<PAGE>
                                                                    EXHIBIT 4.23

                             SECURED PROMISSORY NOTE

U.S. $2,850,000                                                 OCTOBER 17, 2005

     FOR VALUE RECEIVED, the undersigned NORD RESOURCES CORPORATION, a company
organized under the laws of Delaware (the "COMPANY" or "BORROWER"), promises to
pay to the order of AURAMET TRADING, LLC, a Delaware limited liability company
("HOLDER"), the principal sum of $2,850,000, with simple interest accruing daily
from the above-referenced date until paid, at a rate of nine percent (9%) per
annum. Interest shall be paid monthly in cash on the first day of each month
commencing November 1, 2005. Notwithstanding the foregoing, upon the occurrence
of a Default and during the continuance of a Default, the principal balance then
outstanding shall accrue interest at a rate of twelve percent (12%) per annum.

     This Promissory Note (the "NOTE") is being issued to Holder in connection
with a bridge loan (the "Loan") provided to the Company by Holder.

     The following is a statement of the rights of Holder and the conditions to
which this Note is subject, and to which Holder, by acceptance of this Note,
agrees:

     1. MATURITY DATE. The principal balance hereof, and accrued but unpaid
interest thereon, shall be due and payable on the earlier of (a) April 17, 2006,
or (b) the closing of an equity offering in which the Company raises not less
than Twenty-Five Million Dollars ($25,000,000).

     2. LOSS OF NOTE. Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Note, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Note, if mutilated, the Company will execute
and deliver a new Note of like tenor and date. Any such new Note executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not this Note so lost, stolen, destroyed, or mutilated
shall be at any time enforceable by anyone.

     3. DEFAULT.

          (a) Holder may declare the entire unpaid principal and accrued
interest on the Note immediately due and payable, by providing written notice to
the Company, if any of the following events shall occur (each such event being a
"DEFAULT"):

          (1)  the Company shall fail to pay the principal and accrued but
               unpaid interest of the Note on any date such items are due,
               provided however, the Company shall have a period of three (3)
               Business Days from any such date within which cure a Default on
               an interest payment;

          (2)  any representation or warranty made by the Company to Holder
               herein or in

<PAGE>

               any other document, instrument or agreement executed by the
               Company in connection with the Loan (as amended or extended from
               time to time and in effect, each, a "Loan Document," and
               collectively, with the Note, the "Loan Documents") shall fail to
               be true and correct in any material respect (provided that the
               Company shall have a period of five (5) Business Days from the
               date the Company receives written notice thereof from the Holder
               within which to cure such Default(s);

          (3)  the Company shall fail to observe or perform any of the
               covenants, agreements or obligations contained in the Note or any
               other Loan Document or any other agreement with Holder in any
               material respect;

          (4)  the Company shall institute proceedings to be adjudicated
               bankrupt or insolvent, or the consent by the Company to the
               institution of bankruptcy or insolvency proceedings against it
               under the Bankruptcy Act, or any other applicable federal or
               state insolvency law, or the consent by the Company, or
               acquiescence in, the filing of any such petition or in the
               appointment of a receiver, liquidator, assignee, trustee, or
               other similar official of the Company, or of any substantial part
               or its property, or the making by the Company of an assignment
               for the benefit of creditors, or the admission by the Company in
               writing of its inability to pay its debts generally as they
               become due;

          (5)  within sixty (60) days after the commencement of proceedings
               against the Company seeking any bankruptcy, insolvency,
               liquidation, dissolution or similar relief under any present or
               future statute, law or regulation, such action shall not have
               been dismissed or all orders or proceedings thereunder affecting
               the operations or the business of the Company stayed, or the stay
               of any such order or proceedings shall thereafter be set aside,
               or, within thirty (30) days after the appointment without the
               consent or acquiescence of the Company of any trustee, receiver
               or liquidator of the Company over of all or any substantial part
               of the properties of the Company, such appointment shall have not
               been vacated;

          (6)  the Company shall dissolve or take steps toward dissolution;

          (7)  final judgments which exceed an aggregate of $100,000 shall be
               rendered against the Company or its subsidiaries and shall not
               have been paid, discharged or vacated within forty-five (45) days
               after entry or filing of such judgments;

          (8)  any event of default (as such term is defined under any
               applicable underlying agreement) of any of the Company's
               indebtedness in excess of $75,000 in the aggregate shall occur or
               any failure of the Company to pay any such indebtedness when due
               shall occur; and

<PAGE>

          (9)  the Deed of Trust (as hereinafter defined) shall for any reason
               (other than pursuant to the terms thereof or by reason of any
               action taken by the Holder and not with the knowledge of the
               Borrower or within its power to control) cease to create a valid
               and perfected (to the extent required thereby or by this
               Agreement) first priority lien in the Johnson Camp Collateral (as
               hereinafter defined), or the Company asserts such failure,
               provided however, the Company shall have a period of ten (10)
               Business Days within which to cure this deficiency and perfect
               the Holder's first priority lien in the Johnson Camp Collateral.

          (b) Remedies Upon Default. Upon the occurrence, and at any time during
the continuance of, any Default, Holder, upon notice in writing to the Company,
may declare all unpaid principal of the Note and the interest thereon to be
immediately due and payable and the same shall become immediately due and
payable upon such declaration and Holder may pursue any remedy available to
Holder at law or in equity; provided, however, that in the event of any Default
under clauses (4) or (5) above, all unpaid principal hereof and interest
hereunder shall automatically become immediately due and payable, without the
need for declaration, presentment, demand, protest, or other notice of any kind.

     4. MANDATORY REPURCHASE OF NOTES. As soon as possible, and in any event
within five (5) Business Days after the occurrence of a Mandatory Repurchase
Event (as defined below), the Company shall furnish to Holder written notice
setting forth in reasonable detail the facts and circumstances underlying such
Mandatory Repurchase Event. The occurrence of any such Mandatory Repurchase
Event shall constitute an irrevocable offer by the Company to purchase all of
the Notes held by Holder, at 101% of the principal amount thereof, on a date to
be specified by the Company, which date shall be not less than thirty (30) days
nor more than ninety (90) days after the occurrence of such Mandatory Repurchase
Event, together with all accrued and unpaid interest on the amount so purchased
through the date of purchase. Following receipt of any offer to prepay the Notes
hereunder, Holder shall advise the Company, by written notice, within ten (10)
days after receipt of such offer, as to whether it desires to sell all, but not
less than all of the Notes held by it (in integral multiples of $500,000),
specifying the principal amount of the Notes to be sold by it. If Holder accepts
such offer but does not specify an amount it wishes to receive, it will be
deemed to have elected to sell all of the Notes held by it.

     5. MANDATORY REPURCHASE EVENT. "Mandatory Repurchase Event" shall mean at
any time prior to or after a public offering (i) any person together with all
affiliates and associates of such person, shall become the beneficial owner,
directly or indirectly, of securities of the Company representing 51% or more of
the combined voting power of the Company's then outstanding securities having
the right to vote in an election of the Company's Board of Directors; or (ii)
persons who constitute the Company's Board of Directors as of the date hereof
cease for any reason, including, without limitation, as a result of a tender
offer, proxy contest, merger or similar transaction, to constitute at least a
majority of the Company's Board of Directors; or (iii) the Board of Directors
and the stockholders of the Company (if required) shall approve (a) any
consolidation or merger of the Company where the stockholders of the Company,
immediately prior to the

<PAGE>

consolidation or merger, would not, immediately after the consolidation or
merger, beneficially own, directly or indirectly, shares representing in the
aggregate at least 51% or more of the voting shares of the corporation issuing
cash or securities in the consolidation or merger (or of its ultimate parent
corporation, if any), (b) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any party as
a single plan) of all or substantially all of the assets of the Company, (c) any
plan or proposal for the liquidation or dissolution of the Company, or (iv) the
Company terminates the services of Salman Partners without completing an
offering of the Company's capital stock.

     6. PREPAYMENT.

          (a) OPTIONAL PREPAYMENT. The Company may, upon ten (10) days prior
written notice to Holder, prepay this Note in whole or in part, but in no event
less than $250,000 for each occurrence of a prepayment, at any time without
premium or penalty (other than for such premium as is contemplated in Section 4
hereof in connection with a mandatory repurchase of this Note); provided,
however, that the Company shall reimburse Holder for any premiums, penalties or
other costs incurred by Holder on account of the Company's prepayment of this
Note.

          (b) MANDATORY PREPAYMENT. For so long as this Note shall be
outstanding, the Company agrees to apply all funds received by the Company on
any of its future borrowings or offerings of equity, including without
limitation any financings, debt offerings, offerings of its equity or debt
securities, against the outstanding balance due under this Note, except for
proceeds of (i) short term unsecured working capital facilities but not in
excess of $1,000,000 in the aggregate at any one time, and (ii) purchase money
security interest financings used for the acquisition of equipment to be used at
the Johnson Camp Mine but not to exceed $250,000 in the aggregate at any one
time.

     7. NOTICES TO HOLDER. So long as this Note shall be outstanding, (i) if the
Company shall pay any dividend or make any distribution upon the Common Stock or
(ii) if the Company shall offer to the holders of Common Stock for subscription
or purchase by them any share of any class of Capital Stock or any other rights
or (iii) if any capital reorganization of the Company, reclassification of the
Capital Stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to Holder, at least fifteen (15) days prior the date specified in
(x) or (y) below, as the case may be, a notice containing a brief description of
the proposed action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up. The Company shall also promptly deliver a notice to Holder
describing any Default of which it has become aware.

<PAGE>

     8. COSTS. The Company agrees to reimburse Holder for any reasonable legal
fees or other costs associated with this Note or any of the other Loan
Documents, but in no event more than Fifty Thousand Dollars ($50,000).

     9. REPRESENTATIONS AND WARRANTIES. The Company hereby makes each of the
representations and warranties set forth on Schedule 1 hereto, as of the date of
this Agreement.

     10. COVENANTS. The Company hereby agrees to observe and fully perform each
of the covenants set forth on Schedule 2 hereto.

     11. CONDITIONS PRECEDENT. Prior to the extension of the funds contemplated
to be advanced herein, unless waived in writing in advance by Holder, the
Company shall have delivered to Holder the following documents, in form and
substance satisfactory to Holder, and performed the following undertakings to
the satisfaction of Holder:

          (a) this Note;

          (b) a deed of trust, assignment of rents, security agreement and
fixture filing (the "Deed of Trust") relating to the so-called Johnson Camp Mine
granting Holder a first priority lien encumbering all of the real and personal
property associated with the Johnson Camp Mine (the "Johnson Camp Collateral");

          (c) a UCC-1 financing statement, associated with the Johnson Camp
Collateral;

          (d) a post-closing letter evidencing the Company's obligation to
perform certain undertakings post closing;

          (e) an officer's certificate of the Company with respect to incumbency
and resolutions authorizing the execution and delivery of the Note and the other
Loan Documents;

          (f) a legal opinion of the August Law Group, P.C., counsel to the
Company, regarding the due execution, enforceability, authority of all of the
loan documents by Borrower and the first lien priority of Holder in the Johnson
Camp Collateral;

          (g) termination of all funds advanced to the Company by Regiment
Capital III, L.P., and all liens relating thereto, including without limitation
receipt of a payoff letter and the filing of, or authorization to file, a
Beneficiary's Deed of Release and Reconveyance and UCC termination relative to
such liens;

          (h) a certificate of insurance naming Holder as loss payee and
additional insured;

          (i) a memorandum summarizing the sources and uses of the proceeds of
this Note;

          (j) the Subordination Agreement among Ronald A. Hirsch and Steve
Seymour and the Company;

<PAGE>

          (k) payment of a closing fee to Holder in an amount equal to $40,000;

          (l) warrants for the purchase of shares of the Company's common stock,
in the form attached hereto as Exhibit A issued in favor of Lender up to the
aggregate amount reflected in Exhibit A (the "Warrants"); and

          (m) such other documents or certificates, and completion of such other
matters, as the parties may mutually deem necessary or appropriate in good
faith.

     12. CONDITIONS SUBSEQUENT. On or before fifteen (15) Business Days after
the extension of the funds contemplated to be advanced herein, unless waived in
writing in advance by Holder, the Company shall deliver to Holder the following
documents, in form and substance satisfactory to Holder, and performed the
following undertakings to the satisfaction of Holder:

          (a) a standard form lender's title policy from the Trustee under the
Deed of Trust, insuring the title set forth in the Deed of Trust subject only to
the Permitted Exceptions set forth in the Deed of Trust; and

          (b) all other certificates of title and documents necessary to perfect
the lien on the Johnson Camp collateral under the Deed of Trust, including
certificates of title to all vehicles.

     13. MISCELLANEOUS.

          (a) Waiver and Amendment. Any provision of this Note may be waived,
amended or modified only upon the written consent of the Company and Holder.

          (b) Restriction on Transfer. This Note may only be transferred in
compliance with applicable state and federal laws. All rights and obligations of
the Company and Holder shall be binding upon and benefit the successors,
assigns, heirs, and administrators of the parties.

          (c) No Assignment. This Note may be transferred by the Holder,
provided that, unless a Default has occurred and is continuing, the Holder shall
be obliged to give the company at least fifteen (15) Business Days' prior
written notice of its intention to transfer this Note. The Company may not
transfer or assign all or any part of this Note without the prior written
consent of Holder.

          (d) Governing Law. This Note shall be governed by the laws of the
State of New York.

          (e) Severability. If any of the provisions of this Note is held
invalid, such invalidity shall not affect the other provisions hereof that can
be given effect without the invalid provision, and to this end the provisions of
this Note are intended to be and shall be deemed severable.

<PAGE>

          (f) Indemnification. The Company agrees to hold harmless, defend and
indemnify Holder, its officers, employees, agents and representatives (each, an
"Indemnified Party") from and against any liability, loss, cost, expense, damage
claim or cause of action due to or arising out of or in connection with this
Note or any other Loan Document in any way, directly or indirectly. The
indemnification provided for in the immediately preceding sentence shall not
apply to liabilities, losses, costs, expenses, damage, claims or causes of
action which may arise as the result of the willful misconduct or gross
negligence of the Holder.

          (g) Notices. All notices and other communications given to or made
upon any party hereto in connection with this Note shall, except as otherwise
expressly herein provided, be in writing (including telecopy, telefaxed or
telegraphic communication) and mailed via certified mail, telefaxed, telegraphed
or delivered to the respective parties, as follows:

     To the Company:

          Nord Resources Corporation
          P.O. Box 384
          Dragoon, AZ 85609
          Attn: Erland Anderson, President
          Telecopier: (520) 586-7020

     With a copy (which shall not constitute notice) to:

          August Law Group, P.C.
          The Atrium Building
          19200 Von Karman Avenue, Suite 500
          Irvine, CA 92612
          Attn: Kenneth S. August, Esq.
          Telecopier: (949) 752-7776

     To Holder

          Auramet Trading, LLC
          2 Executive Drive
          Suite 645
          Fort Lee, New Jersey 07024
          Attn: Justin Sullivan
          Telecopier: (201) 905-5001

     And a copy (which shall not constitute notice) to:

          Fennemore Craig, P.C.
          3003 North Central Avenue, Suite 2600
          Phoenix, Arizona 85012
          Attn: Sarah A. Strunk, Esq.

<PAGE>

          Telecopier: (602) 916-5327

Or in accordance with any subsequent written direction from the recipient party
to the sending party delivered in accordance with this Section 13(g). All such
notices and other communications shall, except as otherwise expressly herein
provided, be effective upon (i) delivery if delivered by hand; (ii) the third
(3rd) Business Day after the date sent, in the case of certified mail; (iii)
receipt, in the case of telecopy, or (iv) upon delivery to the telegraph
company, charges prepaid, in the case of telegraph.

          (h) Definitions. The following terms shall have the meanings set forth
below.

          "Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of New York are authorized or required to close.

          "Common Stock" means the issued and outstanding common stock, par
value $.01 per share, of the Company.

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by its
officer, thereunto duly authorized as of this 17th day of October, 2005.

                                         NORD RESOURCES CORPORATION


                                         By: /s/ Erland Anderson
                                             -----------------------------------
                                         Name: Erland Anderson
                                         Title: President

<PAGE>

                                    EXHIBIT A

                           FORM OF WARRANT CERTIFICATE

No. ________                                                    [_____] Warrants

THE WARRANTS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. SUCH WARRANTS MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER
APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF
COUNSEL SATISFACTORY TO NORD RESOURCES CORPORATION SUCH QUALIFICATION AND
REGISTRATION IS NOT REQUIRED PURSUANT TO AN EXEMPTION THEREFROM. NO TRANSFER OF
ANY SUCH WARRANT SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED.

                                WARRANTS FOR THE
                            PURCHASE OF COMMON STOCK

Issue Date: October 17, 2005

THIS CERTIFIES THAT, FOR VALUE RECEIVED, Auramet Trading, LLC, a Delaware
limited liability company (the "Holder"), is the owner of the number of warrants
to purchase an equal number of validly-issued, fully-paid and non-assessable
shares of Common Stock of NORD RESOURCES CORPORATION, a corporation organized
and existing under the laws of the State of Delaware (the "Corporation"),
determined as follows:

     FW = 0.15(FA/EP), where

     FW = the number of warrants represented hereby for the purchase of an
          equal number of shares of the Corporation's Common Stock;

     FA = US$1,000,000, converted into Canadian Dollars on the date of issue
          of this Warrant Certificate.

     EP = the Exercise Price.


                                       1

<PAGE>

The warrants represented by this Warrant Certificate are fully vested as of the
date hereof. Purchase may be made at any time, and from time to time, prior to
5:00 p.m. Pacific Time on the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with a written notice
signed by the Holder stating the number of shares of Common Stock with respect
to which such exercise is being made, at the principal corporate address of the
Corporation, accompanied by payment of the Purchase Price, in lawful money of
the United States of America in cash or by official bank or certified check made
payable to NORD RESOURCES CORPORATION. The Purchase Price and the number of
shares of Common Stock subject to purchase upon the exercise of the Warrants are
subject to modification or adjustment as set forth herein. The Warrants
represented by this Warrant Certificate have been issued by the Corporation in
connection with a Secured Promissory Note, dated as of even date herewith,
issued by the Company in favor of the Holder (the "Note").

SECTION 1. DEFINITIONS. As used herein, the following terms shall have the
     following meanings, unless the context shall otherwise require:

          (a)  "Adjusted Purchase Price" shall have the meaning given to it in
               Section 5 of this Certificate.

