANY INTEREST THEREIN, OR PLEDGE OR TRANSFER THIS LEASE, OR OTHERWISE DISPOSE OF THE EQUIPMENT COVERED HEREBY. 6. COMMENCEMENT; RENTALS PAYMENTS; INTERIM RENTALS. This Lease shall commence upon the written acceptance hereof by Lessor and shall end upon full performance and observance by Lessee of each and every term, condition and covenant set forth in this Lease, any Schedules hereto and any extensions hereof. Rental payments shall be in the amounts and frequency as set forth on the face of this Lease or any Schedules hereto. In this Lease, any Schedules hereto and any extensions hereof Rental payments shall be in the amounts and frequency as set forth on the face of this Lease or any Schedules hereto. In addition to regular rentals, Lessee shall pay to Lessor interim rent for the use of the Equipment prior to the due date of the first payment. Interim rent shall be in an amount equal to 1/30th of the monthly rental, multiplied by the number of days elapsing between the date on which the Equipment is accepted by Lessee and the commencement date of this lease, together with the number of days elapsing between commencement of the Lease and the due date of the first payment. The payment of interim rent shall be due and payable upon Lessee's receipt of invoice from Lessor. The rental period under the Lease shall terminate following the last day of the terms stated on the face hereof or in any Schedule hereto unless such Lease or Schedule has been extended other modified. Lessor shall have no obligation to Lessee under this Lease if Lessee fails to execute or deliver to Lessor Acknowledgment and Acceptance of Equipment by Lessee acknowledging its acceptance of the equipment within thirty (30) days after it is delivered to Lessee, with respect to this Lease or any Schedule hereto. THIS LEASE IS NOT CANCELLABLE OR TERMINABLE BY LESSEE SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS WHICH ARE PART OF THIS LEASE. LESSEE UNDERSTANDS AND ACKNOWLEDGES THAT NO BROKER OR SUPPLIER, NOR ANY SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER, IS AN AGENT OF LESSOR, NO BROKER OR SUPPLIER, NOR ANY SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER, IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OR CONDITION OF THIS LEASE, AND NO REPRESENTATION AS TO THE EQUIPMENT OR ANY OTHER MATTER BY THE BROKER OR SUPPLIER, NOR ANY SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER, SHALL IN ANY WAY AFFECT LESSEE'S DUTY TO PAY THE RENTALS AND TO PERFORM LESSEE'S OBLIGATIONS SET FORTH IN THIS LEASE. 7. CHOICE OF LAW. This Lease shall not be effective until signed by Lessor at its principal office listed above. This Lease shall be considered to have been made in the state of Lessor's principal place of business listed above and shall be interpreted in accordance with the laws and regulations of the state of Lessor's principal place of business. Lessee agrees to jurisdiction the state of Lessor's principal place of business listed above by any action, suit or proceeding regarding this Lease, and concede that it, and each of them, transacted business in the state of Lessor's principal place of business listed above by entering into this Lease. In the event of any legal action with regard to this lease or the equipment covered hereby, Lessee agrees that venue may be laid in the County of Lessor's principal place of business. LESSEE; GOLD & MINERALS CO. INC. (Signature) Larry Lozensky, President 5/25/99 LESSOR: (Signature) John R. Balding 5/25/99 EXHIBIT "A" EQUIPMENT DESCRIPTION VENDOR: Can Pay Mining Co., Inc. P.O. Box 1718 Queen Creek, AZ 85242-1718 Qty Description - --- ----------- 1 DRAGON Model 500 DS Hydraulic Furnace 1 Spare #500 Spout 1 36" Hemi Slag Mold 1 48" Conical Vent Hood 1 Paint Vent Hood & Arm 1 Set #60 Crucible Tongs 1 2 Man Ladle Holder 1 Stainless steel viewing mirror 2 50# crucibles 1 Small conical cast iron mold 1 Set Safety Gear (2 hoods, 2 Jackets, 2 pr gloves) 1 DRAGON Model 50GM secondary furnace 1 DRAGON Model R&D 3000 Blast Furnace VENDOR: Asset Exchange Ltd. 3502 E. Broadway Rd Phoenix, AZ 85040 Qty Description - --- ----------- 1 1/2" Thick NPP Tank 1 Rapid DC Power Supply 1 March TE-5C-MD Pump 2 Teflon Heaters 3 Non Indicating Temp Controllers 1 Teflon Heater 1 Low Level Float Switch 1 Technic MRS VENDOR: Spectrex Corporation 3580 Haven Avenue Redwood City, CA 94063 Qty Description - --- ----------- 1 6601000 Vreeland Direct Reading Spectroscope 110 VAC 1 6614000 Quantrex Quantitative Attchment This Exhibit "A" is attached to and a part of Lease No. 914601-001-01 and constitutes a true and accurate description of the equipment. LESSEE: Gold & Minerals Co., Inc. 10115 E. Mountain View Rd., #1008 Scottsdale, AZ 85258 (Signature) Larry Lozensky, President EX-10.3 8 ex10-3.txt PROMISSORY NOTE AND GUARANTY Exhibit 10.3 (TLD Funding Group letterhead) PROMISSORY NOTE - GUARANTY In consideration of value