Document:

Senior Convertible Debenture

    
      

      

    

    Exhibit
      4.1

     

    THIS
      SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR
      THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      AND,
      ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITY AS PERMITTED BY THE SECURITIES
      PURCHASE
      AGREEMENT PURSUANT TO WHICH THE SECURITIES WERE ISSUED.

     

    
      	Original
              Issue Date: September 21, 2006	
               

            
	 	 
	No. 1	
              $1,000,000

            

    

    

    

    

    12%
      SENIOR SECURED CONVERTIBLE DEBENTURE

    

    This
      12%
      Senior Secured Convertible Debenture (this “Debenture”)
      is a
      duly authorized and issued 12% Senior Secured Convertible Debenture of ZONE
      MINING LIMITED, a Nevada corporation (“the
      Company”)
      having
      its principal place of business located at 111 Presidential Blvd., Suite 165,
      Bala Cynwyd, PA 19004, for the principal amount of ONE MILLION DOLLARS AND
      NO
      CENTS ($1,000,000), issued in connection with that certain Purchase Agreement
      (as defined below) of even date herewith entered into by and among the Company
      and the Holder. 

    

    FOR
      VALUE
      RECEIVED, the Company) hereby promises to pay to TRIDENT GROWTH FUND, L.P.,
      a
      Delaware limited partnership, having its principal place of business located
      at
      700 Gemini, Houston, Texas 77058, or its registered assigns (the “Holder”),
      the
      principal sum of the lesser of (i) $1,000,000, or (ii) the amount actually
      advanced by Holder to the Company hereunder, on the earlier of (a) September
      21,
      2007; or (b) upon the Public Offering Date (the “Maturity
      Date”),
      and
      to pay interest to the Holder on the then outstanding principal amount of this
      Debenture in accordance with the provisions hereof. This Debenture is subject
      to
      the following additional provisions:

    

    Section
      1. Definitions.
      For the
      purposes hereof, in addition to the terms defined elsewhere in this Debenture:
      (a) capitalized terms not otherwise defined herein have the meanings given
      to
      such terms in the Purchase Agreement, and (b) the following terms shall have
      the
      following meanings:

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    

    “Bankruptcy
      Event”
means
      any of the following events: (a) the Company or any Subsidiary (as such term
      is
      defined in Rule 1.02(s) of Regulation S-X) thereof commences a case or other
      proceeding under any bankruptcy, reorganization, arrangement, adjustment of
      debt, relief of debtors, dissolution, insolvency or liquidation or similar
      law
      of any jurisdiction relating to the Company or any Subsidiary thereof; (b)
      there
      is commenced against the Company or any Subsidiary thereof any such case or
      proceeding that is not dismissed within 60 days after commencement; (c) the
      Company or any Subsidiary thereof is adjudicated insolvent or bankrupt or any
      order of relief or other order approving any such case or proceeding is entered;
      (d) the Company or any Subsidiary thereof suffers any appointment of any
      custodian or the like for it or any substantial part of its property that is
      not
      discharged or stayed within 60 days; (e) the Company or any Subsidiary thereof
      makes a general assignment for the benefit of creditors; (f) the Company or
      any
      Subsidiary thereof calls a meeting of its creditors with a view to arranging
      a
      composition, adjustment or restructuring of its debts; (g) the Company or any
      Subsidiary thereof, by any act or failure to act, expressly indicates its
      consent to, approval of or acquiescence in any of the foregoing or takes any
      corporate or other action for the purpose of effecting any of the foregoing;
      or
      (h) an application for the appointment of a receiver or liquidator for the
      Company or any of its material assets.

    

    “Capital
      Lease”
means
      any lease of property (real, personal or mixed) which, in accordance with GAAP,
      should be capitalized on the lessee’s balance sheet or for which the amount of
      the asset and liability thereunder as if so capitalized should be disclosed
      in a
      note to such balance sheet.

    

    “Cash
      Flow”
means
      an amount equal to (i) the Company’s Consolidated EBITDA, minus (ii) the
      Company’s Consolidated non-financed Capital Expenditures.