          (b)  "Change of Shares" shall have the meaning given to it in Section
               5 of this Certificate.

          (c)  "Corporate Office" shall mean the office of the Corporation at
               which, at any particular time, its principal business shall be
               administered, which office is currently located at 3048 Seven
               Dash Road, Dragoon, Arizona 85609.

          (d)  "Exercise Date" shall mean, as to any Warrant, the date on which
               the Corporation shall have received both (a) this Warrant
               Certificate, together with a written notice of exercise in
               accordance herewith, duly executed by the Holder hereof, or his
               attorney duly authorized in writing, and indicating that the
               Holder is thereby exercising such Warrant(s), and (b) payment by
               wire transfer, or by official bank or certified check made
               payable to the Corporation, of an amount in lawful money of the
               United States of America equal to the applicable Purchase Price
               for such Warrant(s).

          (e)  "Exercise Price" shall mean, as to any Warrant, the final price
               at which a share of the Corporation's Common Stock is sold in the
               Initial Public Offering of its Common Stock.

          (f)  "Expiration Date" shall mean 5:00 P.M. (Pacific Time) on the date
               that is twenty-four (24) months following the date of this
               Warrant Certificate; provided, however, that if the Corporation
               fails to complete an Initial Public Offering of its Common Stock
               on or


                                       2

<PAGE>

               before April 17, 2006, then this Warrant Certificate shall expire
               on April 17, 2006 and the Corporation shall issue a Warrant
               Certificate to the Holder granting warrants to purchase 256,410
               shares of Common Stock at an exercise price equal to the average
               closing price of the Common Stock (as listed on the bulletin
               board) for the 20 trading days prior to April 17, 2006. This
               replacement Warrant Certificate shall expire on April 17, 2008.

               If the Expiration Date falls on a holiday or a day on which banks
               are authorized to be closed in the State of Arizona, then the
               Expiration Date shall mean 5:00 P.M. (Pacific Time) of the next
               consecutive day which does not fall on a holiday or a day on
               which banks are authorized to be closed in the State of Arizona.

          (g)  "Holder" shall mean, as to any Warrant and as of any particular
               date, the person in whose name the Warrant Certificate
               representing such Warrant is registered as of that date on the
               Warrant Register maintained by the Corporation.

          (h)  "Common Stock" shall mean the common stock of the Corporation,
               which has the right to participate in the distribution of
               earnings and assets of the Corporation without limit as to amount
               or percentage.

          (i)  "Purchase Price" shall mean the purchase price to be paid upon
               exercise of each Warrant hereunder in accordance with the terms
               hereof, which price shall be the Exercise Price, subject to
               adjustment from time to time pursuant to the provisions of
               Section 5 hereof.

          (j)  "Securities Act" shall mean the Securities Act of 1933, and any
               amendments or modifications, or successor legislation, thereto
               adopted, and all regulations, rules or other laws enacted or
               adopted pursuant thereto.

          (k)  "Warrants" shall mean the Warrants represented by this Warrant
               Certificate.

          (l)  "Warrant Certificate" shall mean any certificate representing
               Warrants, and "this Certificate" shall mean they warrant
               Certificate issued to the Holder identification on the first page
               hereof.

          (m)  "Warrant Registry" means the official record maintained by the
               Corporation in which are recorded, with respect to each Warrant
               Certificate issued by the Corporation: the date of issuance, the
               name and address of the original Holder, the name and address of


                                       3

<PAGE>

               each subsequent transferee of such original Holder, and the
               number identifying, such Warrant Certificate.

          (n)  "Warrant Shares" shall have the meaning given to it in Section 2
               of this Certificate.

SECTION 2. EXERCISE OF WARRANTS.

          (a)  Each Warrant evidenced hereby may be exercised by the Holder at
               any time on the Exercise Date, upon the terms and subject to the
               conditions set forth herein. A Warrant shall be deemed to have
               been exercised immediately prior to the close of business on the
               Exercise Date and the person entitled to receive shares of
               restricted common stock of the Corporation deliverable upon such
               exercise shall be treated for all purposes as the Holder of a
               Warrant Share upon the exercise of the applicable Warrant as of
               the close of business on the Exercise Date. Promptly following,
               and in any event within ten (10) business days after, the date on
               which the Corporation first receives clearance of all funds
               received in payment of the Purchase Price pursuant to this
               Warrant Certificate, the Corporation shall cause to be issued and
               delivered to the person or persons entitled to receive the same,
               a certificate or certificates evidencing the issuance to such
               Holder of the applicable number of Warrant Shares (plus a Warrant
               Certificate for any remaining issued but unexercised Warrants of
               the Holder). Notwithstanding the foregoing sentence, in the event
               that any registration or qualification (or filing for exemption
               from any such requirements) is required prior to the issuance of
               such Warrant Shares by the Corporation in accordance with Section
               3(b) below, then the obligation to deliver any such certificates
               shall arise only upon completion of such requirements and at such
               time as the Corporation may lawfully do so.

          (b)  Upon the exercise of the Warrants represented hereby, if the
               Corporation so requests, the Holder shall certify to the
               Corporation that it is not exercising such Warrants with a view
               to distribute the Warrant Shares in violation of the Securities
               Act, and shall provide such other investor representations as the
               Corporation may require to confirm the ability of the Corporation
               to rely upon the exemption from registration under the Securities
               Act which applies to the distribution of Warrant Shares at the
               time of such distribution.


                                       4

<PAGE>

SECTION 3. RESERVATION OF SHARES; REGISTRATION; RIGHTS; TAXES; ETC.

          (a)  The Corporation covenants that it will at all times reserve and
               keep available out of its authorized Common Stock, solely for the
               purpose of issue upon the valid exercise of Warrants, such number
               of Warrant Shares as shall then be issuable upon the exercise of
               all Warrants then outstanding. The Corporation covenants that all
               shares of Common Stock which shall be issuable upon exercise of
               the Warrants shall, at the time of delivery, be duly and validly
               issued, fully-paid, non-assessable and free from all taxes, liens
               and charges with respect to the issuance thereof (other than
               those which the Corporation shall promptly pay or discharge, or
               any liens created thereon by the Holder thereof and/or any
               predecessor of such Holder).

          (b)  The Corporation shall not be obligated to deliver any Warrant
               Shares pursuant to the exercise of the Warrants represented
               hereby unless and until a registration statement under the
               Securities Act and/or under any applicable state securities laws
               and regulations, with respect to such securities is effective, or
               an exemption from such registration is available to the
               Corporation at the time of such exercise. The Corporation
               covenants that if any Warrant Shares reserved for the purpose of
               exercise of Warrants hereunder require registration with, or
               approval of, any governmental authority under any federal or
               state securities law before such securities may be validly issued
               or delivered upon such exercise, then the Corporation will in
               good faith and as expeditiously as reasonably possible, endeavor
               to secure such registration or approval. However, in the event
               that this Warrant Certificate represents Warrants which have been
               transferred by an initial holder thereof, the Warrants
               represented hereby may not be exercised by, nor shares of Common
               Stock issued to, the Holder hereof in any state in which such
               exercise and issuance would be unlawful. If the Holder exercises
               its right to purchase Warrant Shares following the initial public
               offering of the Corporation's Common Stock, the Warrant Shares
               issuable to the Holder upon exercise of the Warrants will be
               registered under the Securities Act and freely tradeable by the
               Holder.

          (c)  The Corporation shall pay all documentary, stamp or similar taxes
               and other governmental charges that may be imposed with respect
               to the issuance of the Warrants, or the issuance or delivery of
               any shares of Common Stock upon exercise of the Warrants;
               provided, however, that if the shares of Common Stock are to be
               delivered in a name other than the name of the Holder hereof,
               then no such


                                       5

<PAGE>

               delivery shall be made unless the person requesting the same has
               paid to the Corporation the amount of transfer taxes or charges
               incident thereto, if any.

SECTION 4. LOSS OR MUTILATION. Upon receipt by the Corporation of evidence
     satisfactory to it of the ownership of, and loss, theft, destruction or
     mutilation of, this Warrant Certificate and (in case of loss, theft or
     destruction) of indemnity satisfactory to the Corporation, and (in the case
     of mutilation) upon surrender and cancellation thereof, the Corporation
     shall execute and deliver to the Holder in lieu thereof a new Warrant
     Certificate of like tenor representing an equal aggregate number of
     Warrants as was indicated to be outstanding on the prior lost or mutilated
     Warrant Certificate (provided, however, that to the extent that any
     discrepancy may exist between the number of Warrants purported to be
     outstanding in respect of any Holder as evidenced by a Warrant Certificate
     that has been lost or mutilated and the number attributable to such Holder
     in the Warrant Registry, then the Warrant Registry shall control for all
     purposes, absent a showing of manifest error. Each Holder requesting a
     substitute Warrant Certificate due to loss, theft or destruction shall,
     prior to receiving such substitute certificate, provide an affidavit to the
     Corporation in the form prescribed thereby and signed by (and notarized on
     behalf of) such Holder. Applicants for a substitute Warrant Certificate
     shall comply with such other reasonable regulations and pay such other
     reasonable charges as the Corporation may prescribe.

SECTION 5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF WARRANT SHARES OR
     WARRANTS.

          (a)  Subject to the provisions of this Warrant Certificate and
               applicable law, in the event the Corporation shall, at any time
               or from time to time after the date hereof, issue any shares of
               Common Stock as a stock dividend to the holders of Common Stock,
               or subdivide or combine the outstanding shares of Common Stock
               into a greater or lesser number of shares (any such sale,
               issuance, subdivision or combination being herein called a
               "Change of Shares"), then, and thereafter upon each further
               Change of Shares, the Purchase Price in effect immediately prior
               to such Change of Shares shall be reduced, but in no event
               increased, to a price (the "Adjusted Purchase Price") determined
               by multiplying the Purchase Price in effect immediately prior to
               such Change of Shares by a fraction, the numerator of which shall
               be the sum of the number of shares of Common Stock outstanding
               immediately prior to the issuance of such additional shares plus
               the number of shares of Common Stock which the aggregate
               consideration received by the Corporation would purchase at such
               Purchase Price, and the denominator of which shall be the sum of
               the number of shares of Common Stock


                                       6

<PAGE>

               outstanding immediately after the issuance of such additional
               shares. Such adjustment to the Purchase Price shall be made
               successively whenever an issuance is made after a Change of
               Shares has occurred.

               Upon each adjustment of the Purchase Price pursuant to this
               Section 5(a), the total number of shares of Common Stock
               purchasable upon the exercise of each Warrant shall become
               (subject to the provisions contained in Section 5(b) hereof) such
               number of shares (calculated to the nearest tenth) purchasable at
               the Purchase Price in effect immediately prior to such adjustment
               multiplied by a fraction, the numerator of which shall be the
               Purchase Price in effect immediately prior to such adjustment and
               the denominator of which shall be the applicable Adjusted
               Purchase Price (rounded to the nearest whole number of shares).
               No fractional shares shall be issued or called for as a result of
               any adjustment made hereunder.

          (b)  The Corporation may elect, at its sole discretion, upon any
               adjustment of the Purchase Price hereunder, to adjust the number
               of Warrants outstanding, in lieu of adjustment of the number of
               Warrant Shares purchasable upon the exercise of each Warrant as
               hereinabove provided, so that each Warrant outstanding after such
               adjustment shall represent the right to purchase one Warrant
               Share. Each Warrant held of record prior to such adjustment of
               the number of Warrants shall become that number of Warrants
               (calculated to the nearest tenth) determined by multiplying the
               number one by a fraction, the numerator of which shall be the
               Purchase Price in effect immediately prior to such adjustment and
               the denominator of which shall be the Adjusted Purchase Price.
               Upon each adjustment of the number of Warrants pursuant to this
               Section 5(b), the Corporation shall, as promptly as practicable,
               cause to be distributed to each Holder of Warrant Certificates,
               on the date of such adjustment, Warrant Certificates evidencing
               the adjusted number of Warrants to which such Holder shall be
               entitled as a result of such adjustment or, at the sole option of
               the Corporation, cause to be distributed to such Holder in
               substitution and replacement for the Warrant Certificates held by
               him prior to the date of adjustment, and upon surrender thereof,
               (if required by the Corporation) new Warrant Certificates
               evidencing the aggregate number of Warrants to which such Holder
               shall be entitled after such adjustment.

          (c)  In case of any reclassification, capital reorganization or other
               change of outstanding shares of Common Stock, or in case of any
               consolidation or merger of the Corporation with or into another


                                       7

<PAGE>

               corporation (other than a consolidation or merger in which the
               Corporation is the continuing corporation and which does not
               result in any reclassification, capital reorganization or other
               change of outstanding shares of Common Stock), or in case of any
               sale or conveyance to another corporation of all, or
               substantially all, of the property of the Corporation (other than
               a sale/leaseback, mortgage or other financing transaction), the
               Corporation shall cause effective provision to be made so that
               each holder of a Warrant then outstanding shall have the right
               thereafter, by exercising such Warrant, to purchase the kind and
               number of shares of stock or other securities or property
               (including cash) receivable upon such reclassification, capital
               reorganization or other change, consolidation, merger, sale or
               conveyance by a holder of the number of Warrant Shares that might
               have been purchased upon exercise of such Warrant immediately
               prior to such reclassification, capital reorganization or other
               change, consolidation, merger, sale or conveyance. Any such
               provision shall include provision for adjustments that shall be
               as nearly equivalent as may be practicable to the adjustments
               provided for in this Section 5 upon a Change of Shares. The
               Corporation shall not effect any such consolidation, merger or
               sale without the written consent of Holders of a majority of the
               Warrants then outstanding, unless prior to or simultaneously with
               the consummation thereof the successor (if other than the
               Corporation) resulting from such consolidation or merger or the
               corporation purchasing assets or other appropriate corporation or
               entity shall assume, by written instrument executed and delivered
               to the Corporation, the obligation to deliver to the holder of
               each Warrant such substitute warrants, shares of stock,
               securities or assets as, in accordance with the foregoing
               provisions, such Holders may be entitled to purchase, and the
               other obligations of the Corporation set out in this Certificate.
               The foregoing provisions shall similarly apply to successive
               reclassifications, capital reorganizations and other changes of
               outstanding shares of Common Stock and to successive
               consolidations, mergers, sales or conveyances.

          (d)  Irrespective of any adjustments or changes in the Purchase Price
               or the number of Warrant Shares purchasable upon exercise of the
               Warrants, all Warrant Certificates issued (whether prior to or
               subsequent to any event causing an adjustment thereof) shall
               continue to express the Purchase Price per share, and the number
               of shares purchasable thereunder as originally expressed in the
               Warrant Certificate initially issued to any Holder.

          (e)  After each adjustment of the Purchase Price pursuant to this
               Section 5, the Corporation will promptly prepare a certificate


                                       8

<PAGE>

               signed by the Chairman or Chief Executive Officer, and attested
               by the Secretary or an Assistant Secretary, of the Corporation
               setting forth: (i) the Purchase Price as so adjusted, (ii) the
               number of shares of Common Stock purchasable upon exercise of
               each Warrant after such adjustment or, if the Corporation shall
               have elected to adjust the number of Warrants, the number of
               Warrants to which the Holder of each Warrant shall then be
               entitled, and (iii) a brief statement of the facts accounting for
               such adjustment. The Corporation will promptly cause a brief
               summary thereof to be sent by ordinary first class mail to each
               Holder of Warrants at his or her last address as it shall appear
               on the registry books of the Corporation. No failure to mail such
               notice nor any defect therein nor in the mailing thereof shall
               affect the validity thereof. The affidavit of the Secretary or an
               Assistant Secretary of the Corporation that such notice has been
               mailed shall, in the absence of fraud, be prima facie evidence of
               the facts stated therein.

          (f)  As used in this Section 5, references to "Common Stock" shall
               mean and include all of the Corporation's Common Stock authorized
               on the date hereof and shall also include any capital stock of
               any class of the Corporation thereafter authorized which shall
               not be limited to a fixed sum or percentage in respect of the
               rights of the holders thereof to participate in dividends and in
               the distribution of assets upon the voluntary liquidation,
               dissolution or winding up of the Corporation; provided, however,
               that "Warrant Shares" shall include only shares of such class
               designated in the Corporation's Certificate of Incorporation as
               Common Stock on the date hereof or (i) in the case of any
               reclassification, change, consolidation, merger, sale or
               conveyance of the character referred to in Section 5(c) hereof,
               the stock, securities or property provided for in such section,
               or (ii) in the case of any reclassification or change in the
               outstanding shares of Common Stock issuable upon exercise of the
               Warrants as a result of a subdivision or combination or
               consisting of a change in par value, or from par value to no par
               value, or from no par value to par value, such shares of Common
               Stock as so reclassified or changed.

          (g)  Any determination as to whether an adjustment in the Purchase
               Price in effect hereunder is required pursuant to this Section 5,
               or as to the amount of any such adjustment, if required, shall be
               binding upon all holders of Warrants and the Corporation if made
               in good faith by the Board of Directors of the Corporation. For
               purposes of this Section 5(g), the Corporation's Board of
               Directors shall be deemed to have acted in good faith if it makes
               any such decision in reliance upon advice of its legal counsel
               and/or another


                                       9

<PAGE>

               independent professional hired to advise the Board on such
               matters.

SECTION 6. RESTRICTIVE LEGEND.

          (a)  Except as otherwise provided in this Section 6, each certificate
               evidencing the issuance of Warrant Shares (whether issued in the
               name of the original Holder of this Certificate or of any
               subsequent transferee thereof), shall be stamped or otherwise
               imprinted with a legend in substantially the following form:

               "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
               REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
               REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH
               SHARES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
               TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND
               REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR
               UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO NORD RESOURCES
               CORPORATION, SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED.
               NO TRANSFER OF ANY SUCH SHARE SHALL BE VALID OR EFFECTIVE UNTIL
               SUCH CONDITIONS HAVE BEEN FULFILLED."

          (b)  Except as otherwise provided in this Section 6, each Warrant
               Certificate shall be stamped or otherwise imprinted with a legend
               in substantially the following form:

               "THE WARRANTS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
               THE SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED NOR
               QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH WARRANTS MAY NOT
               BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED,
               PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER
               APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE
               WRITTEN OPINION OF


                                       10

<PAGE>

               COUNSEL SATISFACTORY TO NORD RESOURCES CORPORATION, SUCH
               QUALIFICATION AND REGISTRATION IS NOT REQUIRED. NO TRANSFER OF
               ANY SUCH WARRANT SHALL BE VALID OR EFFECTIVE UNTIL SUCH
               CONDITIONS HAVE BEEN FULFILLED."