received, GOLD AND MINERALS COMPANY, INC. AN ARIZONA CORPORATION, AND LARRY LOZENSKY (hereinafter "Borrowers") do hereby jointly and severally promise to pay to CEE & GEE FUNDING, INC. dba TLD funding Group an Arizona corporation (hereinafter "Lender") the amount of $365,947.03, such amount accruing interest at the rate of 1.5% per month. This amount is to be paid with interest only for a period of 36 months subject to review by the lender on an annual basis. First payment due on July 15th, with 21 days of interim interest to charged at $182.97 per day. Security Interest as specified in the appropriate UCC-1 Filing. Such payments shall be first applied to interest and then to the principal. Payments will be due and payable on a mutually agreed to day of the month between the lender and the borrower. Payments not made within five (5) days of due date and shall be subject to a late charge of 5% of said payment. This Note may be paid in full at any time without penalty charges. Lender reserves the right to demand payment, in full or in part, with accrued interest charges, at any time with due cause of fraud, neglect, or malfeasance. Borrower agrees to pay all reasonable expenses, including court costs and attorney fees, as may be incurred during collection proceedings in the event of default on this Note. Each maker, surety, guarantor or endorser of this note waives presentation of payment, notice of non-payment, protest and notice of protest and agrees to all extensions, renewals, or release, discharge or exchange of any other party or collateral without notice. GOLD AND MINERALS, INC., (Borrowers) TLD FUNDING GROUP (Lender) (Signature) (Signature: Larry Lozensky, President 5/25/99 John R. Balding, President 5/25/99 (Signature) Larry Lozensky, Individual 5/25/99 EX-10.4 9 ex10-4.txt JMJ PARTNERS JOINT VENTURE AGREEMENT 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. 1 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 2 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 3 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; 4 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 5 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 6 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 7 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. 8 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: --------------------------------- 9 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 10 EX-10.5 10 ex10-5.txt EL CAPITAN I PURCHASE AGREEMENT Exhibit 10.5 AGREEMENT THIS AGREEMENT made and entered into this 12th day of October, 1994, by and between DON ROFOLPH, and NORM ROTHER, hereinafter referred to as FIRST PARTIES and GOLD AND MINERALS, INC., hereinafter referred to as SECOND PARTY. It is agreed that FIRST PARTIES are the owners of the following described real property situated in Lincoln County, New Mexico, Township 8 South, Range 14 East, Sections 10, 11, 13, and 14, El Capital Mining District, Patented claim numbers 1140, 1441, 1442 and 1443. The parties agree FIRST PARTIES will sell to SECOND PARTY, and SECOND PARTY agrees to purchase one million (1,000,000) tons of ore from the aforementioned property under the following terms conditions, and covenants, to wit: 1. FIRST PARTIES, or assigns, agree to provide ore to SECOND PARTY at the Capital property site. Said ore is to be mined and crushed to one-fourth (1/4) inch and loaded. However, it will be the responsibility of SECOND PARTY to provide for the use of the FIRST PARTIES additional crushing equipment needed, to meet the crushing specifications, also it will be the responsibility of SECOND PARTY to provide a front end loader to load the truck or trucks of SECOND PARTY for the purpose of hauling said ore. 2. Purchase price for said ore is to be Two Hundred Dollars ($200.00) per ton, paid weekly at the end of each week. Should SECOND PARTY fail to pay for said ore at the end of each week, then FIRST PARTIES shall have the right to refuse to crush and load additional ore. 3. The SECOND PARTY shall have an option of an additional Five Million (5,000,000) tons of ore which will be granted after the first One Million (1,000,000) tons are delivered to SECOND PARTY. 4. SECOND PARTY agrees tha5t all expenses including but not limited to start up and approved expenses will be borne by SECOND PARTY and will include any additional crushing equipment needed to meet the crushing specifications. 