     

    “Consolidated
      EBITDA”
means,
      for any Person for any period:

     

    (i)  the
      consolidated net income of such Person and its Consolidated Subsidiaries for
      such period (after Income Taxes), calculated in accordance with GAAP, but
      excluding:

     

    (A)  any
      gain
      arising from the sale of capital assets,

     

    (B)  any
      gain
      arising from any write-up of assets,

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (C)  earnings
      of any other Person, substantially all of the assets of which have been acquired
      by such Person or its Consolidated Subsidiaries in any manner, to the extent
      that such earnings were realized by such other Person prior to the date of
      such
      acquisition.

     

    (D)  earnings
      of any Person in which the Person or its Consolidated Subsidiaries has an
      ownership interest (other than wholly owned Subsidiaries of such Person ),
      unless such earnings have actually been received by the Person or its
      Consolidated Subsidiaries in the form of cash distributions,

     

    (E)  earnings
      of any Person to which assets of the Person or its Consolidated Subsidiaries
      shall have been sold, transferred or disposed of, or into which the Person
      shall
      have merged, to the extent that such earnings arise prior to the date of such
      transaction,

     

    (F)  any
      gain
      arising from the acquisition of any securities of such Person or any of its
      Consolidated Subsidiaries, and

     

    (G)  any
      extraordinary gain realized by such Person or any of its Consolidated
      Subsidiaries during such period. 

     

    (ii)  plus
      the
      following, but only in each case to the extent incurred by the Company and
      its
      Consolidated Subsidiaries during such period and deducted in the calculation
      above for such period, 

     

    (A)  all
      income and franchise taxes,

     

    (B)  all
      Interest Expense, 

     

    (C)  all
      depreciation expense, and

     

    (D)  all
      amortization expense.

     

    “Current
      Assets”
means,
      at any particular time, all amounts which, in conformity with GAAP, would be
      included as current assets on a consolidated balance sheet of the Company and
      its Subsidiaries; provided
      however,
      there
      shall be excluded therefrom (a) all prepaid expenses of every type and nature,
      (b) all amounts due from partners, officers, stockholders or other Affiliates,
      and all loans due from employees, and (c) all deferred charges.

    

    “Current
      Liabilities”
means,
      at any particular time, all amounts (including deferred taxes) which, in
      conformity with GAAP, would be included as current liabilities on a consolidated
      balance sheet of the Company and its Subsidiaries.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    “Current
      Ratio”
means
      the ratio of Current Assets to Current Liabilities.

    

    “Dallas
      Courts”
shall
      have the meaning set forth in Section 7(e). 

    

    “Debenture
      Register”
shall
      have the meaning set forth in Section 2(b).

    

    “Event
      of Default”
shall
      have the meaning set forth in Section 7.

    

    “GAAP”
mean
      generally accepted accounting principles.

    

    “Interest
      Expense”
means,
      with respect to any Person and for any period (without duplication), all
      interest on that Person’s Debt, whether paid in cash or accrued as a liability
      and payable in cash during any subsequent period (including, without limitation,
      the interest component of Capital Leases), as determined by GAAP.

    

    “Late
      Fees”
shall
      have the meaning set forth in the second paragraph to this
      Debenture.

    

    “Liabilities”
mean
      all liabilities, obligations and indebtedness of any and every kind and nature
      (including, without limitation, lease obligations, accrued interest, charges,
      expenses, attorneys' fees and other sums) chargeable to the Company and made
      to
      or for the benefit of the Company, whether arising under this Debenture or
      arising under the any of the Transaction Documents, whether heretofore, now
      or
      hereafter owing, arising, due or payable from Company to the Holder and however
      evidenced, credited, incurred, acquired or owing, whether primary, secondary,
      direct, contingent, fixed, or otherwise, including obligation of
      performance.

    

    “Net
      Income”
      or “Net
      Loss”
means,
      with respect to any Person for any period, the net income or net loss of such
      Person determined in accordance with GAAP, after payment of income Taxes but
      excluding any extraordinary or non-recurring items.

    

    “Original
      Issue Date”
shall
      mean the date of the first issuance of this Debenture regardless of the number
      of transfers of this or any portion of this Debenture and regardless of the
      number of instruments which may be issued to evidence such Debenture or
      Debentures.

    

     “Purchase
      Agreement”
means
      the Securities Purchase Agreement of even date herewith, to which the Company
      and the original Holder are parties, as amended, modified or supplemented from
      time to time in accordance with its terms.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    Section
      2. Interest.