          (c)  The legend requirements of Sections 6(a) and 6(b) above shall
               terminate as to any particular Warrant or Warrant Share: (i) when
               and so long as such security shall have been effectively
               registered under the Securities Act and is disposed of pursuant
               thereto; or (ii) when the Company shall have received an opinion
               of counsel reasonably satisfactory to it that such shares may be
               sold to the public without registration thereof under the
               Securities Act. Whenever the legend requirements imposed by this
               Section 6 shall terminate as to any Warrant Share, as hereinabove
               provided, the Holder hereof shall be entitled to receive from the
               Corporation, at the Corporation's expense, a new certificate
               representing such Warrant Shares and not bearing the restrictive
               legend set forth in Section 6(a).

SECTION 7. RIGHTS OF ACTION. All rights of action with respect to the Warrants
     are vested in the Holders of the Warrants, and any Holder of a Warrant,
     without consent of the holder of any other Warrant, may, in such Holder's
     own behalf and for his own benefit, enforce against the Company his right
     to exercise his Warrants for the purchase of Warrant Shares in the manner
     provided in this Warrant Certificate.

SECTION 8. AGREEMENT OF WARRANT HOLDERS. Every holder of a Warrant, by his or
     her acceptance thereof, consents and agrees with the Corporation and every
     other holder of a Warrant that:

          (a)  The Warrant Registry shall be maintained by the Corporation's
               Secretary, and shall be the official register of all Warrants
               issued to any person in the Offering. The Warrant Registry shall
               be dispositive as to the issuance, ownership, transfer and other
               aspects of each Warrant issued by the Corporation which are
               recorded therein and, absent manifest error, such records shall
               control for all purposes.

          (b)  The Warrants are transferable only on the Warrant Registry by the
               Holder thereof in person or by his attorney duly authorized in
               writing and only if the Warrant Certificates representing such
               Warrants are surrendered at the Corporate Office of the
               Corporation, duly endorsed or accompanied by a proper instrument


                                       11

<PAGE>

               of transfer satisfactory to the Corporation in its sole
               discretion, together with payment of the amount of any applicable
               transfer taxes; and

          (c)  The Corporation may deem and treat the person in whose name the
               Warrant Certificate is registered on the Warrant Registry as the
               holder and as the absolute, true and lawful owner of the Warrants
               represented thereby for all purposes, and the Corporation shall
               not be affected by any notice or knowledge to the contrary,
               except as otherwise expressly provided in this Certificate.

SECTION 9. MODIFICATION OF WARRANTS. Other than with respect to any adjustment
     made by the Corporation in accordance with the provisions of Section 5
     hereof, this Certificate may only be modified, supplemented or altered by
     the Corporation, and only with the consent in writing of the Holders of
     Warrants representing greater than fifty percent (50%) of the total
     Warrants then outstanding; provided, that no change in the number or nature
     of the securities purchasable upon the exercise of any Warrant, or the
     acceleration of the Exercise Date, shall be made without the consent in
     writing of the Holder of the Warrant Certificate representing such Warrant,
     other than such changes as are specifically prescribed by this Certificate
     as originally executed or are made in compliance with applicable law.

SECTION 10. NOTICES. All notices, requests, consents and other communications
     hereunder shall be in writing and shall be deemed to have been made when
     delivered or mailed first class registered or certified mail, postage
     prepaid as follows: if to the Holder of a Warrant Certificate, at the
     address of such Holder as shown on the Warrant Registry maintained by the
     Corporation; and if to the Corporation, at 3048 Seven Dash Road, Dragoon,
     AZ 85609, or such other place as may be designated by the Corporation from
     time to time in accordance with this Section 10.

SECTION 11. GOVERNING LAW. This Certificate shall be governed by and construed
     in accordance with the corporations laws of the State of New York, without
     giving effect to the law of conflicts of laws applied thereby. In the event
     that any dispute shall occur between the parties arising out of or
     resulting from the construction, interpretation, enforcement or any other
     aspect of this Certificate, the parties hereby agree to accept the
     exclusive jurisdiction of the Courts of the State of New York. In the event
     either party shall be forced to bring any legal action to protect or defend
     its rights hereunder, then the prevailing party in such proceeding shall be
     entitled to reimbursement from the non-prevailing party of all fees, costs
     and other expenses (including,


                                       12

<PAGE>

     without limitation, the reasonable expenses of its attorneys) in bringing
     or defending against such action.

SECTION 12. ENTIRE UNDERSTANDING. This Certificate contains the entire
     understanding among the Corporation and the Holder relating to the subject
     matter covered herein, and merges all prior discussions, negotiations and
     agreements, if any between them. Neither of the parties to this agreement
     shall be bound by any representations, warranties, covenants, or other
     understandings relating to such subject matter, other than as expressly
     provided for or referred to herein.


                                       13

<PAGE>

     IN WITNESS WHEREOF, the Corporation has caused this Warrant Certificate to
be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized, as of the date set forth below.

NORD RESOURCES CORPORATION                  ATTEST:


By:                                         By:
    -------------------------------------       --------------------------------
    Erland A. Anderson                          Ronald A. Hirsch
    Chief Executive Officer                     President

Date: October 17, 2005


                                       14

<PAGE>

                                   SCHEDULE 1

Except as expressly disclosed on Appendix I delivered to Holder together with
this Note, and which is hereby incorporated herein by reference as an integral
part of this Schedule 1, the Company hereby represents and warrants to Holder,
as of the date of this Note, the following:

          (a) Organization. The Company is a corporation duly organized, validly
     existing, and in good standing under the laws of the State of Delaware,
     with full power and authority, and all necessary consents, authorizations,
     approvals, orders, licenses, certificates, and permits of and from, and
     declarations and filings with all Federal, state, local, foreign, and other
     governmental authorities and all courts and other tribunals, to own, lease,
     license and use its properties and assets, and to carry on its business or
     proposed business as required. The Company is duly licensed and qualified
     to do business and be in good standing in every jurisdiction in which the
     ownership, leasing, licensing or use of property and assets or the conduct
     of its business makes such qualification necessary. The Company has no
     subsidiaries.

          (b) Capitalization. The authorized, issued and outstanding capital
     stock of the Company has been validly issued, and consists of 28,789,240
     fully paid and nonassessable shares of the Company's common stock and
     6,497,249 warrants and options to purchase common stock. There are no other
     classes of capital stock or other securities authorized or issued by the
     Company. The Company has no obligation (contingent or otherwise) to pay any
     dividend or make any other distribution in respect of its capital stock.
     There exist no voting trusts or agreements, stockholders' agreements,
     pledge agreements, buy-sell agreements, rights of first refusal or proxies
     relating to any securities of the Company. The Company has no obligation
     (contingent or otherwise) to repurchase, redeem or otherwise acquire any
     shares of its capital stock. There is no commitment by the Company to issue
     shares, subscriptions, warrants, options, preemptive rights, convertible
     securities or other such rights or to distribute to holders of any of its
     equity securities any evidence of indebtedness or asset.

          (c) Financial Statements. The unaudited balance sheet of the Company
     for the year ended December 31, 2004, the related unaudited statements of
     operations and statements of cash flow for the year ended December 31, 2004
     and the unaudited balance sheet of the Company for the six months ended
     June 30, 2005 (such date being referred to herein as the "Balance Sheet
     Date" and collectively, the "Financial Statements"), present fairly in all
     material respects the financial position and cash flows of the Company at
     the indicated dates and for the indicated periods. Except as set forth in
     the Financial Statements, the Company has no liabilities, contingent or
     otherwise, other than (i) liabilities incurred in the ordinary course of
     business subsequent to the Balance Sheet Date and (ii) obligations under
     contracts and commitments incurred in the ordinary course of business which
     are not required to be reflected in the Financial Statements, which, in
     both cases, individually or in the aggregate, are not material to the
     business, proposed business, financial condition or operating results of
     the Company. The Company is not a guarantor or indemnitor of any
     indebtedness of any other person, firm or corporation.


                                      -1-

<PAGE>

          (d) Absence of Undisclosed Liabilities. The Company has no material
     outstanding claims, liabilities, obligations or indebtedness, contingent or
     otherwise, whether asserted or unasserted, except as set forth in the
     Financial Statements, or referred to in any of the notes thereto, except as
     incurred in the ordinary course of business since the Balance Sheet Date.
     All liabilities of the Company incurred subsequent to the Balance Sheet
     Date have been incurred in the ordinary course of business and do not
     involve borrowings which individually exceed $5,000 and which do not exceed
     $15,000 in the aggregate.

          (e) Absence of Changes. Since the Balance Sheet Date, the Company has
     operated in the ordinary course of business consistent with past practice.
     Since the Balance Sheet Date, there has not occurred any change in the
     financial condition, results of operations, assets, liabilities or business
     of the Company which, in the aggregate, has had a material adverse effect
     on the Company's business.

          (f) Title to Properties; Encumbrances. To the Company's knowledge, the
     Company has good, valid and marketable title to (A) all of its properties
     and assets (real, personal, tangible and intangible), including, without
     limitation, all the properties and assets reflected in the Financial
     Statements, and (B) all the properties and assets purchased or otherwise
     acquired since the Balance Sheet Date; in each case clear of all
     encumbrances, liens, claims, charges or other restrictions of whatever kind
     or character, except for Permitted Liens (as defined in Schedule 2)
     existing as of the date of this Note.

          (g) Material Agreements. The Company is not in material violation or
     breach of or in material default with respect to, complying with any
     provision of any material contract, agreement, instrument, lease, license,
     arrangement or understanding to which the Company is a party, and each such
     material contract, agreement, instrument, lease, license, arrangement and
     understanding is in full force and effect and is the legal, valid and
     binding obligation of the Company enforceable as to the Company in
     accordance with its terms (subject to applicable bankruptcy, insolvency and
     other laws affecting the enforceability of creditors' rights generally and
     to general equitable principles). The Company has performed in all material
     respects all obligations to have been performed on such contracts through
     the date hereof. The Company is not in violation or breach of, or in
     default with respect to, any term of its Certificate of Incorporation or
     By-Laws. To the Company's knowledge, no third party is in default under any
     agreement, contract or other instrument, document or agreement to which the
     Company is a party, which default would or could have a material adverse
     effect on the Company's properties or assets or the business of the Company
     as presently conducted or proposed to be conducted.

          (h) Patents, Trademarks, and Copyrights, Etc. All patents, trademarks,
     trade names, brand names and copyrights (in each case, whether issued or
     pending), all applications for any of the foregoing, and all licenses or
     rights with respect to any of the foregoing, necessary for the conduct of
     the Company's business as currently being conducted are owned by the
     Company, or the Company otherwise has the legal right to use the foregoing,
     free and clear of all liens and encumbrances of any nature. To the
     Company's knowledge, the Company is not infringing any copyright,
     trademark, trade secret or other intellectual property rights of others
     and, to the Company's knowledge,


                                      -2-

<PAGE>

     any patent. All trade secrets, know how, technical processes and procedures
     developed by and belonging to the Company which are material to the
     business of the Company and which have not been patented have been kept
     confidential. The Company has the right to use, free and clear of claims or
     rights of others, other than as set forth under applicable license or
     assignment agreements to which the Company is bound, all trade secrets,
     customer lists, processes, software, patents, copyrights, trademarks, or
     other intellectual property required for the business of the Company as now
     being and as proposed to be conducted. The Company has not entered into any
     agreement granting any third party the right to bring infringement actions
     with respect to, or otherwise to enforce rights with respect to, any
     intellectual property right. The Company has the exclusive right to file,
     prosecute and maintain all applications and registrations with respect to
     its intellectual property rights. Each current and former service provider
     of the Company has executed a proprietary information and inventions
     agreement (or similar agreement) with the Company. To the extent the
     Company has ever utilized consultants or independent contractors for such
     purpose, each consultant or independent contractor has executed a written
     agreement, validly assigning to the Company his or her rights in and to all
     copyrights and works of authorship relating to products, services or
     technology designed, developed, manufactured, licensed, sold, marketed or
     serviced by the Company and its business. To the Company's knowledge, none
     of the Company's service providers is in violation thereof.

          (i) Litigation. There is no action, suit, investigation, customer
     complaint, claim or proceeding at law or in equity by or before any
     arbitrator, governmental instrumentality or other agency now pending or, to
     the Company's knowledge, threatened against or affecting the Company, nor,
     to the Company's knowledge, does there exist any basis therefor. The
     Company is not subject to any judgment, order, writ, injunction or decree
     of any Federal, state, municipal or other governmental department,
     commission, board, bureau, agency or instrumentality, domestic or foreign.
     To the Company's knowledge, none of the Company's officers or directors is
     a party to, or subject to the provisions of, any order, writ, injunction,
     judgment or decree of any court or governmental agency or instrumentality
     relating to the Company. There is no action, suit or proceeding by the
     Company currently pending or which the Company presently intends to
     initiate.

          (j) Non-Defaults. To the Company's knowledge, the Company is not in
     default in the performance or observance of any obligation with respect to
     any order, writ, injunction or decree of any court of any Federal, state,
     municipal or other governmental department, commission, board, bureau,
     agency or instrumentality, domestic or foreign and there exists no
     condition, event or act which constitutes, nor which after notice, the
     lapse of time or both, would constitute, a default under any of the
     foregoing. Upon the execution of the Loan Documents, the Company will not
     be in material breach of any term of any of the Loan Documents nor will any
     Default be presently occurring, which, in either event, if not cured
     pursuant to the terms of the Note, would materially and adversely impair
     the Company's ability to perform its obligations under the Note.


                                      -3-

<PAGE>

          (k) Employment of Officers, Employees and Consultants. To the
     Company's knowledge, no third party may assert any valid claim against the
     Company with respect to the (i) continued employment by, or association
     with, the Company of any of its present officers, employees or consultants;
     or (ii) use by the Company of any information which the Company would be
     prohibited from using under any prior agreements or arrangements or any
     laws applicable to unfair competition, trade secrets or proprietary
     information.

          (l) Taxes. The Company has filed all Federal, state, local and foreign
     tax returns which are required to be filed by it and all such returns are
     true and correct in all material respects. The Company has paid all taxes
     pursuant to such returns or pursuant to any assessments received by it and
     have withheld all amounts which it is obligated to withhold from amounts
     owing to any employee, creditor or third party. The tax returns of the
     Company have never been audited by any state, local or Federal authorities.
     The Company has not waived any statute of limitations with respect to taxes
     or agreed to any extension of time with respect to any tax assessment or
     deficiency. All tax elections have been made by the Company in accordance
     with generally accepted practices. No deficiency assessment with respect to
     or proposed adjustment of the Company's Federal, state, county or local
     taxes is pending or, to the Company's knowledge, threatened. There is no
     tax lien, whether imposed by any Federal, state, county or local taxing
     authority, outstanding against the assets, properties or business of the
     Company.

          (m) Compliance with Laws; Environmental Matters, Licenses, Etc. The
     Company has not received any notice of any violation of, or noncompliance
     with, any Federal, state, local or foreign laws, ordinances, regulations or
     orders (including, without limitation, those relating to all applicable
     Federal, state and local insurance laws, rules and regulations,
     environmental protection, occupational safety and health and other labor
     laws, ERISA, Federal drug laws, Federal securities laws, equal employment
     opportunity, consumer protection, credit reporting, "truth-in-lending," and
     warranties and trade practices) ("Notice of Violation") applicable to the
     business of the Company operated under the direction of the Company, the
     violation of, or noncompliance with which, would have a material adverse
     effect on the Company's business or operations, and the Company knows of no
     facts or set of circumstances which, to its knowledge, would give rise to
     such a notice. The Company has all licenses and permits and other
     governmental certificates, authorizations and permits and approvals
     (collectively, "Governmental Licenses") required by every Federal, state
     and local government or regulatory body for the operation of its business
     and the use of its properties where the failure to obtain or possess such
     license or permit would have a material adverse effect on the business of
     the Company. The Governmental Licenses are in full force and effect and, to
     the Company's knowledge, no violations are or have been recorded in respect
     of any Governmental License and no proceeding is pending or threatened to
     revoke or limit any thereof. The Company has not received any written
     opinion or memorandum from legal counsel indicating that it has taken any
     action which has resulted in, or is reasonably likely to result in, the
     Company incurring any liability which may be material to its business,
     prospects, financial condition, operations, property or affairs. The
     Company is in compliance with all applicable laws, rules, regulations and
     orders, the noncompliance


                                      -4-

<PAGE>

     with which could materially adversely affect the Company's business or
     condition, financial or otherwise.

          (n) Authorization. The execution and delivery of the Note and the
     other Loan Documents has been duly authorized by all requisite corporate
     action of the Company, and when so executed and delivered, the Note and the
     other Loan Documents will constitute the valid and binding obligation of
     the Company, enforceable against the Company in accordance with their
     terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium and similar laws affecting creditors' rights and
     remedies generally and general principles of equity. The issuance of the
     Note and the Warrants is exempt from the registration requirements of the
     Securities Act of 1933, as amended (the "Act") and the rules and
     regulations promulgated thereunder and the Note and the Warrants will be
     issued in compliance with all applicable Federal securities laws.

          (o) Non-Contravention Etc. The execution, delivery and performance of
     the terms of the Notes and the other Loan Documents will not (i) violate
     any provision of law or statute or any order of any court or other agency
     of government binding on the Company; or (ii) conflict with or result in
     any breach of any of the terms, conditions or provisions of, or constitute
     (with due notice or lapse of time or both) a default under, or result in
     the creation of any lien, security interest, charge or encumbrance upon any
     of the properties or assets of the Company under the Certificate of
     Incorporation, or By-Laws of the Company or any indenture, mortgage, deed
     of trust, note, credit or lease agreement or other material agreement or
     instrument to which the Company is a party or by which it or any of its
     property is bound or affected, except for such conflict, breach or default
     as to which requisite waivers or consents shall have been obtained by the
     Company.

          (p) Insurance. All insurable assets and properties of the Company are
     insured against all risks usually insured against by persons owning or
     operating similar properties and assets in the localities where such
     properties or assets are located, through insurance policies all of which
     are in full force and effect. The Company is insured against all claims
     relating to its activities to the same extent that the risks of such claims
     are usually insured against by persons or entities involved in similar
     activities. Each of the insurance policies referred to in this section is
     issued by an insurer of recognized responsibility, and the Company has not
     received any notice or threat of the cancellation or nonrenewal of any such
     policy.