5. It is further agreed that FIRST PARTIES and SECOND PARTY each retain the right to assign this agreement to third parties, and in the event that it is not economical to continue, this agreement will become null and void. 6. It is further understood and agreed by and between said parties that the first 20 tons purchased will be made by said SECOND PARTY by the 12th day of April 1995 and weekly purchases of 10 tons per week will be made by the SECOND PARTY beginning May 12, 1995. This agreement shall be binding on the heirs, executors, administrators and assigns. /s/ Don Rodolph (Signatures) --------------------------------------- DON RODOLPH, FIRST PARTY /s/ Norm Rother --------------------------------------- NORM ROTHER, FIRST PARTY /s/ Charles O. Mottley --------------------------------------- CHARLES O. MOTTLEY, SECOND PARTY /s/ Larry Lozensky --------------------------------------- LARRY LOZENSKY, SECOND PARTY Amendment to Agreement originating August 8, 1994 formalize October 12, 1994 and its extensions. This Amendment as made and entered into this 24th day of December, 1996 between and among Don Rodolph and Norb Rother hereinafter (First Party) and Gold and Minerals Co. Inc. Hereinafter (Second Party). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowl- edged, the First Party and Second Party amend the Agreement dated October 12, 1994 as follows: #2 is hereby deleted and replaced with the following: Second Party shall pay to First Party an 8% Net Smelting Revenue from all metal produced from Capitan. Net Smelting Revenue shall be defined as the value paid for the smelted metals, less the cost of smelting. First party to be paid upon receipt of payment by Second party for metals from refinery or buying party. Secnd party shall furnish First party a copy of all checks received for smelted metals. Should Second party fail to pay First Party within three (3) days of the date the smelting payments are deposited in the account of Second party, then said Second party will not crush or load additional ore. Payments of $65,000 paid to date by Second party to First party shall be first applied towards this agreement. IN WITNESS WHEREOF, this document has been executed as of the date first above written. /s/ Don Rodolph (Signatures) --------------------------------------- DON RODOLPH, FIRST PARTY /s/ Norm Rother --------------------------------------- NORM ROTHER, FIRST PARTY /s/ Charles O. Mottley --------------------------------------- CHARLES O. MOTTLEY, SECOND PARTY /s/ Larry Lozensky --------------------------------------- LARRY LOZENSKY, SECOND PARTY EX-10.6 11 ex10-6.txt EL CAPITAN II PURCHASE AGREEMENT Exhibit 10.6 PURCHASE AGREEMENT AND PROMISSORY NOTE It is agreed by EL Capitan LTD, as ("Purchaser") and H.M. LaRue and Sons, the ("Seller") that $25,000 will be the selling price for the following: The BLM Claim NMMC serial #163908 Smokey #3 Located at TOWNSHIP 8 SOUTH, RANGE 14 EAST Section 10:SE 1/4, Section 15: NE 1/4, El Capitan Mining District, Lincoln County, NM. In addition to the above claim, the following personal and real property that is presently owned by H.N. LaRue and Sons shall be included as part of the sale: The steel building, all tools and equipment that are presently on the claim or the property described at the legal description above. TERMS El Capitan LTD will pay $15,000 down payment upon all parties executing this agreement. The balance of $10,000 will be paid to H.N. LaRue and Sons on May 17, 1999 as per the Promissory Note listed below. For value received, the undersigned El Capitan LTD ("the Purchaser") promises to pay to the order of H.N. LaRue and Sons (the "Seller"), at P.O. Box 384, Capitan, NM 88316 (or at such other place as the Payee may designate in writing) the sum of $10,000.00. The unpaid principal shall be payable in full on May 17, 1999 (the "Due Date"). All payments of principal on this Note shall be paid in the legal currency of the United States. This Note shall be construed in accordance with the laws of the State of NM. Signed this _____ day of _______________, 19___, at Capitan, NM. Purchaser: EL Capitan LTD By: ---------------------------------------------- B.J. Bouldin, Vice President, El Capitan, LTD. Seller's: H.N. LaRue and Sons By: --------------------------------------------- Keith LaRue By: --------------------------------------------- Leslie W. LaRue By: --------------------------------------------- Hawley N. LaRue EX-10.7 12 ex10-7.txt WEAVER-RICH HILL PURCHASE AGREEMENT Exhibit 10.7 -------------------------------------------------- (Seal) Name: Black Sands Int. LLC Instrument #9550999 Address: 7008 E. Gold Official Records of Yavapai County Dust, #21, Scottsdale Margo W. Carson C/S/Z: AZ 85253 Request of: Black Sands International Date: 10/03/95 Time: 09:40 Fee: 5.00 SC: 4.00 PT 1.00 Book 3087 Page 087 Pages: 001 ================================================================================ QUIT CLAIM DEED KNOWN ALL MEN BY THESE PRESENTS: That I, Robert L. Langguth, the undersigned, for the consideration of Ten Dollars ($10.00), and other valuable considerations, do hereby release, remise, and forever quitclaim unto Black Sands International, LLC, all right, title and interest in the certain Property situated in Yavapai County, State of Arizona, and described as follows: Weaver #1, AMC 318082 a mining claim located in the N.W. 1/4, Sec 