    
       

      a)
        Payment
        of Interest in Cash.
        The
        Company shall pay interest, in cash, to the Holder on the then outstanding
        principal amount of this Debenture at the rate of 12% per annum, payable
        monthly
        in arrears in cash via wire transfer or by automated bank transfer in
        immediately available and freely transferable funds (as requested by Holder),
        on
        the last day of each month for the period beginning on the Original Issue
        Date
        and ending on the Maturity Date or such earlier or later time when this
        Debenture is paid or prepaid in full (except that, if any such date is not
        a
        Business Day, then such payment shall be due on the next succeeding Business
        Day) (each such date, an “Interest
        Payment Date”),
        subject to the conversion rights of Holder as stated herein.

       

      b)
        Interest
        Calculations.
        Interest shall be calculated on the basis of a 360-day year and shall accrue
        daily commencing on the Original Issue Date until payment in full of the
        principal sum, together with all accrued and unpaid interest and other amounts
        which may become due hereunder, has been made. Interest hereunder will be
        paid
        to the Person in whose name this Debenture is registered on the records of
        the
        Company regarding registration and transfers of Debentures (the “Debenture
        Register”).

       

      c)
        Late
        Fee.
        All
        overdue accrued and unpaid interest to be paid hereunder shall entail a late
        fee
        at the rate of 18% per annum (or such lower maximum amount of interest permitted
        to be charged under applicable law or regulation) (“Late
        Fee”)
        which
        will accrue daily, from the date such interest is due hereunder through and
        including the date of payment.

       

      d)
        Prepayment.
        The
        Company may prepay all or any portion of the then outstanding principal amount
        of this Debenture without any prepayment premium or discount by providing
        Holder
        not less than 30 days prior written notice, such outstanding principal balance
        remaining subject to Holder’s conversion rights hereunder until the actual
        prepayment is made following such notice period.

    

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    Section
      3.  Conversion
      Right; Adjustments. 

     

    The
      Holder of this Debenture shall have the right, at Holder’s option, immediately
      following the Original Issue Date, to convert all, or, in multiples of $50,000,
      any part of this Debenture into such number of fully paid and nonassessable
      shares of Common Stock as shall be provided herein. The Holder of this Debenture
      may exercise the conversion right by giving written notice (a “Conversion
      Notice”)
      to the
      Company of the exercise of such right and stating the name or names in which
      the
      stock certificate or stock certificates for the shares of Common Stock are
      to be
      issued and the address to which such certificates shall be delivered. The
      Conversion Notice shall be accompanied by this Debenture. The number of shares
      of Common Stock that shall be issuable upon conversion of the Debenture shall
      equal the then outstanding principal amount of this Debenture on the Conversion
      Date (defined
      below) or a portion thereof (in the discretion of the Holder) divided
      by the Conversion Price (as defined below) in effect on the date the Conversion
      Notice is given. Conversion shall be deemed to have been effected on the date
      the Conversion Notice is delivered to the Company (each, a “Conversion
      Date”).
      Within five (5) Business days after a Conversion Date, the Company shall issue
      and deliver by hand against a signed receipt therefor or by reputable overnight
      delivery carrier to the address designated in the Conversion Notice, a stock
      certificate or stock certificates of the Company representing the number of
      shares of Common Stock to which Holder is entitled and a check or cash in
      payment of all interest accrued and unpaid under the Debenture being converted
      up to and including the Conversion Date. If a stock certificate or stock
      certificates are not delivered within five (5) Business days after a Conversion
      Date, the Company shall pay to Holder the sum of $1,000 per day until such
      certificates are delivered (not to exceed $150,000 under any circumstances).
      The
      conversion rights will be governed by the following provisions:

     

    a) Conversion
      Price. On
      the
      issue date hereof and until such time as an adjustment shall occur, the
      Conversion Price shall be equal to $1.25 per share (post the stock split
      described in Schedule 1.1 of the Purchase Agreement).

     

    b) Adjustment
      for Issuance of Shares at less than the Conversion Price.
      

     

    (i) If
      and
      whenever any Additional Common Stock (as herein defined) shares shall be issued
      by the Company (the “Stock
      Issue Date”)
      for a
      gross consideration per share less than the Conversion Price, then in each
      such
      case the initial Conversion Price shall be reduced to a new Conversion Price
      equal to the gross consideration per share received by the Company for the
      additional shares of Common Stock then issued, and accordingly, the number
      of
      shares issuable to Holder upon conversion shall be proportionately increased
      as
      a result thereof; and, in the case of shares issued without consideration,
      the
      initial Conversion Price shall be reduced in amount and the number of shares
      issued upon conversion shall be increased in an amount so as to maintain for
      the
      Holder the right to convert this Debenture into shares equal in amount to the
      same percentage interest in the Common Stock of the Company as existed for
      the
      Holder immediately preceding the applicable Stock Issue Date. 