          (q) No Consent. No permit, consent, approval, authorization, order or
     filing with any court or governmental authority is required in connection
     with the issuance of the Note.

          (r) Employee Relations. To the Company's knowledge, the Company is in
     compliance with all applicable Federal, state, local and foreign laws and
     regulations respecting employment and employment practices, terms and
     conditions of employment and wages and hours. To the Company's knowledge,
     there are no pending investigations involving the Company by the U.S.
     Department of Labor, or any other domestic or foreign governmental agency
     responsible for the enforcement of such Federal, state,


                                      -5-

<PAGE>

     local, or foreign laws and regulations. There is no unfair labor practice
     charge or complaint against the Company pending before the National Labor
     Relations Board or any strike, picketing, boycott, dispute, slowdown or
     stoppage pending or to the Company's knowledge, threatened against or
     involving the Company, or any predecessor entities, and none has ever
     occurred. No collective bargaining agreement or modification thereof is
     currently being negotiated by the Company. To the Company's knowledge, no
     labor dispute with the employees of the Company exists, or is imminent.

          (s) Transactions with Affiliates. No stockholder, officer or director
     of the Company nor any "affiliate" or "associate" of such persons (as such
     terms are defined in the rules and regulations promulgated under the Act)
     (herein, a "Related Party") is a party to any agreement with the Company
     including, without limitation, any contract, agreement or other arrangement
     providing for the rental of real or personal property from, or otherwise
     requiring payments not in the ordinary course of business to, any Related
     Party. No employee of the Company or any Related Party is indebted in an
     amount greater than $5,000 to the Company, indebtedness to the Company by
     all employees and related parties does not exceed $15,000 and the Company
     is not indebted to any of its employees.

As used in this Note, the phrase, "to the Company's knowledge" or similar
phrases shall mean to the knowledge of the Company's directors, officers and key
employees, following reasonable inquiry.


                                      -6-

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                          Page 1


                                   APPENDIX I

      EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES SET FORTH IN SCHEDULE 1

(A)  ORGANIZATION:

     The Company has one wholly-owned subsidiary, which is Cochise Aggregate and
Materials, Inc., a Nevada corporation.

(B)  CAPITALIZATION:

(1) On February 21, 2001, Ronald A. Hirsch was granted Two Hundred and Fifty
Thousand (250,000) non-qualifying stock options as consideration for a
consulting agreement by and between the Company and Mr. Hirsch, with an exercise
price of $0.18 per share.

(2) On October 20, 2003, the Company granted Shon O'Laughlin an option to
purchase up to fifteen thousand (15,000) shares of the Company's common stock at
the purchase price of $0.02 per share.

(3) On October 20, 2003, the Company granted Mary Elkins an option to purchase
up to twenty five thousand (25,000) shares of the Company's common stock at the
purchase price of $0.02 per share.

(4) On January 2, 2004, the Company entered into an Executive Employment
Agreement with Ronald A. Hirsch to serve as the Company's Chairman. Pursuant to
the Executive Employment Agreement and the Unanimous Consent of the Board, dated
October 20, 2003, the Company granted Mr. Hirsch the options to purchase up to
three million (3,000,000) shares of the Company's common stock at an exercise
price of Two Cents ($0.02) per share. On June 29, 2004, Mr. Hirsch partially
exercised the stock options to receive one million seven hundred fifty thousand
(1,750,000) shares of the Company's common stock by paying the Company
Thirty-Five Thousand Dollars ($35,000). However, on July 18, 2005, Mr. Hirsch
and the Company entered into a Rescission Agreement to rescind Mr. Hirsch's
purchase of the 1,750,000 shares, effective as of June 29, 2004.

(5) Effective June 29, 2004, and in connection with the rescission of the
Thirty-Five Thousand Dollars ($35,000) that was paid by Ronald A. Hirsch for the
one million seven hundred fifty thousand (1,750,000) shares of the Company's
common stock, the Company issued a Convertible Promissory Note to Mr. Hirsch
dated July 1, 2004. As of July 1, 2005, which is the maturity date of the Note,
Mr. Hirsch may convert all or some of the unpaid principal and accrued interest
into shares of the Company's common stock at a conversion price of Seventeen and
One-Half Cents ($.175) per share.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                          Page 2


(6) On October 4, 2004, the Company issued a Convertible Promissory Note to
Ronald A. Hirsch for the principal sum of One Hundred Six Thousand Dollars
($106,000), plus any accrued but unpaid interest. As of October 5, 2005, which
is the maturity date of the Note, Mr. Hirsch may convert all or some of the
unpaid principal and accrued interest into shares of the Company's common stock
at a conversion price of Twenty Cents ($0.20) per share.

(7) Effective as of September 26, 2005, the Company entered into an Amendment to
Convertible Promissory Note dated October 4, 2004 with Ronald Hirsch which
states that unless the Promissory Note is converted as provided in Section 2 (of
the Promissory Note), the Promissory Note will automatically mature and be due
and payable on December 31, 2005.

(8) On August 19, 2004, the Company issued a Convertible Promissory Note to
Stephen D. Seymour for the principal sum of Sixty-Six Thousand Dollars
($66,000), plus any accrued but unpaid interest. As of August 19, 2005, which is
the maturity date of the Note, Mr. Seymour may convert all or some of the unpaid
principal and accrued interest into shares of the Company's common stock at a
conversion price of Twenty Cents ($0.20) per share.

(9) Effective as of September 26, 2005, the Company entered into an Amendment to
Convertible Promissory Note dated August 19, 2004 with Stephen D. Seymour which
states that unless the Promissory Note is converted as provided in Section 2 (of
the Promissory Note), the Promissory Note will automatically mature and be due
and payable on December 31, 2005.

(10) On January 2, 2004, the Company entered into an Executive Employment
Agreement with Erland A. Anderson to serve as the Company's President. Pursuant
to the Executive Employment Agreement and the Unanimous Consent of the Board,
dated October 20, 2003, the Company granted Mr. Anderson the options to purchase
up to one million five hundred (1,500,000) shares of the Company's common stock
at an exercise price of $0.02 per share. As of October 3, 2005, Mr. Anderson has
exercised options to purchase one hundred fifty thousand (150,000) shares of the
Company's common stock, and there are options outstanding which remain to be
exercised and which would allow him to purchase an additional amount of up to
one million three hundred fifty thousand (1,350,000) shares of the Company's
common stock.

(11) On October 20, 2003, the Company granted Stephen D. Seymour an option to
purchase up to two hundred and fifty thousand (250,000) shares of the Company's
common stock at the purchase price of Two Cents ($0.02) per share.

(12) As of January 2004, Laflin, Lieuwen, Tucker ("LLT"), has agreed to accept
three thousand six hundred and sixty eight (3,668) shares of its common stock in
full satisfaction of an outstanding debt in the amount of $9536.36 owed to LLT.
In

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                          Page 3


accordance therewith, the Company has reserved, but has not yet issued, three
thousand six hundred and sixty eight (3,668) shares of its common stock for this
purpose.

(11) As of January 10, 2004, Davis, Graham & Stubbs, LLP, a Colorado limited
liability partnership ("DGS") has agreed to accept three thousand nine hundred
and sixty (3,960) shares of the Company's common stock in full satisfaction of
an outstanding debt in the amount of $11,880.28 owed to DGS. In accordance
therewith, the Company has reserved, but has not yet issued, three thousand nine
hundred and sixty (3,960) shares of its common stock.

(12) As of February 2004, Pfeifer, Hanson, & Mullins, P.C., a New Mexico
professional corporation ("PHM"), has agreed to accept two hundred and thirty
nine thousand, four hundred and sixty three (239,463) shares of the Company's
common stock in full satisfaction of the total outstanding debt and accrued
interest on said debt owed by the Company to PHM for legal services rendered to
the Company by PHM. A Debt Conversion Agreement to this effect has been drafted,
but has not yet been signed by all involved parties. In accordance therewith,
the Company has reserved, but has not yet issued, two hundred thirty nine
thousand four hundred and sixty three (239,463) shares of its common stock for
this purpose.

(13) In connection with a default judgment entered on October 31, 2003 against
the Company and in favor of Bowne of Dallas, L.P. ("Bowne"), in Cause No.
cc-0402321-d, filed in the County Court at Law No. 4, County of Dallas, State of
Texas, as of March 31, 2004, the Company and Bowne are currently negotiating a
settlement agreement pursuant to which Bowne will accept Six Thousand Dollars
($6,000) and ten thousand (10,000) shares of the Company's common stock in full
satisfaction of the total outstanding debt and accrued interest on said debt
owed by the Company to Bowne pursuant to the default judgment. A Settlement
Agreement to this effect has been drafted, but has not yet been signed by all
involved parties. In accordance therewith, the Company has reserved, but has not
yet issued ten thousand (10,000) shares of its common stock for this purpose
(although the Company has already paid and Bowne has acknowledged the receipt
of, the $6,000 cash).

(14) As of April 16, 2004, Quadna, Inc., an Arizona corporation ("Quadna"). has
agreed to subscribe for twelve thousand (12,0000) shares of the Company's common
stock in full satisfaction of the total outstanding debt and accrued interest on
said debt owed by the Company to Quadna. A Debt Conversion Agreement to this
effect has been drafted, but has not yet been signed by all involved parties.

(15) As of April 16, 2004, MPRGEO, LLC, an Arizona limited liability company
("MPRGEO") has agreed to subscribe for sixty-six thousand six hundred and
sixty-six (66,666) shares of the Company's common stock and an additional
sixty-six thousand six hundred sixty-four (66,664) shares of the Company's
common stock which is to be issued to MPRGEO on the first, second, third, and
fourth anniversaries of the date of a Debt Conversion Agreement that was entered
into between MPRGEO and the Company. Of

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                          Page 4


these amounts, MPRGEO has been issued sixty-six thousand six hundred sixty-six
(66,666) shares and twenty-eight thousand eight hundred forty-six (28,846)
shares, the latter of which was issued in connection with the first anniversary
payment pursuant to an amendment to the Debt Conversion Agreement that was
entered into between the parties, as further described below. In addition,
pursuant to the Debt Conversion Agreement, MPRGEO agreed to accept one option to
purchase up to and including ninety-nine thousand, nine hundred and ninety-nine
(99,999) shares of the Company's common stock in full satisfaction of the
Company's obligations to MPRGEO under a certain Property Agreement relating to
the Company's option to purchase the "Coyote Springs" property.

(16) As of April 16, 2004, Thornwell Rogers, an individual ("Rogers") has agreed
to subscribe for sixty-six thousand six hundred and sixty-six (66,666) shares of
the Company's common stock and an additional sixty-six thousand six hundred
sixty-four (66,664) shares of the Company's common stock which is to be issued
to Rogers on the first, second, third, and fourth anniversaries of the date of a
Debt Conversion Agreement that was entered into between Rogers and the Company.
Of these amounts, Rogers has been issued sixty-six thousand six hundred
sixty-six (66,666) shares and twenty-eight thousand eight hundred forty-six
(28,846) shares, the latter of which was issued in connection with the first
anniversary payment pursuant to an amendment to the Debt Conversion Agreement
that was entered into between the parties, as further described below. In
addition, pursuant to the Debt Conversion Agreement, Rogers agreed to accept one
option to purchase up to and including ninety-nine thousand, nine hundred and
ninety-nine (99,999) shares of the Company's common stock in full satisfaction
of the Company's obligations to Rogers under a certain Property Agreement
relating to the Company's option to purchase the "Coyote Springs" property.

(17) As of April 16, 2004, South Branch Resources, LLC, an Arizona limited
liability company organized and existing under the laws of the State of Arizona
("SBR") has agreed to subscribe for sixty-six thousand six hundred and sixty-six
(66,666) shares of the Company's common stock and an additional sixty-six
thousand six hundred sixty-four (66,664) shares of the Company's common stock
which is to be issued to SBR on the first, second, third, and fourth
anniversaries of the date of a Debt Conversion Agreement that was entered into
between SBR and the Company. Of these amounts, SBR has been issued sixty-six
thousand six hundred sixty-six (66,666) shares and twenty-eight thousand eight
hundred forty-six (28,846) shares, the latter of which was issued in connection
with the first anniversary payment pursuant to an amendment to the Debt
Conversion Agreement that was entered into between the parties, as further
described below. In addition, pursuant to the Debt Conversion Agreement, SBR
agreed to accept one option to purchase up to and including ninety-nine
thousand, nine hundred and ninety-nine (99,999) shares of the Company's common
stock in full satisfaction of the Company's obligations to SBR under a certain
Property Agreement relating to the Company's option to purchase the "Coyote
Springs" property.

(18) On April 24, 2004, the Company entered into a Subscription Agreement with
C. Max Detjens, an individual ("Detjens"), whereby Detjens agreed to subscribe
for and was

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                          Page 5


issued one hundred thousand (100,000) shares of the Company's common stock.
Pursuant to that certain Subscription Agreement, Mr. Detjens also received a
warrant to purchase an additional fifty thousand (50,000) shares of the
Company's common stock within three years from the closing of the offering for a
price of Thirty-Five Cents ($0.35) per share.

(19) On April 24, 2004, the Company entered into a Subscription Agreement with
Brian A. Cook, an individual ("Cook"), whereby Cook agreed to subscribe for and
was issued one hundred thousand (100,000) shares of the Company's common stock.
Pursuant to that certain Subscription Agreement, Mr. Cook also received a
warrant to purchase an additional fifty thousand (50,000) shares of the
Company's common stock within three years from the closing of the offering for a
price of Thirty-Five Cents ($0.35) per share.

(20) On April 24, 2004, the Company entered into a Subscription Agreement with
William A. Peoples, an individual ("Peoples"), whereby Peoples agreed to
subscribe for and was issued one hundred thousand (100,000) shares of the
Company's common stock. Pursuant to that certain Subscription Agreement, Mr.
Peoples also received a warrant to purchase an additional fifty thousand
(50,000) shares of the Company's common stock within three years from the
closing of the offering for a price of Thirty-Five Cents ($0.35) per share.

(21) As of May 24, 2004, Cognis Corporation, a Delaware Corporation ("Cognis")
agreed to accept twenty eight thousand five hundred and six (28,506) shares of
the Company's common stock in full satisfaction of an outstanding debt in the
amount of Twenty Eight Thousand Five Hundred and Six Dollars ($28,506.00) owed
by the Company to Cognis. A Debt Conversion Agreement to this effect has been
drafted, but has not yet been signed by all involved parties. In accordance
therewith, the Company has reserved, but not yet issued, twenty eight thousand
five hundred and six (28,506) shares of its common stock for this purpose.

(22) As of June 10, 2004, the Company has negotiated an agreement with South
Branch Resources, LLC, an Arizona limited liability company ("SBR"), whereby SBR
would receive up to one hundred thousand (100,000) shares of the Company's
common stock and an option to purchase up to and including fifty thousand
(50,000) shares of the Company's common stock in full satisfaction of the
Company's obligations to SBR under a certain Property Agreement relating to the
Company's option to purchase the "Mimbres" property, located in Grant County,
New Mexico and consisting of forty-five (45) unpatented mining claims. These
shares have been reserved for issuance until an agreement to this effect has
been drafted and fully executed.

(23) As of June 10, 2004, the Company has negotiated an agreement with Thornwell
Rogers, an individual ("Rogers"), whereby Rogers would receive up to one hundred
thousand (100,000) shares of the Company's common stock and an option to
purchase up to and including fifty thousand (50,000) shares of the Company's
common stock in full

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                          Page 6


satisfaction of the Company's obligations to Rogers under a certain Property
Agreement relating to the Company's option to purchase the "Mimbres" property,
located in Grant County, New Mexico and consisting of forty-five (45) Unpatented
Mining Claims. These shares have been reserved for issuance until an agreement
to this effect has been drafted and fully executed.

(24) As of June 10, 2004, the Company has negotiated an agreement with MPRGEO,
LLC, an Arizona limited liability company ("MPRGEO"), whereby MRGPEO would
receive up to one hundred thousand (100,000) shares of the Company's common
stock and an option to purchase up to and including fifty thousand (50,000)
shares of the Company's common stock in full satisfaction of the Company's
obligations to Rogers under a certain Property Agreement relating to the
Company's option to purchase the "Mimbres" property, located in Grant County,
New Mexico and consisting of forty-five (45) Unpatented Mining Claims. These
shares have been reserved for issuance until an agreement to this effect has
been drafted and fully executed.

(25) As of December 14, 2004, the Company has negotiated a First Amendment to
the Terms of Agreement, Option to Purchase the "Coyote Springs" Property dated
January 28, 2004 (the "Original Agreement") with Thornwell Rogers, an adult
individual ("Rogers"), South Branch Resources, LLC, an Arizona limited liability
company ("SBR") and MRPGEO, LLC ("MRPGEO" and collectively, with Rogers and SBR,
the "Vendors") pursuant to which the Vendors would not receive either the 16,666
shares of common stock of the Company or the $15,000, as called for in the
Original Agreement, but rather, on January 28, 2005 (the "First Anniversary
Date") of the Original Agreement, the Vendors would each receive $7,500 upon the
signing of the First Amendment to the Original Agreement. In addition, within
five (5) business days of the First Anniversary Date and the necessary execution
of a Subscription Agreement by each of the Vendors, whichever occurs later, the
Company shall convey to the Vendors a number of shares of the Company's common
stock valued at $7,500. The share price for such valuation, and the number of
shares to be conveyed to the Vendors was calculated based on the closing price
of the shares of the Company's common stock on the First Anniversary Date.

(26) On July 15, 2004, the Company agreed to enter into a Subscription Agreement
with William A. Peoples, an individual ("Peoples"), whereby Peoples would
receive up to fifty thousand (50,000) shares of the Company's common stock and a
warrant to purchase an additional twenty-five thousand (25,000) shares of the
Company's common stock.

(27) On July 15, 2004, the Company agreed to enter into a Subscription Agreement
with Rex E. Loesby, whereby Mr. Loesby would receive up to seventy-one thousand
five hundred (71,500) shares of the Company's common stock and a warrant to
purchase an additional thirty-five thousand seven hundred fifty (35,750) shares
of the Company's common stock.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                          Page 7


(28) Commencing in April 2004, the Company conducted a private placement
pursuant to which it sought to raise up to a maximum amount of $420,000 from the
sale of Units, each such United comprised of one (1) share of common stock plus
one (1) warrant to purchase a one-half (1/2) share of common stock, at a
purchase price of Thirty Five Cents ($0.35) per Unit. An aggregate amount of
three hundred thousand (300,000) Units were subscribed for.