5 T9N R4W recorded in Yavapai County Book 2429, Pg. 508 IN WITNESS WHEREOF, I have hereunto set my hand and seal this 1st day of September, 1995. ROBERT L. LANGGUTH (Signature) State of Arizona ) ACKNOWLEDGMENT ) ss. County of Maricopa ) On this 1st day of September 1995, before me, the undersigned Notary Public, personally appeared Robert L. Langguth, known to me to be the individual who executed the foregoing instrument and acknowledged the same to be his free act and deed. My Commission Expires: July 8, 1999 (Signature) Claudia Cabrena Notary Public (Seal) EX-10.8 13 ex10-8.txt LOGAN MINE ASSIGNMENT Exhibit 10.8 ASSIGNMENT OF BLM CLAIM For value received I (Larry L. Lozensky) assign all of my rights and interest in BLM claim #340152 otherwise known as TL#2 to Gold and Minerals Co. Inc. /s/ Larry L. Lozensky (Signature) Larry L. Lozensky EX-10.9 14 ex10-9.txt WIKIEUP MINE LEASE ASSIGNMENT Exhibit 10.9 LEASE ASSIGNMENT AGREEMENT This agreement is made and entered into this ____ day of ____________, 1996, for the express purpose of assignment of the rights to the minerals on properties in the Wikieup area owned or controlled by Paul Landers and Marty Talcott to Gold and Minerals Company, Inc. These include the SW and SE quarter of sections 25 and 26, Township 16 1/2 N, Range 14 West in an area northwest of Wikieup, Arizona, in Mojave county. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: Mr. Landers and Mr. Talcott will receive advance production bonus payments totaling $10,000, $1,000 to be paid upon closing of this agreement, and $9,000 when the concentration plant is in production. Mr. Landers and Mr. Talcott will lease 240 or more acres exclusively for the use by Gold and Minerals for processing on the San Tan Reservation releasing by deed or bill of sale acreage as needed to Gold and Minerals for their operations. Gold and Minerals shall have first right of refusal on all properties owned or controlled by Mr. Landers and Mr. Talcott. Mr. Landers and Mr. Talcott will receive a combined monthly production bonus of $10.00 per ton of ore removed from the property. This ore must have minimum values of 3 ounces per ton. For ores of lesser value, the bonus will be pro-rated. Initial projections are for removal of 20 tons daily. These bonuses shall continue for as long as Gold and Minerals continues to remove ore from these properties. These bonuses shall begin and be paid 30 days after removal of production quantities of ore from the property. This bonus will be reevaluat- ed if the amount of tonnage removed is dramatically reduced and a fair adjustment to the production bonus will be made. This contract will remain in effect as long as economically feasible for Gold and Minerals. /s/ Larry Lozensky /s/ Paul Landers - ------------------------------------- --------------------------------------- Larry Lozensky Paul Landers President - Gold and Minerals /s/ Joseph Hohmann /s/ Mary Talcott - ------------------------------------- --------------------------------------- Joseph Hohmann Mary Talcott Chief Executive Officer - Gold and Minerals When recorded mail to: Paul Landers P.O. Box 1351 Congress, AZ 85332 -------------------------------------------------------- QUIT CLAIM DEED - -------------------------------------------------------------------------------- Effective Date: 11/13/96 GRANTORS: (Person(s) on the Deed now) Paul Landers ------------------------------------------ GRANTEE: (Person(s) to be on the Deed after recording) GOLD AND MINERAL CO. INC. ------------------------- Subject Real Property (Address or Location) MINING CLAIM BORESIGHT #5 Located in South east 1/4 Sec., Sec.#26 Township 16 1/2 N. Range, 14 W Mohave Co. Bk. 2801, Pg. 620 Subject Real Property (ENTIRE Legal Description) Mining Claim Boresight #5 = 20, 232 Ft. w/o US Hy __, Located in South east 1/4 Sec., Sec 26 Township 16 1/2Range 14W AMC #341926, Mohave Co. Book 2801, Pg. 620 For valuable consideration, Grantor quit claims to Grantee all rights, title, and interest of Grantor in Subject Real Property together with all rights and privileges appurtenant or to become appurtenant to Subject Real Property on effective date. - -------------------------------------------------------------------------------- (DO NOT sign until you are in front of a Notary Public) - ------------------------------------- --------------------------------------- Grantor Grantor - ------------------------------------- --------------------------------------- Grantee Chief Executive Officer Grantee Gold & Minerals Co. Inc. Subscribed and sworn to before me on this 13th day of November, 1996. Notary Public (Claudia Cabrena) ------------------------------ My Commission Expires July 8, 1999 (Seal) EX-21.1 15 ex21-1.txt SUBSIDIARIES Exhibit 21.1 SUBSIDIARIES OF REGISTRANT El Capitan Ltd. Incorporated In Arizona Does Business Under Its Name -----END PRIVACY-ENHANCED MESSAGE-----