     

    
      (ii)  Consideration
        for Shares.
        In case
        of the issuance of Additional Common Stock for a consideration part or all
        of
        which shall be cash, the amount of the cash consideration therefor shall
        be
        deemed to be the amount of the cash paid by the purchasers (prior to reduction
        for commissions, fees or expenses) for such shares. In case of the issuance
        of
        any shares of Additional Common Stock for a consideration part or all of
        which
        shall be other than cash, the amount of the consideration therefor, other
        than
        cash, shall be deemed to be the then fair market value of the property exchanged
        (prior to reduction for commissions, fees or expenses) as determined by an
        investment banking firm selected by Holder.

    

     

    (iii)
       Reclassification
      of Shares.
      In case
      of the reclassification of securities into shares of Common Stock, the shares
      of
      Common Stock issued in such reclassification shall be deemed to have been issued
      for a consideration other than cash. Shares of Additional Common Stock issued
      by
      way of dividend or other distribution on any class of stock of the Company
      (other than Common Stock) shall be deemed to have been issued without
      consideration.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (iv)  Split
      up or Combination of Shares.
      Except
      for the stock split described in Schedule 1.1 of the Purchase Agreement, in
      case
      issued and outstanding shares of Common Stock shall be subdivided or split
      up
      into a greater number of shares of the Common Stock, the Conversion Price shall
      be proportionately decreased, and in case issued and outstanding shares of
      Common Stock shall be combined into a smaller number of shares of Common Stock,
      the Conversion Price shall be proportionately increased, such increase or
      decrease, as the case may be, becoming effective at the time of record of the
      split-up or combination, as the case may be.

     

    (v)
       The
      term
“Additional
      Common Stock”
herein
      shall mean in the most broadest sense all shares of Common Stock or Common
      Stock
      Equivalents hereafter issued by the Company (including, but not limited to
      Common Stock held in the treasury of the Company), except Common Stock and
      Common Stock Equivalents issued in an Exempt Issuance.

     

    c)
       Adjustment
      for Mergers, Consolidations, Etc..
      

     

    (i) In
      the
      event of distribution to all Common Stock holders of any stock, indebtedness
      of
      the Company or assets (excluding cash dividends or distributions from retained
      earnings) or other rights to purchase securities or assets, then, after such
      event, this Debenture will be convertible into the kind and amount of
      securities, cash and other property which the holder of the Debenture would
      have
      been entitled to receive if the holder owned the Common Stock issuable upon
      conversion of the Debenture immediately prior to the occurrence of such event.
      

     

    (ii) In
      case
      of any capital reorganization, reclassification of the stock of the Company
      (other than a change in par value or as a result of a stock dividend,
      subdivision, split up or combination of shares), this Debenture shall be
      convertible into the kind and number of shares of stock or other securities
      or
      property of the Company to which the holder of the Debenture would have been
      entitled to receive if the holder owned the Common Stock issuable upon
      conversion of the Debenture immediately prior to the occurrence of such event.
      The provisions of the foregoing sentence shall similarly apply to successive
      reorganizations, reclassifications, consolidations, exchanges, leases, transfers
      or other dispositions or other share exchanges.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    d) Notice
      of Adjustment.
      In the
      event the Company shall propose to take any action which shall result in an
      adjustment in the Conversion Price, the Company shall give notice to the Holder,
      which notice shall specify the record date, if any, with respect to such action
      and the date on which such action is to take place. Such notice shall be given
      on or before the earlier of 10 days before the record date or the date which
      such action shall be taken. Such notice shall also set forth all facts (to
      the
      extent known) material to the effect of such action on the Conversion Price
      and
      the number, kind or class of shares or other securities or property which shall
      be deliverable or purchasable upon the occurrence of such action or deliverable
      upon conversion of this Debenture. Additionally, following completion of an
      event wherein the Conversion Price shall be adjusted, the Company shall furnish
      to the holder of this Debenture a statement, signed by an authorized officer
      of
      the Company of the facts creating such adjustment and specifying the resultant
      adjusted Conversion Price then in effect.