(29) Commencing in April 2004, the Company conducted a private placement
pursuant to which it sought to raise up to a maximum amount of $420,000 from the
sale of Units, each such United comprised of one (1) share of common stock plus
one (1) warrant to purchase a one-half (1/2) share of common stock, at a
purchase price of Thirty Five Cents ($0.35) per Unit. An aggregate amount of one
hundred twenty one thousand five hundred (121,500) Units were subscribed for.

(30) In April, 2005, the Company agreed to enter into an employment agreement
with John Perry to serve as the Company's Senior Vice President and Chief
Financial Officer. In connection with this agreement and until the Company
receives funding, Mr. Perry is to receive twenty thousand (20,000) shares of the
Company's common stock on a pro rata basis. Further, upon the execution of the
employment agreement, Mr. Perry was to receive five hundred thousand (500,000)
shares of common stock of the Company, two hundred fifty thousand (250,000) of
which were received upon his acceptance of the employment terms and two hundred
fifty thousand (250,000) of which are to be received at his (1) one-year
anniversary. In addition, Mr. Perry was granted five hundred thousand (500,000)
common stock options with a term of two (5) years.

(31) The Company is about to commence a private placement whereby it is seeking
to raise up to the maximum amount of $500,000 from the sale of Units comprised
of one (1) share of common stock plus one (1) warrant to purchase a one-half
(1/2) share of common stock, at a purchase price of Thirty Five Cents ($0.35)
per Unit. At the commencement of the offering, there will be one million four
hundred twenty-eight thousand five hundred seventy-one (1,428,571) Units to be
subscribed for.

(32) On April 22, 2005, the Company entered into a Settlement Agreement and
General Release (the "Settlement Agreement") with W. Pierce Carson, an adult
individual ("Carson"). Pursuant to the Settlement Agreement, Carson was to
receive two hundred fifty thousand (250,000) shares of the Company's common
stock on or before August 1, 2005 and warrants to purchase an additional two
hundred fifty thousand (250,000) shares of the Company's common stock at an
exercise price of Fifty Cents ($0.50) per share. The warrants expire on April
22, 2008.

(33) On June 30, 2004, the Company entered into a Revolving Line of Credit
Agreement (the "Line of Credit Agreement") with Ronald A. Hirsch and Stephen
Seymour (the "Lenders") in the principal amount of Six Hundred Thousand Dollars
($600,000.00), which matures on December 31, 2005. Pursuant to the Line of
Credit Agreement, the Company executed and delivered to the Lenders a secured
promissory

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                          Page 8


note in the amount of Six Hundred Thousand Dollars ($600,000) and the Company
and the Lenders entered into a Security Agreement (the "Security Agreement").
The Company also agreed to issue to the Lenders four (4) shares of the Company's
common stock and four (4) warrants for every One Dollar ($1.00) loaned to the
Company in Advances (as such term in defined in the Line of Credit Agreement).
Each Warrant enables the Lenders to purchase one share of the Company's common
stock for an exercise price of Twenty-Five Cents ($0.25) for three (3) years.
The Shares and Warrants owed to the Lenders for any particular Advance shall be
issued in the names of the Lenders, in accordance with instructions from the
Lenders, within ten (10) days of an Advance. The Lenders agreed that the shares
and warrants described above are "restricted securities" as defined by SEC Rule
144; however, the Company agreed to register for sale the shares and the shares
of common stock underlying the warrants on any registration statement that the
Company files during the next ten (10) years with the Securities and Exchange
Commission, except for any registration statement filed on Form S-8.

(34) About August 19, 2005, the Company received a letter from Mr. Walter Belous
in which he requested payment from the Company in the amount of $43,750 due to
accrued pension payments since his retirement as a Director of the Company. On
August 25, 2005, the Company sent a letter to Mr. Belous stating that since his
retirement, the Company instituted new management and a new infrastructure and
therefore, the Company's current management was unaware of his claim. Further,
the letter from the Company requested that Mr. Belous provide documentation and
evidence to Ron Hirsch so that an investigation may commence regarding his claim
for accrued pension payments. On or about September 9, 2005, the Company
received another letter dated September 2, 2005 with the requested information.
The Company's corporate counsel, August Law Group, P.C., will be sending a
response to Mr. Belous to discuss the funding issues of the Company and the
possibility of a share issuance in exchange for any accrued pension payments.

(35) If the claim above from Mr. Walter Belous is legitimite, there is one (1)
other former director of the Company, Donald L. Roettele, who may also qualify
for accrued pension payments. However, at this time, the Company has not
received any communication from him requesting that any accrued pension payments
be made to him and his whereabouts are unknown at this time. In the event that
Mr. Roettele does have a ligitimite claim, the Company may consider the
possibility of a share issuance in exchange for any accrued pension payments.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                          Page 9


(C)  FINANCIAL STATEMENTS.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 10


(D)  ABSENCE OF UNDISCLOSED LIABILITIES.

(1) On June 30, 2004, the Company entered into a Revolving Line of Credit
Agreement (the "Line of Credit Agreement") with Ronald A. Hirsch and Stephen
Seymour (the "Lenders") in the principal amount of Six Hundred Thousand Dollars
($600,000.00), which matures on December 31, 2005. Pursuant to the Line of
Credit Agreement, the Company executed and delivered to the Lenders a secured
promissory note in the amount of Six Hundred Thousand Dollars ($600,000) and the
Company and the Lenders entered into a Security Agreement (the "Security
Agreement"). The Company also agreed to issue to the Lenders four (4) shares of
the Company's common stock and four (4) warrants for every One Dollar ($1.00)
loaned to the Company in Advances (as such term in defined in the Line of Credit
Agreement). Each Warrant enables the Lenders to purchase one share of the
Company's common stock for an exercise price of Twenty-Five Cents ($0.25) for
three (3) years. The Shares and Warrants owed to the Lenders for any particular
Advance shall be issued in the names of the Lenders, in accordance with
instructions from the Lenders, within ten (10) days of an Advance. The Lenders
agreed that the shares and warrants described above are "restricted securities"
as defined by SEC Rule 144; however, the Company agreed to register for sale the
shares and the shares of common stock underlying the warrants on any
registration statement that the Company files during the next ten (10) years
with the Securities and Exchange Commission, except for any registration
statement filed on Form S-8.

(2) About August 19, 2005, the Company received a letter from Mr. Walter Belous
in which he requested payment from the Company in the amount of $43,750 due to
accrued pension payments since his retirement as a Director of the Company. On
August 25, 2005, the Company sent a letter to Mr. Belous stating that since his
retirement, the Company instituted new management and a new infrastructure and
therefore, the Company's current management was unaware of his claim. Further,
the letter from the Company requested that Mr. Belous provide documentation and
evidence to Ron Hirsch so that an investigation may commence regarding his claim
for accrued pension payments. On or about September 9, 2005, the Company
received another letter dated September 2, 2005 with the requested information.
The Company's corporate counsel, August Law Group, P.C., will be sending a
response to Mr. Belous to discuss the funding issues of the Company and the
possibility of a share issuance in exchange for any accrued pension payments.

(3) If the claim above from Mr. Walter Belous is legitimite, there is one (1)
other former director of the Company, Donald L. Roettele, who may also qualify
for accrued pension payments. However, at this time, the Company has not
received any communication from him requesting that any accrued pension payments
be made to him and his whereabouts are unknown at this time. In the event that
Mr. Roettele does have a ligitimite claim, the Company may consider the
possibility of a share issuance in exchange for any accrued pension payments.

(E) ABSENCE OF CHANGES.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 11


     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 12


(F) TITLE TO PROPERTIES; ENCUMBRANCES.

(1) On or about October 30, 2002 the Company entered into a loan agreement with
McGuire Machinery Inc., having a place of business located at 85 Riverwood
Drive, Grayson, Kentucky 41143, such loan agreement evidenced by a Promissory
Note for the amount of Ninety-Five Thousand Dollars ($95,000). As collateral for
the loan, the Promissory Note is secured by the Company's "Ingersol Rand DM45E
Blasthole Drill, Serial Number 7301.". This loan was subsequently transferred to
Javernick Equipment, Inc. on September 8, 2005.

(2) On or about August 12, 2004, the Company entered into an equipment lease for
a "Caterpillar 980G Serial #2KR02433." Pursuant to the Lease, the Company is
required to make monthly payments in the amount of 2,107.79 for a term of
forty-eight (48) months. On August 18, 2004, an addendum to the equipment lease
was entered into which grants the Company an option to purchase the "Caterpillar
980G Loader Serial #2KR02433" for one dollar ($1.00). Under the terms of the
agreement, the Lessor is identified as Nationwide Funding, LLC., 520 Trabuco
Road, Irvine, California 92620 ("Nationwide Funding). Nationwide Funding
subsequently assigned the lease to Santa Barbara Bank & Trust, P.O. Box 60607,
Santa Barbara, CA 93117.

(3) On June 30, 2004, the Company entered into a Revolving Line of Credit
Agreement (the "Line of Credit Agreement") with Ronald A. Hirsch and Stephen
Seymour (the "Lenders") in the principal amount of Six Hundred Thousand Dollars
($600,000.00), which matures on December 31, 2005. Pursuant to the Line of
Credit Agreement, the Company executed and delivered to the Lenders a secured
promissory note in the amount of Six Hundred Thousand Dollars ($600,000) and the
Company and the Lenders entered into a Security Agreement (the "Security
Agreement"). The Company also agreed to issue to the Lenders four (4) shares of
the Company's common stock and four (4) warrants for every One Dollar ($1.00)
loaned to the Company in Advances (as such term in defined in the Line of Credit
Agreement). Each Warrant enables the Lenders to purchase one share of the
Company's common stock for an exercise price of Twenty-Five Cents ($0.25) for
three (3) years. The Shares and Warrants owed to the Lenders for any particular
Advance shall be issued in the names of the Lenders, in accordance with
instructions from the Lenders, within ten (10) days of an Advance. The Lenders
agreed that the shares and warrants described above are "restricted securities"
as defined by SEC Rule 144; however, the Company agreed to register for sale the
shares and the shares of common stock underlying the warrants on any
registration statement that the Company files during the next ten (10) years
with the Securities and Exchange Commission, except for any registration
statement filed on Form S-8. The Line of Credit Agreement is secured by all of
the assets of the Company (the "Johnson Camp Collateral" as such term is defined
in that certain Secured Convertible Note to be issued by the Company to Nedbank
Limited).

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 13


(G) MATERIAL AGREEMENTS.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 14


(H) PATENTS, TRADEMARKS, AND COPYRIGHTS, ETC.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 15


(I) LITIGATION.

(1) On December 4, 2001, default judgment was entered against the Company for
failing to appear on a complaint filed by Accounting Solutions Holding Company,
Inc. (Accounting Solutions) for the aggregate sum of $25,682.31, inclusive of
prejudgment interest and attorneys fees. The Company has not paid any amounts
towards this judgment.

(2) On September 7, 2002, the Arizona Department of Environmental Quality
("ADEQ") issued a Compliance Order (the "Order") indicating that the Company's
operation of the Johnson Camp Mine located at Dragoon, Arizona (the "Mine") was
in violation of the Arizona Revised Statutes ("A.R.S"), Title 49, Chapter 2,
Article 3 and Arizona Administrative Code ("A.A.C.") Title 18, Chapter 9,
Articles 1 and 2 (collectively hereinafter "Arizona's aquifer protection laws,")
and ADEQ Consent Order P-4-01 and requiring the Company to bring the Mine into
compliance with Arizona's aquifer protection laws. Pursuant to the Order, the
Company and the ADEQ entered into a stipulated judgment which assessed civil
penalties against the Company in the amount of four million, three hundred and
twenty five thousand dollars ($4,325,000). In addition, the Order created an
escrow account, into which the Company was required to deposit, and did deposit
One Million, Five Hundred Thousand Dollars ($1,500,000), which was to be used to
bring the Mine into compliance with said Order. The Order provides that
violation of the order will subject the Company to further civil penalties which
shall include the entry of the stipulated judgment and the assessment of the
civil penalties therein. Pursuant to the Order, the Company has deposited One
Million, Five Hundred Thousand Dollars ($1,500,000) into an escrow account, all
the funds of which have been used to bring the Mine into Compliance with the
Order. The Company currently operates the Mine in compliance with the Order.

(3) On October 31, 2003, judgment was entered against the Company on a Complaint
filed by Bowne of Dallas ("Bowne") in the County Court of Law No. 4, Dallas
County, Texas. The Company and Bowne have subsequently negotiated an agreement
which has not yet been fully executed, whereby in exchange for a Release of
Judgment the Company covenants and agrees to pay Bowne the six thousand dollars
($6,000) and ten thousand (10,000) shares of the Company's restricted Common
Stock. Pursuant to this pending settlement agreement, the Company has already
paid to Bowne the sum of Six Thousand Dollars ($6,000).

(4) On or about December 11, 2003, Great West Life & Annuity Insurance Company
("Great West") filed a verified complaint (the "Complaint") against the Company
in case number CV2003-024231, filed in the Superior Court of Arizona, County of
Maricopa alleging causes of action for breach of contract and unjust enrichment
and seeking to recover $107,606.09 in addition to prejudgment interest, costs
and attorneys fees. The Complaint alleges that the Company breached a contract
with Great West for the establishment and maintenance of the Company's employee
health and welfare benefit plans by failing to pay Great West the amounts owing
to Great West under the contract.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 16


The Company has filed a cross-complaint against Great West for failing to pay
the claims made by the Company's employees under employee health and welfare
benefit plans. Litigation is pending.

(5) On October 31, 2001, a complaint was filed against the Company by Gallagher
& Kennedy, P.A. ("Gallagher") in the Superior Court of Arizona, County of
Maricopa, alleging causes of action for Breach of Contract, Unjust Enrichment,
and Quantum Meruit and seeking to recover, in addition to prejudgment interest
and attorneys fees, Twenty Thousand One Hundred and Fifty Seven Dollars and
Ninety Eight Cents ($20,157.98), the balance due in exchange for legal services
provided by Gallagher to the Company. On March 4, 2004, counsel for Gallagher
filed an application for entry of default. Since that time, the Company and
Gallagher have entered into an Agreement and Covenant Not to Execute dated March
10, 2005 pursuant to which the Company agreed to pay a monthly fee of $1,000 for
twelve (12) months and a final payment of $5,657.98 on the thirteenth (13th)
month until the amount of $17,657.98 is paid in full.

(6) On August 22, 2003, judgment was entered in Cause No. CV200300419 against
the Company and in favor of Sulphur Springs Valley Electric Cooperative, Inc.,
an Arizona corporation ("SSVEC"), for the aggregate amount of $169,759.27,
inclusive of prejudgment interest, costs, and attorneys fees. Subsequently, on
January 23, 2004, the Company and SSVEC entered into a Covenant Not To Execute
On Judgment whereby, in exchange for scheduled payments by the Company to SSVEC,
SSVEC agreed not to execute on the judgment. The agreement provides for a
payment schedule of: (i) $1,000 on the first of every month commencing March 1,
2004 and continuing until February 1, 2005 and a payment of $30,000 on or before
February 28, 2005; and (ii) $3,000 on the first of every month commencing March
1, 2005, and continuing until February 1, 2006, with the remaining amount due on
the judgment to be paid on February 28, 2006.

(7) As of October 31, 2004, the Company entered into a Settlement Agreement and
Mutual and General Release with Schuler Messersmith Daly & Landsdowne ("SMDL"),
in connection with indebtedness (the "Debt") in the aggregate amount of
$110,255.28 that was owed by the Company. Pursuant to this agreement and in full
settlement of the Debt, the Company agreed to make monthly payments of Two
Thousand Five Hundred Dollars ($2,500) commencing November 1, 2004 with the
remaining balance of any unpaid principal and accrued interest to be paid within
fifteen (15) days following the closing of financing for the Company, if
earlier, November 1, 2005.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 17


(J) NON-DEFAULTS.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 18


(K) EMPLOYMENT WITH OFFICERS, EMPLOYEES AND CONSULTANTS.

     On January 2, 2004, the Company entered into an Executive Employment
Agreement with Erland Anderson to serve as the Company's Chief Executive
Officer.

     On January 2, 2004, the Company entered into an Executive Employment
Agreement with Ron A. Hirsch to serve as the Company's Chairman of the Board of
Directors.

     In April, 2005, the Company agreed to enter into an employment agreement
with John Perry to serve as the Company's Senior Vice President and Chief
Financial Officer. In connection with this agreement and until the Company
receives funding, Mr. Perry is to receive twenty thousand (20,000) shares of the
Company's common stock on a pro rata basis. Further, upon the execution of the
employment agreement, Mr. Perry was to receive five hundred thousand (500,000)
shares of common stock of the Company, two hundred fifty thousand (250,000) of
which were received upon his acceptance of the employment terms and two hundred
fifty thousand (250,000) of which are to be received at his (1) one-year
anniversary. In addition, Mr. Perry was granted five hundred thousand (500,000)
common stock options with a term of two (5) years.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 19


(1) TAXES.

The Company has not filed its property taxes with respect to the Property in the
amount of $28,653.08 with the County of Cochise for the tax year 2004, and is
currently delinquent in the payment of these taxes. The Company has until
February 1, 2006 to pay such property taxes, and the failure to pay these
property taxes would result in a tax lien and possible tax sale of the Property.
As provided for in the Memorandum of Sources and Uses, the funds provided to the
Company pursuant to the Loan will be used to pay in full the delinquent property
taxes.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 20


(M) COMPLIANCE WITH LAWS; ENVIRONMENTAL MATTERS, LICENSES, ETC.

(1) On September 7, 2002, the Arizona Department of Environmental Quality
("ADEQ") issued a Compliance Order (the "Order") indicating that the Company's
operation of the Johnson Camp Mine located at Dragoon, Arizona (the "Mine") was
in violation of the Arizona Revised Statutes ("A.R.S"), Title 49, Chapter 2,
Article 3 and Arizona Administrative Code ("A.A.C.") Title 18, Chapter 9,
Articles 1 and 2 (collectively hereinafter "Arizona's aquifer protection laws,")
and ADEQ Consent Order P-4-01 and requiring the Company to bring the Mine into
compliance with Arizona's aquifer protection laws. Pursuant to the Order, the
Company and the ADEQ entered into a stipulated judgment which assessed civil
penalties against the Company in the amount of four million, three hundred and
twenty five thousand dollars ($4,325,000). In addition, the Order created an
escrow account, into which the Company was required to deposit, and did deposit
One Million, Five Hundred Thousand Dollars ($1,500,000), which was to be used to
bring the Mine into compliance with said Order. The Order provides that
violation of the order will subject the Company to further civil penalties which
shall include the entry of the stipulated judgment and the assessment of the
civil penalties therein. Pursuant to the Order, the Company has deposited One
Million, Five Hundred Thousand Dollars ($1,500,000) into an escrow account, all
the funds of which have been used to bring the Mine into Compliance with the
Order. The Company currently operates the Mine in compliance with the Order.

(2) The Company is delinquent in the filing of periodic reports required under
the Securities Exchange Act of 1934, and has therefore been a non-reporting
company listed in the Pink Sheets stock market since the year 2000. The Company
is currently in the process of completing the audits necessary to bring current
its periodic reports under the Exchange Act, and its legal counsel has been in
discussion with the Securities and Exchange Commission about the filing of a
comprehensive annual report on Form 10-KSB to bring the Company back into
compliance once the audits are completed.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 21


(N) AUTHORIZATION.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 22


(O) NON-CONTRAVENTION ETC.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 23


(P) INSURANCE.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 24


(Q) NO CONSENT.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 25


(R) EMPLOYEE RELATIONS.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 26


(S) TRANSACTIONS WITH AFFILIATES.

(1) On February 21, 2001, Ronald A. Hirsch was granted Two Hundred and Fifty
Thousand (250,000) non-qualifying stock options as consideration for a
consulting agreement by and between the Company and Mr. Hirsch, with an exercise
price of $0.18 per share.

(2) On January 2, 2004, the Company entered into an Executive Employment
Agreement with Erland A. Anderson to serve as the Company's President and the
Company agreed to compensate Mr. Anderson at a base salary of One Hundred and
Fifty Thousand Dollars ($150,000) annually. Pursuant to the Executive Employment
Agreement and the Unanimous Consent of the Board, dated October 20, 2003, the
Company granted Mr. Anderson the options to purchase up to one million five
hundred (1,500,000) shares of the Company's common stock at an exercise price of
$0.02 per share. As of October 3, 2005, Mr. Anderson has exercised options to
purchase one hundred fifty thousand (150,000) shares of the Company's common
stock, and there are options outstanding which remain to be exercised and which
would allow him to purchase an additional amount of up to one million three
hundred fifty thousand (1,350,000) shares of the Company's common stock.

(3) On January 2, 2004, the Company entered into an Executive Employment
Agreement with Ronald A. Hirsch to serve as the Company's Chairman. Pursuant to
the Executive Employment Agreement; a Unanimous Written Consent of the Board
dated October 20, 2003, the Company agreed to grant Mr. Hirsch the options to
purchase up to three million (3,000,000) shares of the Company's common stock at
an exercise price of Two Cents ($0.02) per share and to compensate Mr. Hirsch at
base salary of Two Hundred Thousand Dollars ($200,000) annually.

(4) On June 29, 2004, Mr. Hirsch partially exercised the stock options he
received pursuant to that certain Executive Employment Agreement dated January
2, 2004 to receive one million seven hundred fifty thousand (1,750,000) shares
of the Company's common stock by paying the Company Thirty-Five Thousand Dollars
($35,000). However, on July 18, 2005, Mr. Hirsch and the Company entered into a
Rescission Agreement to rescind Mr. Hirsch's purchase of the 1,750,000 shares,
effective as of June 29, 2004.

(5) Effective June 29, 2004, and in connection with the rescission of the
Thirty-Five Thousand Dollars ($35,000) that was paid by Ronald A. Hirsch for the
one million seven hundred fifty thousand (1,750,000) shares of the Company's
common stock, the Company issued a Convertible Promissory Note to Mr. Hirsch
dated July 1, 2004. As of July 1, 2005, which is the maturity date of the Note,
Mr. Hirsch may convert all or some of the unpaid principal and accrued interest
into shares of the Company's common stock at a conversion price of Seventeen and
One-Half Cents ($.175) per share.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 27


(6) On October 4, 2004, the Company issued a Convertible Promissory Note to
Ronald A. Hirsch for the principal sum of One Hundred Six Thousand Dollars
($106,000), plus any accrued but unpaid interest. As of October 5, 2005, which
is the maturity date of the Note, Mr. Hirsch may convert all or some of the
unpaid principal and accrued interest into shares of the Company's common stock
at a conversion price of Twenty Cents ($0.20) per share.

(7) Effective as of September 26, 2005, the Company entered into an Amendment to
Convertible Promissory Note dated October 4, 2004 with Ronald Hirsch which
states that unless the Promissory Note is converted as provided in Section 2 (of
the Promissory Note), the Promissory Note will automatically mature and be due
and payable on December 31, 2005.

(8) On August 19, 2004, the Company issued a Convertible Promissory Note to
Stephen D. Seymour for the principal sum of Sixty-Six Thousand Dollars
($66,000), plus any accrued but unpaid interest. As of August 19, 2005, which is
the maturity date of the Note, Mr. Seymour may convert all or some of the unpaid
principal and accrued interest into shares of the Company's common stock at a
conversion price of Twenty Cents ($0.20) per share.

(9) Effective as of September 26, 2005, the Company entered into an Amendment to
Convertible Promissory Note dated August 19, 2004 with Stephen D. Seymour which
states that unless the Promissory Note is converted as provided in Section 2 (of
the Promissory Note), the Promissory Note will automatically mature and be due
and payable on December 31, 2005.

(10) On October 20, 2003, the Company granted Stephen D. Seymour an option to
purchase up to two hundred and fifty thousand (250,000) shares of the Company's
common stock at the purchase price of Two Cents ($0.02) per share.

(11) As of June 17, 2004, the Company has agreed to compensate Rex Loesby to
serve as a consultant and the Company's Treasurer in exchange for payment of
twelve thousand five hundred (12,500) shares of the Company's common stock for
each month of consulting services provided to the Company by Mr. Loesby.
However, Mr. Loesby no longer serves as a consultant to the Company or as the
Company's Treasurer, as further described below. In consideration of past
consulting services provided pursuant to this agreement, the Company has issued
fifty thousand (50,000) shares of its common stock to Mr. Loesby.

(12) Pursuant to a private placement of the Company which commenced July 15,
2004, the Company agreed to enter into a Subscription Agreement with Rex E.
Loesby, whereby Mr. Loesby received up to seventy-one thousand five hundred
(71,500) shares of the Company's common stock and a warrant to purchase an
additional thirty-five thousand seven hundred fifty (35,750) shares of the
Company's common stock.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 28


(13) In April, 2005, the Company agreed to enter into an employment agreement
with John Perry to serve as the Company's Senior Vice President and Chief
Financial Officer. In connection with this agreement and until the Company
receives funding, Mr. Perry is to receive twenty thousand (20,000) shares of the
Company's common stock on a pro rata basis. Further, upon the execution of the
employment agreement, Mr. Perry was to receive five hundred thousand (500,000)
shares of common stock of the Company, two hundred fifty thousand (250,000) of
which were received upon his acceptance of the employment terms and two hundred
fifty thousand (250,000) of which are to be received at his (1) one-year
anniversary. In addition, Mr. Perry was granted five hundred thousand (500,000)
common stock options with a term of two (5) years.

(14) On June 30, 2004, the Company entered into a Revolving Line of Credit
Agreement (the "Line of Credit Agreement") with Ronald A. Hirsch and Stephen
Seymour (the "Lenders") in the principal amount of Six Hundred Thousand Dollars
($600,000.00), which matures on December 31, 2005. Pursuant to the Line of
Credit Agreement, the Company executed and delivered to the Lenders a secured
promissory note in the amount of Six Hundred Thousand Dollars ($600,000) and the
Company and the Lenders entered into a Security Agreement (the "Security
Agreement"). The Company also agreed to issue to the Lenders four (4) shares of
the Company's common stock and four (4) warrants for every One Dollar ($1.00)
loaned to the Company in Advances (as such term in defined in the Line of Credit
Agreement). Each Warrant enables the Lenders to purchase one share of the
Company's common stock for an exercise price of Twenty-Five Cents ($0.25) for
three (3) years. The Shares and Warrants owed to the Lenders for any particular
Advance shall be issued in the names of the Lenders, in accordance with
instructions from the Lenders, within ten (10) days of an Advance. The Lenders
agreed that the shares and warrants described above are "restricted securities"
as defined by SEC Rule 144; however, the Company agreed to register for sale the
shares and the shares of common stock underlying the warrants on any
registration statement that the Company files during the next ten (10) years
with the Securities and Exchange Commission, except for any registration
statement filed on Form S-8.

(15) The Company has a contingent right of first refusal to acquire from Ronald
A. Hirsch and Steven Seymour, two of the Company's directors, a right of first
refusal to acquire all of their respective interest (to the extent they acquire
any such interest at any time and from time to time during the term of this
Agreement) in the proposed Asset Purchase Agreement which they may (but are not
obligated to) enter into with ASARCO, a New Jersey corporation ("ASARCO") and
providing for the sale by ASARCO of its Tennessee Mining Division, a zinc
operation (the "Purchase Agreement"). By written consent dated October 14, 2004,
the Company assigned any and all rights, title and interest it had in and to the
Purchase Agreement to Messrs. Hirsch and Seymour, in consideration for the right
of first refusal.

(16) About August 19, 2005, the Company received a letter from Mr. Walter Belous
in which he requested payment from the Company in the amount of $43,750 due to
accrued

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 29


pension payments since his retirement as a Director of the Company. On August
25, 2005, the Company sent a letter to Mr. Belous stating that since his
retirement, the Company instituted new management and a new infrastructure and
therefore, the Company's current management was unaware of his claim. Further,
the letter from the Company requested that Mr. Belous provide documentation and
evidence to Ron Hirsch so that an investigation may commence regarding his claim
for accrued pension payments. On or about September 9, 2005, the Company
received another letter dated September 2, 2005 with the requested information.
The Company's corporate counsel, August Law Group, P.C., will be sending a
response to Mr. Belous to discuss the funding issues of the Company and the
possibility of a share issuance in exchange for any accrued pension payments.

(17) If the claim above from Mr. Walter Belous is legitimite, there is one (1)
other former director of the Company, Donald L. Roettele, who may also qualify
for accrued pension payments. However, at this time, the Company has not
received any communication from him requesting that any accrued pension payments
be made to him and his whereabouts are unknown at this time. In the event that
Mr. Roettele does have a ligitimite claim, the Company may consider the
possibility of a share issuance in exchange for any accrued pension payments.

(18) As of October 3, 2005, the Company is indebted to its Employees, Officers,
Directors, and Affiliates as follows:

<TABLE>
<CAPTION>
OFFICER/DIRECTOR                         AMOUNT ($US)   TOTAL ($US)
----------------                         ------------   -----------
<S>                                      <C>            <C>
RONALD HIRSCH
Prior Consulting contract                   320,000
Accrued Salary through 12/31/04             200,000
Accrued Salary through 9/30/05              150,000
Accrued Directors Fees through 9/30/05       47,500         717,500
                                            =======      ==========
ERLAND ANDERSON
Consulting as Mine Tech Services             46,384
Accrued Salary as of 12/31/04               172,500
Accrued Salary through 9/30/05               73,500
Accrued Director fees through 9/30/05        20,000         312,384
                                            =======      ==========
STEPHEN SEYMOUR
Accrued Director fees through 12/31/04       12,500
Accrued Director fees through 9/30/05         7,500          20,000
                                            =======      ==========
   TOTAL ACCRUED COMPENSATION                            $1,049,884
</TABLE>

         EXCEPTIONS TO COVENANTS AND AGREEMENTS SET FORTH IN SCHEDULE 2.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 30


(1.1.) INDEBTEDNESS.

(1) As of October 3, 2005, Accounts Payable over sixty (60) days includes the
following:

<TABLE>
<CAPTION>
VENDOR                                  DUE DATE           NUMBER            BALANCE
------                                 ----------   --------------------   ----------
<S>                                    <C>          <C>                    <C>
Accounting Solutions                   01/10/2005   AUDIT 04                25,682.31
ADP                                    02/14/2003   345949                      24.00
ADP                                    02/27/2003   350181                      92.50
AGE Contracting, Inc.                  01/10/2005   2390 audit 5-25-1        5,700.00
Aggreko                                11/10/2001                           10,796.40
Aggreko                                01/10/2005                           25,380.40
Aitco Inc.                             07/01/2003   2003-277                   286.36
Arizona DMV                            08/15/2004   4WT849                      74.94
Arizona Paging                         01/10/2005   105182-460-778-053         475.71
Asarco, Inc                            05/29/2003   011990A                     19.94
Asarco, Inc                            07/02/2003   012230A                      3.88
Ascom Hasler Leasing                   01/10/2005   12-01 per audit            917.68
Bass Consultants                       04/10/2001                            3,800.00
Belew's, Inc.                          02/10/2001                              611.52
Belous, Walter T.                      01/25/2001                            8,500.00
Blue Flame Bottle Gas Service          01/10/2005   515628                     755.30
Border Products Corp.                  08/27/2003   921339                     256.59
Border Products Corp.                  09/05/2003   925105                      53.71
Border Products Corp.                  09/05/2003   924081                     129.99
Border Products Corp.                  09/18/2003   22454                       37.91
Border Products Corp.                  09/18/2003   929921                      72.86
Capital Bank and Trust                 08/30/2001                              750.00
Capital Bank and Trust                 02/15/2002   102623                     750.00
Capital Bank and Trust                 02/16/2003   104959                     750.00
Cassels Brock & Blackwell LLP          04/14/2003   1043778                    464.87
Cassels Brock & Blackwell LLP          08/15/2004   028059-00001               488.94
CBIZ Actuarial                         01/10/2005   audit14344B3-31-1        2,300.00
Ceridan Benefits Services              09/10/2001                              125.00
Cochise County Treasurer               06/13/2005   2004 PROP TAX            4,811.46
Cochise County Treasurer               06/24/2005   INTEREST 05                325.41
Cognis                                 11/16/2001                           28,505.75
CRU Intrnl.                            04/07/2001                            1,500.00
CSC                                    02/01/2002   7236773                    290.00
CSC                                    03/11/2004   FINANCE CHARGE              35.53
</TABLE>

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 31


<TABLE>
<S>                                    <C>          <C>                    <C>
CSC                                    01/08/2005                              608.00
CSC                                    01/08/2005                              298.00
CSC                                    02/21/2005                              285.00
Custom Mailing Solutions               01/24/2003   3569                       519.61
Cytec Industries                                    PO1123                      (7.59)
D.C. Treasurer                         01/10/2005   9/29/00 audit               30.00
Demand Printing                        05/26/2001                              474.49
Depository Trust                       01/10/2005   09/06/01  per audit        375.00
Entre Computer                         01/10/2005   audit 2001                 352.18
Expanets                               01/10/2005   per audit 2001             403.83
Field Lining Systems Inc.              01/20/2003   Dec. 02-079-AZ           4,952.92
GCR Tucson Tire                        01/01/2002   97484                       95.00
GCR Tucson Tire                        01/10/2005   92613&97484 audit           70.00
Geographe International                04/22/2001                            9,756.50
Grainger                               02/22/2001                              222.82
Great Western Chemical co.             01/10/2005   per audit 2001           5,330.00
Harllee, Porges                        12/30/2001                              388.00
Harold Burr Attny                                                             (256.45)
IBM Corporation                        01/10/2005   per audit 2001             213.08
Industrial Motor & Control, Inc.       11/26/2001                              144.44
Keenen Supply                          06/02/2001                            3,163.69
Keenen Supply                          03/21/2002   S022502                     72.40
Laser Specialists                      01/10/2005   44184 per audit            148.03
Leanne Ann Baker                       05/05/2005   42401                      725.00
Mardian Equipment - TUC                09/27/2003   aug 03                   1,902.20
MARSHCO, Inc.                          01/10/2005   147474 per audit         5,610.00
Maskell-Robbins, Inc.                  03/10/2001                            3,372.90
Mayer Hoffman McCann P.C.              08/11/2005   FC JULY 05                  10.00
McCollister's                          01/10/2005   059198251 per audit        312.80
Micon International Ltd                06/10/2005   05-05-1047               2,192.27
Micon International Ltd                07/10/2005   05-06-1092              11,990.96
Midland Information Systems            01/10/2005   S54802-000 per audit       725.00
Mining & Construction Suppliers        02/09/2001                              249.42
Paul Revere Insurance                  01/10/2005   049725.22                  309.83
PR Newswire                            01/20/2001   24772780                   164.50
PR Newswire                            02/25/2001                            2,567.50
Prudential Securities Incorporated     01/24/2003   5766                       154.92
Quality Copier                         02/10/2001                               76.48
R. Berger & Associates                 05/10/2001   4020                     7,814.70
</TABLE>

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 32


<TABLE>
<S>                                    <C>          <C>                     <C>
R. Berger & Associates                 05/30/2002   4281                       129.65
R. Berger & Associates                 08/22/2002   4557                       126.20
R. Berger & Associates                 08/22/2002   4575                       126.80
R. Berger & Associates                 09/22/2002   4699                       131.50
R. Berger & Associates                 10/19/2002   4830                       148.05
Rieser & Marx                          01/10/2005   15325 Audit             14,680.57
Roettele, Donald                       01/25/2001                            8,500.00
RSC                                    09/07/2003   aug 03                   1,434.00
SETON                                  08/16/2003   9301629376                  44.66
Sierra Springs                         01/10/2005   546949 AUDIT               244.25
Stewart, McKelvey, Stirling & Scales   08/08/2003   06/27/03                11,227.12
Sturgeon Electric                      10/29/2001                            2,325.00
Sunwest Supply                         02/28/2003   9081                       215.80
Sunwest Supply                         04/20/2003   9312                        44.20
Sunwest Supply                         04/26/2003   9339                       260.00
Sunwest Supply                         06/12/2003   9536                       100.00
Tucson Transformer                     09/21/2001                              451.00
Unisource                              01/10/2005   43505075 AUDIT               5.35
Vision Engineering                     05/10/2001                            8,890.00
Weber Drilling                         02/10/2003                           10,536.87
Weber Drilling                         02/25/2003                            2,286.46
Willis payment plan                    01/23/2005   05 liability payment     8,965.12
Winters, Dorsey & Co., LLC             03/14/2003   N02-03-001-02               22.07
Winters, Dorsey & Co., LLC             04/14/2003   N02-03-001-03            5,660.67
Xerox Corp.                            12/13/2001                            1,614.24
Xerox Corp.                            02/01/2002   086878268                  282.73
Xerox Corp.                            01/10/2005   AUDIT ADJUST TO ACT         32.71
Gallagher & Kennedy                    12/21/2001                           10,657.98
Jacobvitz, Thuma & Walker              03/28/2002   2013                         1.56
Jacobvitz, Thuma & Walker              04/25/2002   2014                       936.44
Jacobvitz, Thuma & Walker              08/16/2003   PER STATEMENT 5/6/3     22,867.13
Javernick Equipment                    12/14/2004   dump truck balance       4,000.00
Mine Tech Services                     12/27/2001                           39,235.62
Mine Tech Services                     08/07/2002   3049                     6,712.50
Schuler, Messersmith                   02/10/2003   1767                    41,059.33
Schuler, Messersmith                   03/21/2003   1778                    21,621.81
Schuler, Messersmith                   05/02/2003   1797                       289.07
</TABLE>

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 33


<TABLE>
<S>                                    <C>           <C>                    <C>
Schuler, Messersmith                   05/12/2003   1813                        48.28
Schuler, Messersmith                   11/11/2004   INTEREST TO DATE        31,637.97
SSVEC                                  03/12/2003   March 03                16,499.00
SSVEC                                  04/30/2003   April 03                38,051.00
SSVEC                                  05/11/2003   May 03                     563.09
SSVEC                                  07/04/2003   June 03                 40,207.91
SSVEC                                  08/16/2003   SCAUG 03                   594.91
SSVEC                                  01/10/2005   INTEREST PER JUDGMNT    52,519.17
SSVEC                                  04/10/2005   1st qrt 05 interest      9,201.91
SSVEC                                  07/10/2005   2nd qrt interest         7,887.14
Winters Company                        07/05/2001                           41,973.13
Bowne of Dallas                        04/12/2003   BODI-03030033-1          9,162.09
Bowne of Dallas                        04/12/2003   BODI-03030032-1            406.00
Bowne of Dallas                        04/27/2003   BODI-03010054-2            650.00
Carson, Pierce                         04/10/2001                            7,239.37
Great West Life                        01/11/2003   OCT 01                   9,011.57
Great West Life                        03/19/2003   March 03                 9,730.43
Great West Life                        04/11/2003   APRIL PREM & CLAIMS     25,079.37
John F Champagne                       12/28/2000                           31,845.00
John F Champagne                       03/19/2002   684646                   1,236.25
Airgas                                 11/30/2003                              280.50
Airgas                                 12/31/2003                              289.60
Airgas                                 01/31/2004                              289.60
Airgas                                 02/01/2004                              289.60
Airgas                                 02/29/2004   103142673                  271.40
Airgas                                 03/31/2004                              289.60
Airgas                                 07/12/2004   103223417                  338.38
Airgas                                 08/05/2004   103796615                   46.61
Airgas                                 08/09/2004   103245344                  305.72
Airgas                                 09/14/2004   Inv103700588                51.06
Kirkland - Clarence                    01/11/2003   thru 12/30/03            3,496.00
Lightnin                               06/28/2001                           26,000.00
                                                                           ----------
                                                                           755,944.51
                                                                           ==========
</TABLE>

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 34


(2) As of October 3, 2004, the Company is indebted to its Employees, Officers,
Directors, or Affiliates as follows:

<TABLE>
<CAPTION>
OFFICER/DIRECTOR                         AMOUNT ($US)   TOTAL ($US)
----------------                         ------------   -----------
<S>                                      <C>            <C>
RONALD HIRSCH
Prior Consulting contract                   320,000
Accrued Salary through 12/31/04             200,000
Accrued Salary through 9/30/05              150,000
Accrued Directors Fees through 9/30/05       47,500         717,500
                                           ========      ==========

ERLAND ANDERSON
Consulting as Mine Tech Services             46,384
Accrued Salary as of 12/31/04               172,500
Accrued Salary through 9/30/05               73,500
Accrued Director fees through 9/30/05        20,000         312,384
                                           ========      ==========

STEPHEN SEYMOUR
Accrued Director fees through 12/31/04       12,500
Accrued Director fees through 9/30/05         7,500          20,000
                                           ========      ==========
   TOTAL ACCRUED COMPENSATION                            $1,049,884
</TABLE>

(3) On or about October 30, 2002 the Company entered into a loan agreement with
McGuire Machinery Inc., having a place of business located at 85 Riverwood
Drive, Grayson, Kentucky 41143, such loan agreement evidenced by a Promissory
Note for the amount of Ninety-Five Thousand Dollars ($95,000). As collateral for
the loan, the Promissory Note is secured by the Company's "Ingersol Rand DM45E
Blasthole Drill, Serial Number 7301."

(4) On June 30, 2004, the Company entered into a Revolving Line of Credit
Agreement (the "Line of Credit Agreement") with Ronald A. Hirsch and Stephen
Seymour (the "Lenders") in the principal amount of Six Hundred Thousand Dollars
($600,000.00), which matures on December 31, 2005. Pursuant to the Line of
Credit Agreement, the Company executed and delivered to the Lenders a secured
promissory note in the amount of Six Hundred Thousand Dollars ($600,000) and the
Company and the Lenders entered into a Security Agreement (the "Security
Agreement"). The Company also agreed to issue to the Lenders four (4) shares of
the Company's common stock and four (4) warrants for every One Dollar ($1.00)
loaned to the Company in Advances (as such term in defined in the Line of Credit
Agreement). Each Warrant enables the Lenders to purchase one share of the
Company's common stock for an exercise price of Twenty-Five Cents ($0.25) for
three (3) years. The Shares and Warrants

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 35


owed to the Lenders for any particular Advance shall be issued in the names of
the Lenders, in accordance with instructions from the Lenders, within ten (10)
days of an Advance. The Lenders agreed that the shares and warrants described
above are "restricted securities" as defined by SEC Rule 144; however, the
Company agreed to register for sale the shares and the shares of common stock
underlying the warrants on any registration statement that the Company files
during the next ten (10) years with the Securities and Exchange Commission,
except for any registration statement filed on Form S-8.

(5) About August 19, 2005, the Company received a letter from Mr. Walter Belous
in which he requested payment from the Company in the amount of $43,750 due to
accrued pension payments since his retirement as a Director of the Company. On
August 25, 2005, the Company sent a letter to Mr. Belous stating that since his
retirement, the Company instituted new management and a new infrastructure and
therefore, the Company's current management was unaware of his claim. Further,
the letter from the Company requested that Mr. Belous provide documentation and
evidence to Ron Hirsch so that an investigation may commence regarding his claim
for accrued pension payments. On or about September 9, 2005, the Company
received another letter dated September 2, 2005 with the requested information.
The Company's corporate counsel, August Law Group, P.C., will be sending a
response to Mr. Belous to discuss the funding issues of the Company and the
possibility of a share issuance in exchange for any accrued pension payments.

(6) If the claim above from Mr. Walter Belous is legitimite, there is one (1)
other former director of the Company, Donald L. Roettele, who may also qualify
for accrued pension payments. However, at this time, the Company has not
received any communication from him requesting that any accrued pension payments
be made to him and his whereabouts are unknown at this time. In the event that
Mr. Roettele does have a ligitimite claim, the Company may consider the
possibility of a share issuance in exchange for any accrued pension payments.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 36


(1.2). LIENS.

(1) On or about October 30, 2002 the Company entered into a loan agreement with
McGuire Machinery Inc., having a place of business located at 85 Riverwood
Drive, Grayson, Kentucky 41143, such loan agreement evidenced by a Promissory
Note for the amount of Ninety-Five Thousand Dollars ($95,000). As collateral for
the loan, the Promissory Note is secured by the Company's "Ingersol Rand DM45E
Blasthole Drill, Serial Number 7301." This loan was subsequently transferred to
Javernick Equipment, Inc. on September 8, 2005.

(2) On June 30, 2004, the Company entered into a Revolving Line of Credit
Agreement (the "Line of Credit Agreement") with Ronald A. Hirsch and Stephen
Seymour (the "Lenders") in the principal amount of Six Hundred Thousand Dollars
($600,000.00), which matures on December 31, 2005. Pursuant to the Line of
Credit Agreement, the Company executed and delivered to the Lenders a secured
promissory note in the amount of Six Hundred Thousand Dollars ($600,000) and the
Company and the Lenders entered into a Security Agreement (the "Security
Agreement"). The Company also agreed to issue to the Lenders four (4) shares of
the Company's common stock and four (4) warrants for every One Dollar ($1.00)
loaned to the Company in Advances (as such term in defined in the Line of Credit
Agreement). Each Warrant enables the Lenders to purchase one share of the
Company's common stock for an exercise price of Twenty-Five Cents ($0.25) for
three (3) years. The Shares and Warrants owed to the Lenders for any particular
Advance shall be issued in the names of the Lenders, in accordance with
instructions from the Lenders, within ten (10) days of an Advance. The Lenders
agreed that the shares and warrants described above are "restricted securities"
as defined by SEC Rule 144; however, the Company agreed to register for sale the
shares and the shares of common stock underlying the warrants on any
registration statement that the Company files during the next ten (10) years
with the Securities and Exchange Commission, except for any registration
statement filed on Form S-8. All of the assets of the Company are secured by the
Lenders pursuant to this Line of Credit Agreement.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 37


(1.3) RESTRICTIONS ON INVESTMENTS.

(1) The Company has a contingent right of first refusal to acquire from Ronald
A. Hirsch and Steven Seymour, two of the Company's directors, a right of first
refusal to acquire all of their respective interest (to the extent they acquire
any such interest at any time and from time to time during the term of this
Agreement) in the proposed Asset Purchase Agreement which they may (but are not
obligated to) enter into with ASARCO, a New Jersey corporation ("ASARCO") and
providing for the sale by ASARCO of its Tennessee Mining Division, a zinc
operation (the "Purchase Agreement"). By written consent dated October 14, 2004,
the Company assigned any and all rights, title and interest it had in and to the
Purchase Agreement to Messrs. Hirsch and Seymour, in consideration for the right
of first refusal.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 38


(1.4) DISTRIBUTIONS; RESTRICTED PAYMENTS.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 39


(1.5) MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.

     (1.5.1) MERGERS AND ACQUISITIONS.

          None.

     (1.5.2) DISPOSITION OF ASSETS.

          (a) Pursuant to the Post-Closing letter to be entered into between the
Company, Auramet Trading, LLC ("Auramet") and Nedbank Limited, the parties may
mutually agree in good faith, that the Company and Auramet shall negotiate in
good faith the terms of an agreement for copper cathode (the "Copper Cathode
Offtake Agreement"), providing for, among other things, the purchase by Auramet
of copper cathode produced by the Company, on prices and conditions based on
then existing market terms and conditions and reasonably acceptable to the
Company, over a term of twenty-four (24) months.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 40


(1.6) COMPLIANCE WITH ENVIRONMENTAL LAWS.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 41


(1.7) BUSINESS ACTIVITIES.

(1) The Company has a contingent right of first refusal to acquire from Ronald
A. Hirsch and Steven Seymour, two of the Company's directors, a right of first
refusal to acquire all of their respective interest (to the extent they acquire
any such interest at any time and from time to time during the term of this
Agreement) in the proposed Asset Purchase Agreement which they may (but are not
obligated to) enter into with ASARCO, a New Jersey corporation ("ASARCO") and
providing for the sale by ASARCO of its Tennessee Mining Division, a zinc
operation (the "Purchase Agreement"). By written consent dated October 14, 2004,
the Company assigned any and all rights, title and interest it had in and to the
Purchase Agreement to Messrs. Hirsch and Seymour, in consideration for the right
of first refusal.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 42


(1.8) TRANSACTIONS WITH AFFILIATES.

(1) On February 21, 2001, Ronald A. Hirsch was granted Two Hundred and Fifty
Thousand (250,000) non-qualifying stock options as consideration for a
consulting agreement by and between the Company and Mr. Hirsch, with an exercise
price of $0.18 per share.

(2) On January 2, 2004, the Company entered into an Executive Employment
Agreement with Erland A. Anderson to serve as the Company's President and the
Company agreed to compensate Mr. Anderson at a base salary of One Hundred and
Fifty Thousand Dollars ($150,000) annually. Pursuant to the Executive Employment
Agreement and the Unanimous Consent of the Board, dated October 20, 2003, the
Company granted Mr. Anderson the options to purchase up to one million five
hundred (1,500,000) shares of the Company's common stock at an exercise price of
$0.02 per share. As of October 3, 2005, Mr. Anderson has exercised options to
purchase one hundred fifty thousand (150,000) shares of the Company's common
stock, and there are options outstanding which remain to be exercised and which
would allow him to purchase an additional amount of up to one million three
hundred fifty thousand (1,350,000) shares of the Company's common stock.

(3) On January 2, 2004, the Company entered into an Executive Employment
Agreement with Ronald A. Hirsch to serve as the Company's Chairman. Pursuant to
the Executive Employment Agreement; a Unanimous Written Consent of the Board
dated October 20, 2003, the Company agreed to grant Mr. Hirsch the options to
purchase up to three million (3,000,000) shares of the Company's common stock at
an exercise price of Two Cents ($0.02) per share and to compensate Mr. Hirsch at
base salary of Two Hundred Thousand Dollars ($200,000) annually.

(4) On June 29, 2004, Mr. Hirsch partially exercised the stock options he
received pursuant to that certain Executive Employment Agreement dated January
2, 2004 to receive one million seven hundred fifty thousand (1,750,000) shares
of the Company's common stock by paying the Company Thirty-Five Thousand Dollars
($35,000). However, on July 18, 2005, Mr. Hirsch and the Company entered into a
Rescission Agreement to rescind Mr. Hirsch's purchase of the 1,750,000 shares,
effective as of June 29, 2004.

(5) Effective June 29, 2004, and in connection with the rescission of the
Thirty-Five Thousand Dollars ($35,000) that was paid by Ronald A. Hirsch for the
one million seven hundred fifty thousand (1,750,000) shares of the Company's
common stock, the Company issued a Convertible Promissory Note to Mr. Hirsch
dated July 1, 2004. As of July 1, 2005, which is the maturity date of the Note,
Mr. Hirsch may convert all or some of the unpaid principal and accrued interest
into shares of the Company's common stock at a conversion price of Seventeen and
One-Half Cents ($.175) per share.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 43


(6) On October 4, 2004, the Company issued a Convertible Promissory Note to
Ronald A. Hirsch for the principal sum of One Hundred Six Thousand Dollars
($106,000), plus any accrued but unpaid interest. As of October 5, 2005, which
is the maturity date of the Note, Mr. Hirsch may convert all or some of the
unpaid principal and accrued interest into shares of the Company's common stock
at a conversion price of Twenty Cents ($0.20) per share.

(7) Effective as of September 26, 2005, the Company entered into an Amendment to
Convertible Promissory Note dated October 4, 2004 with Ronald Hirsch which
states that unless the Promissory Note is converted as provided in Section 2 (of
the Promissory Note), the Promissory Note will automatically mature and be due
and payable on December 31, 2005.

(8) On August 19, 2004, the Company issued a Convertible Promissory Note to
Stephen D. Seymour for the principal sum of Sixty-Six Thousand Dollars
($66,000), plus any accrued but unpaid interest. As of August 19, 2005, which is
the maturity date of the Note, Mr. Seymour may convert all or some of the unpaid
principal and accrued interest into shares of the Company's common stock at a
conversion price of Twenty Cents ($0.20) per share.

(9) Effective as of September 26, 2005, the Company entered into an Amendment to
Convertible Promissory Note dated August 19, 2004 with Stephen D. Seymour which
states that unless the Promissory Note is converted as provided in Section 2 (of
the Promissory Note), the Promissory Note will automatically mature and be due
and payable on December 31, 2005.

(10) On October 20, 2003, the Company granted Stephen D. Seymour an option to
purchase up to two hundred and fifty thousand (250,000) shares of the Company's
common stock at the purchase price of Two Cents ($0.02) per share.

(11) As of June 17, 2004, the Company has agreed to compensate Rex Loesby to
serve as a consultant and the Company's Treasurer in exchange for payment of
twelve thousand five hundred (12,500) shares of the Company's common stock for
each month of consulting services provided to the Company by Mr. Loesby.
However, Mr. Loesby no longer serves as a consultant to the Company or as the
Company's Treasurer, as further described below. In consideration of past
consulting services provided pursuant to this agreement, the Company has issued
fifty thousand (50,000) shares of its common stock to Mr. Loesby.

(12) Pursuant to a private placement of the Company which commenced July 15,
2004, the Company agreed to enter into a Subscription Agreement with Rex E.
Loesby, whereby Mr. Loesby received up to seventy-one thousand five hundred
(71,500) shares of the Company's common stock and a warrant to purchase an
additional thirty-five thousand seven hundred fifty (35,750) shares of the
Company's common stock.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 44


(13) On March 28, 2005, the Company agreed to enter into an employment agreement
with John Perry to serve as the Company's Senior Vice President and Chief
Financial Officer. In connection with this agreement and until the Company
receives funding, Mr. Perry is to receive twenty thousand (20,000) shares of the
Company's common stock on a pro rata basis. Further, upon the execution of the
employment agreement, Mr. Perry was to receive five hundred thousand (500,000)
shares of common stock of the Company, two hundred fifty thousand (250,000) of
which were received upon his acceptance of the employment terms and two hundred
fifty thousand (250,000) of which are to be received at his (1) one-year
anniversary. In addition, Mr. Perry was granted five hundred thousand (500,000)
common stock options with a term of two (2) years.

(14) On June 30, 2004, the Company entered into a Revolving Line of Credit
Agreement (the "Line of Credit Agreement") with Ronald A. Hirsch and Stephen
Seymour (the "Lenders") in the principal amount of Six Hundred Thousand Dollars
($600,000.00), which matures on December 31, 2005. Pursuant to the Line of
Credit Agreement, the Company executed and delivered to the Lenders a secured
promissory note in the amount of Six Hundred Thousand Dollars ($600,000) and the
Company and the Lenders entered into a Security Agreement (the "Security
Agreement"). The Company also agreed to issue to the Lenders four (4) shares of
the Company's common stock and four (4) warrants for every One Dollar ($1.00)
loaned to the Company in Advances (as such term in defined in the Line of Credit
Agreement). Each Warrant enables the Lenders to purchase one share of the
Company's common stock for an exercise price of Twenty-Five Cents ($0.25) for
three (3) years. The Shares and Warrants owed to the Lenders for any particular
Advance shall be issued in the names of the Lenders, in accordance with
instructions from the Lenders, within ten (10) days of an Advance. The Lenders
agreed that the shares and warrants described above are "restricted securities"
as defined by SEC Rule 144; however, the Company agreed to register for sale the
shares and the shares of common stock underlying the warrants on any
registration statement that the Company files during the next ten (10) years
with the Securities and Exchange Commission, except for any registration
statement filed on Form S-8.

(15) The Company has a contingent right of first refusal to acquire from Ronald
A. Hirsch and Steven Seymour, two of the Company's directors, a right of first
refusal to acquire all of their respective interest (to the extent they acquire
any such interest at any time and from time to time during the term of this
Agreement) in the proposed Asset Purchase Agreement which they may (but are not
obligated to) enter into with ASARCO, a New Jersey corporation ("ASARCO") and
providing for the sale by ASARCO of its Tennessee Mining Division, a zinc
operation (the "Purchase Agreement"). By written consent dated October 14, 2004,
the Company assigned any and all rights, title and interest it had in and to the
Purchase Agreement to Messrs. Hirsch and Seymour, in consideration for the right
of first refusal.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 45


(16) As of October 3, 2005, the Company is indebted to its Employees, Officers,
Directors, and Affiliates as follows:

<TABLE>
<CAPTION>
                                          AMOUNT
OFFICER/DIRECTOR                          ($US)    TOTAL ($US)
----------------                         -------   -----------
<S>                                      <C>       <C>
RONALD HIRSCH
Prior Consulting contract                320,000
Accrued Salary through 12/31/04          200,000
Accrued Salary through 9/30/05           150,000
Accrued Directors Fees through 9/30/05    47,500       717,500
                                         =======    ==========
ERLAND ANDERSON
Consulting as Mine Tech Services          46,384
Accrued Salary as of 12/31/04            172,500
Accrued Salary through 9/30/05            73,500
Accrued Director fees through 9/30/05     20,000       312,384
                                         =======    ==========
STEPHEN SEYMOUR
Accrued Director fees through 12/31/04    12,500
Accrued Director fees through 9/30/05      7,500        20,000
                                         =======    ==========
   TOTAL ACCRUED COMPENSATION                       $1,049,884
</TABLE>

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 46


(1.9) CONFLICTING AGREEMENTS.

(1) On June 30, 2004, the Company entered into a Revolving Line of Credit
Agreement (the "Line of Credit Agreement") with Ronald A. Hirsch and Stephen
Seymour (the "Lenders") in the principal amount of Six Hundred Thousand Dollars
($600,000.00), which has an interest rate of 6% and which had an original
maturity date of December 31, 2005. Pursuant to the terms and conditions of that
certain Subordination Agreement between Lenders and Auramet Trading, LLC, the
maturity date of the Line of Credit Agreement has been extended to immediately
after all sums due and payable under the Loan are paid. If any extensions to the
Line of Credit are granted by the Lenders, this will require the Company to pay
additional interest payments, which may impair the Company from making timely
payments pursuant to that certain Secured Promissory Note to be entered into
between the Company and Nedbank Limited.

Pursuant to the Line of Credit Agreement, the Company also executed and
delivered to the Lenders a secured promissory note in the amount of Six Hundred
Thousand Dollars ($600,000) and the Company and the Lenders entered into a
Security Agreement (the "Security Agreement"). The Company also agreed to issue
to the Lenders four (4) shares of the Company's common stock and four (4)
warrants for every One Dollar ($1.00) loaned to the Company in Advances (as such
term in defined in the Line of Credit Agreement). Each Warrant enables the
Lenders to purchase one share of the Company's common stock for an exercise
price of Twenty-Five Cents ($0.25) for three (3) years. The Shares and Warrants
owed to the Lenders for any particular Advance shall be issued in the names of
the Lenders, in accordance with instructions from the Lenders, within ten (10)
days of an Advance. The Lenders agreed that the shares and warrants described
above are "restricted securities" as defined by SEC Rule 144; however, the
Company agreed to register for sale the shares and the shares of common stock
underlying the warrants on any registration statement that the Company files
during the next ten (10) years with the Securities and Exchange Commission,
except for any registration statement filed on Form S-8.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 47


(1.10) FISCAL YEAR 2004 FINANCIAL STATEMENTS.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 48


(1.11) MONTHLY OPERATING REPORTS.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 49


(1.12) NOTIFICATION AS TO CERTAIN EVENTS.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 50


(1.13) PAYMENT OF ACCRUED COMPENSATION.

     None.

<PAGE>

                                                                      Appendix 1
                                                          Schedule of Exceptions
                                                                         Page 51


(1.14) MAINTENANCE OF REQUIRED APPROVAL AND CONSENTS; COMPLIANCE WITH LAWS.

(1) The Company is delinquent in the filing of periodic reports required under
the Securities Exchange Act of 1934, and has therefore been a non-reporting
company listed in the Pink Sheets stock market since the year 2000. The Company
is currently in the process of completing the audits necessary to bring current
its periodic reports under the Exchange Act, and its legal counsel has been in
discussion with the Securities and Exchange Commission about the filing of a
comprehensive annual report on Form 10-KSB to bring the Company back into
compliance once the audits are completed.

<PAGE>

                                   SCHEDULE 2

     The Company covenants and agrees that for so long as the Note is
outstanding or any amounts remain due and payable to Holder hereunder or under
any other Loan Document, it shall observe and abide by each of the covenants and
agreements contained in this Schedule 2, unless consented to in writing in
advance by Holder or otherwise permitted hereunder.

     1.1 Indebtedness. Other than the Indebtedness described on Appendix I, the
Company will not create, incur, assume, or suffer to exist, any Indebtedness,
except: (a) this Note (as the same may be extended, increased, renewed or
refunded from time to time by mutual agreement of the parties); (b) accounts
payable to trade creditors and current operating expenses; or (c) Indebtedness
that is subordinated in favor of the Holder.

     1.2 Liens. Without the prior written consent of Holder, which consent may
be given or denied at Holder's sole discretion, other than Permitted Liens (as
defined below), the Company will not (i) create or incur or suffer to be created
or incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind (each of the foregoing, a
"Lien") upon any of the Property, or upon the income or profits therefrom,
except as otherwise permitted herein, transfer any of such Property or the
income or profits therefrom for the performance of any other obligation in
priority to payment of its general creditors; or (iii) acquire, or agree or have
an option to acquire, any Property upon conditional sale or other title
retention or purchase money security agreement, device or arrangement. For
purposes of this Note, the term "Permitted Liens" means, collectively, (a) Liens
existing on the date of this Note and disclosed to Holder in Appendix I and
Liens arising pursuant to this Note and the other Loan Documents; (b) Liens for
taxes, fees, levies, duties or other governmental charges of any kind, either
not yet due or being contested in good faith and with respect to which adequate
reserves or other appropriate provisions are being maintained in accordance with
generally accepted accounting principles, provided the same have no priority
over any of Holder's security interests; (c) Liens for landlords, common
carriers, warehousemen, mechanics, materialmen, laborers, employees, suppliers
or similar Liens arising by operation of law for amounts that are owed but not
yet delinquent, provided such Liens do not, in the aggregate, materially detract
from the value of the assets of the Company and its subsidiaries or materially
impair the use thereof in the operation of the Company's or its subsidiaries'
business, in each case, taken as a whole, (d) Liens not to exceed $100,000 in
the aggregate in any fiscal year incurred solely for the purpose of financing
the acquisition of goods or equipment acquired by the Company or any subsidiary
in the ordinary course of business, (e) in the case of real property, any
matters, restrictions, covenants, conditions, limitations, rights, rights of
way, encumbrances, encroachments, reservations, easements, agreements and other
matters of record, such state of facts of which an accurate survey of the
property would reveal, which in the aggregate, are not material in amount, and
which do not, in the aggregate, materially detract from the value of any such
real property or materially interfere with the ordinary conduct of the Company's
business (Appendix I sets forth such matters of which the Company is currently
aware), (f) notifications under the Uniform Commercial Code (as then in effect
in the State of New York) pertaining to operating leases or installment sales
contracts entered into in the ordinary course of business not to exceed $100,000
in the aggregate in any fiscal year (Appendix I sets forth such leases or

<PAGE>

installment contracts existing as of the date hereof), and (g) any other Liens
arising from or related to immaterial indebtedness or capital leases of the
Company or any subsidiary, not to exceed $25,000 in the aggregate in any fiscal
year.

     1.3 Restrictions on Investments. Without Holder's prior written consent,
which consent may be given or denied at Holder's sole discretion, the Company
will not, and will not permit any of its subsidiaries to make or permit to exist
or to remain outstanding any Investment except Investments described on Appendix
I and Investments in: (a) cash equivalents; (b) short term indebtedness
guaranteed by the United States government with a maturity not exceeding 6
months; (c) inventory purchased in the ordinary course of business; and (d)
Investments consisting of loans and advances to employees for travel and other
similar expenses in the ordinary course of business not to exceed $10,000 in the
aggregate at any time outstanding.

     1.4 Distributions; Restricted Payments. Without Holder's prior written
consent, which consent may be given or denied at Holder's sole discretion, the
Company will not (i) declare, pay or make any Distribution on shares of its
Capital Stock or apply any of its funds or Property to the purchase, redemption
or other retirement of any shares of its Capital Stock, or of any options to
purchase or acquire any Capital Stock of the Company or any of its subsidiaries,
except that so long as no Default shall have occurred immediately before or
after giving effect to such proposed Distribution any subsidiary may pay cash
dividends to the Company; (ii) make any redemption, prepayment (whether
mandatory or optional), defeasance, repurchase or other type of prepayment in
respect of any Indebtedness (other than in respect of this Note); or (iii) set
aside any funds for any of the foregoing.

     1.5 Merger, Consolidation and Disposition of Assets.

          1.5.1 Mergers and Acquisitions. Without Holder's prior written
consent, which consent may be given or denied at Holder's sole discretion, the
Company will not become a party to any merger or consolidation, or agree to or
effect any asset acquisition or stock acquisition except for (a) the merger or
consolidation of one or more of the subsidiaries of the Company with and into
the Company, provided that no changes are made to the articles of incorporation
or bylaws of the Company in connection with such merger or consolidation or (b)
any merger or consolidation or asset acquisition or stock acquisition which
results in the acquisition of any business division or operation that is in the
Company's current lines of business and that does not result in a change of
control of the Company or any subsidiary (for purposes hereof, the term "change
of control" shall be deemed to mean a Mandatory Repurchase Event), provided that
(i) notwithstanding anything herein to the contrary, only Capital Stock of the
Company or a subsidiary of the Company may be used to affect any such
transaction, (ii) the value of the Capital Stock issued in connection with any
such merger, consolidation or acquisition is not more than the fair market value
of the stock or assets being acquired (as determined in the reasonable and good
faith judgment of the Company's Board of Directors or, if thereafter requested
by Holder, at the Company's sole expense, by a third-party evaluator reasonably
acceptable to Holder and having experience in the valuation of assets and
businesses in the mining industry generally), and (iii) in the event that any
such acquisition is made by any subsidiary of the Company, each such subsidiary
executes (i) a guaranty guaranteeing the full and punctual payment in full of
all Indebtedness under the Note and any other Loan Documents, (ii)

<PAGE>

in the case of a stock acquisition, a pledge in favor of Holder of the capital
stock or equity acquired by such subsidiary, and (iii) a joinder to the Security
Agreement, granting Holder a security interest in the assets acquired by such
subsidiary as a result of any such merger, consolidation or acquisition.

          1.5.2 Disposition of Property. Without Holder's prior written consent,
which consent may be given or denied at Holder's sole discretion, the Company
will not sell, lease or otherwise dispose of any of the Property, including any
disposition of the Property as part of a sale and leaseback transaction, to or
in favor of any Person, except for sales of inventory made in the ordinary
course (including, without limitation, pursuant to any installment, output
requirement, offtake or similar agreement with respect to the sale of future
production in the ordinary course) to the extent that all net proceeds of any
such sale, lease or disposition are applied to permanently reduce the Note in
inverse order of maturity.

     1.6 Compliance with Environmental Laws. The Company will not, and will not
permit any of its subsidiaries to, (i) use any of the Property or any portion
thereof for the handling, processing, storage, generation, manufacture,
treatment, production, refining or disposal of hazardous substances, other than
in compliance with environmental laws, except where the failure of such
compliance would not be reasonably likely to have a material adverse effect upon
the financial, business, legal condition or prospects of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect"), (ii) cause or
permit to be located on any of the Property any underground tank, surface
impoundment, lagoons, pits, sumps, or underground storage receptacle for
hazardous substances in any manner that would violate any environmental law in
any material respects or bring such Property in violation of any environmental
law in any material respects, (iii) generate any hazardous substances on any of
the Property in any manner that would violate any environmental law or bring
such Property in violation of any environmental law, (iv) conduct any activity
at any of the Property or use any of the Property in any manner so as to cause a
release or threatened release of hazardous substances on, upon or into the
Property, or (v) otherwise conduct any activity at any of the Property or use
any of the Property in any manner that would violate any environmental law or
bring such Property in violation of any environmental law in any material
respects, in each case except where such violation would not be reasonably
likely to have a Material Adverse Effect.

     1.7 Business Activities. Without the prior written consent of Holder, which
consent may be given or denied at Holder's sole discretion, the Company will not
cease engaging in its business or engage directly or indirectly (whether through
subsidiaries or otherwise) in any type of business other than the businesses
presently or currently planned to be conducted by them and in related lines of
businesses.

     1.8 Transactions with Affiliates. Without the prior written consent of
Holder, which consent may be given or denied at Holder's sole discretion, other
than the transactions described on Appendix I and other than in the Company's
ordinary course of business, the Company will not engage in any transaction with
any affiliate (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
affiliate or, to the knowledge of the Company, any

<PAGE>

person in which any such affiliate has a substantial interest or is an officer,
director, partner, member or trustee on terms more favorable to such Person than
would have been obtainable on an arm's-length basis in the ordinary course of
business. Notwithstanding the provisions of this Section 1.8 to the contrary,
the Company shall not, other than in connection with any transaction or
agreement which is permitted hereunder, (A) enter into or consummate any
transaction or agreement pursuant to which it becomes a party to any mortgage,
note, indenture or guarantee evidencing any Indebtedness of any of its
affiliates or otherwise to become responsible or liable, as a guarantor, surety
or otherwise, pursuant to an agreement for any Indebtedness of any such
affiliate, or (B) make any payment to any of its affiliates in excess of $10,000
without the prior written consent of Holder.

     1.9 Conflicting Agreements. Without the prior written consent of Holder,
which consent may be given or denied at Holder's sole discretion, the Company
will not enter into any amendment or other modification to any currently
existing contractual obligation, which by its terms materially impairs the
ability of the Company to (a) pay the principal of or interest on the Note, or
(b) fully satisfy all of its obligations hereunder.

     1.10 Fiscal Year 2004 and Quarterly Financial Statements. Within thirty
(30) days following the end of each fiscal quarter while this Note is
outstanding, the Company shall deliver to Holder unaudited quarterly financial
statements substantially prepared in accordance with GAAP, except for normal
recurring year-end adjustments.

     1.11 Monthly Operating Reports. As soon as practicable following the end of
each month while this Note is outstanding, the Company shall deliver to Holder a
copy of the Company's monthly operating reports and such other reports as Holder
may reasonably request.

     1.12 Notification as to Certain Events. The Company shall notify Holder if
the Company becomes aware of any events that may result in a Material Adverse
Effect with respect to the Property or the Company's ability to perform its
obligations under the Note.

     1.13 Payment of Accrued Compensation. The Company will not, and will not
permit any of its subsidiaries to, pay in cash any of the Indebtedness disclosed
in Appendix I, Exceptions to Covenants and Agreement Set Forth in Schedule 2,
Section 1.1 (2).

     1.14 Maintenance of Required Approvals and Consents; Compliance with Laws.
The Company will take all action necessary to maintain all approvals and
consents necessary with respect to the operation of its business and the
maintenance of the Property. The Company shall comply in all material respects
with all applicable laws with respect to the operation of its business and the
maintenance of the Property.

     1.15 Certain Definitions. As used herein, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined).

     "Capital Stock" shall mean any and all shares, interests, participations or
other equivalents (however, designated) of capital stock of a corporation, any
and all equivalent

<PAGE>

ownership interests in a Person (other than a corporation) including, without
limitation, membership interests in a limited liability company and any and all
warrants, rights or options to purchase any of the foregoing.

     "Distribution" shall mean (i) the declaration or payment of any dividend on
or in respect of any shares of any class of Capital Stock of the Company or any
subsidiary, other than dividends payable solely in shares of common stock of the
Company or such subsidiary; (ii) the purchase, redemption, or other retirement
of any shares of any class of Capital Stock of the Company, directly or
indirectly through a subsidiary of the Company or otherwise; (iii) the return of
capital by the Company or any subsidiary to its stockholders as such; or (iv)
any other distribution on or in respect of any shares of any class of Capital
Stock of the Company or any subsidiary.

     "Governmental Authority" means any national or federal government, any
state, regional, local or other political subdivision thereof with jurisdiction
and any person with jurisdiction exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.

     "Indebtedness" shall mean, without limitation, (i) incurrence of debt
arising from the lending of money by any Person to the Company or any of its
subsidiaries; (ii) incurrence of debt, whether or not in any such case arising
from the lending by any Person of money to the Company or any of its
subsidiaries, (A) which is represented by notes payable or drafts accepted that
evidence extensions of credit, (B) which constitutes obligations evidenced by
bonds, debentures, notes or similar instruments, (C) upon which interest charges
are customarily paid (other than accounts payable) or that was issued or assumed
as full or partial payment for Property, or (D) to the extent not covered by the
foregoing clauses (A) through (C), pursuant to any merger, consolidation or
acquisition by the Company or any Subsidiary; (iii) incurrence of debt that
constitutes a capitalized lease obligation in excess of $50,000; (iv)
reimbursement obligations with respect to letters of credit or guaranties of
letters of credit; and (v) Indebtedness of the Company or any of its
subsidiaries under any guaranty of obligations that would constitute
Indebtedness under clauses (i) through (iii) hereof, if owed directly by the
Company or any of its subsidiaries.

     "Investments" shall mean all expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of capital stock or Indebtedness
of, or for loans, advances, capital contributions or transfers of property to,
or in respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person.

     "Person" shall mean any individual, corporation, partnership, limited
liability company, trust, unincorporated association, business, or other legal
entity, and any government or any Governmental Authority.

     "Property" shall mean the Trust Property (as such term is defined in the
Deed of Trust).