    

    e) Reservation
      of Shares. The
      Company warrants and agrees that it shall at all times reserve and keep
      available, free from preemptive rights, sufficient authorized and unissued
      shares of Common Stock to effect conversion of this Debenture.

    

    f) Registration
      Rights.
      The
      Holder has certain rights with respect to the registration of shares of Common
      Stock issued upon the conversion of this Debenture, such rights being
      specifically set forth in the Purchase Agreement entered into by and between
      Holder and the Company on the date hereof.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    
      
        g) Exercise
          Limitations.
          The
          Holder shall not have the right to convert any portion of this Debenture,
          pursuant to Section 3 or otherwise, to the extent that after giving effect
          to
          such issuance after exercise, the Holder (together with the Holder’s
          affiliates), as set forth on the applicable Conversion Notice, would
          beneficially own in excess of 4.99% (or as applicable, 9.99%) of the number
          of
          shares of the Common Stock outstanding immediately after giving effect
          to such
          issuance.  For purposes of the foregoing determination, the number of
          shares of Common Stock beneficially owned by the Holder and its affiliates
          shall
          include the number of shares of Common Stock issuable upon such conversion
          of
          this Debenture less the number of shares of Common Stock which would be
          issuable
          upon (A) conversion of the remaining, unexercised portion of this Debenture
          and
          (B) exercise or conversion of the unexercised or unconverted portion of
          any
          other Securities (including, without limitation, any other Debentures or
          Warrants) subject to a limitation on conversion or exercise analogous to
          the
          limitation contained herein beneficially owned by the Holder.  Except as
          set forth in the preceding sentence, for purposes of this Section 3(g),
          beneficial ownership shall be calculated in accordance with Section 13(d)
          of the
          Exchange Act. To the extent that the limitation contained in this Section
          3(g)
          applies, the determination of whether this Debenture is convertible (in
          relation
          to other securities owned by the Holder) and of which a portion of this
          Debenture is convertible shall be in the sole discretion of Holder. For
          purposes
          of this Section 3(g), in determining the number of outstanding shares of
          Common
          Stock, the Holder may rely on the number of outstanding shares of Common
          Stock
          as reflected in (x) Schedule
          3.1(g)
          to the
          Purchase Agreement, (y) a more recent public announcement by the Company
          or (z)
          any other notice by the Company or the Company’s Transfer Agent setting forth
          the number of shares of Common Stock outstanding.  Upon the written or oral
          request of the Holder, the Company shall within five Business Days confirm
          orally and in writing to the Holder the number of shares of Common Stock
          then
          outstanding.  The provisions of this Section 3(g) may be waived by the
          Holder upon, at the election of the Holder, not less than 61 days’ prior notice
          to the Company, and the provisions of this Section 3(g) shall continue
          to apply
          until such 61st day (or such later date, as determined by the Holder, as
          may be
          specified in such notice of waiver).

      

    

     

    Section
      4. Registration
      of Transfers and Exchanges.
      

     

    
      a) Different
        Denominations.
        This
        Debenture is exchangeable for an equal aggregate principal amount of Debentures
        of different authorized denominations, as requested by the Holder surrendering
        the same. No service charge will be made for such registration of transfer
        or
        exchange.

       

      
        b) Investment
          Representations.
          This
          Debenture has been issued subject to certain investment representations
          of the
          original Holder set forth in the Purchase Agreement and may be transferred
          or
          exchanged only in compliance with the Purchase Agreement and applicable
          federal
          and state securities laws and regulations.

         

        
          
            c)Reliance
              on Debenture Register.
              Prior
              to due presentment to the Company for transfer of this Debenture, the
              Company
              and any agent of the Company may treat the Person in whose name this
              Debenture
              is duly registered on the Debenture Register as the owner hereof for
              the purpose
              of receiving payment as herein provided and for all other purposes,
              whether or
              not this Debenture is overdue, and neither the Company nor any such
              agent shall
              be affected by notice to the contrary.

             

          

        

      

    

    Section
      5. Negative
      Covenants.
      Other
      than with respect to actions taken that are described in the merger agreement
      approved by Holder in connection with the DIA Transaction, so long as any
      portion of this Debenture is outstanding, without the prior written consent
      of
      the Holder, which consent may be withheld in the sole discretion of the Holder,
      the Company will not and will not permit any of its Subsidiaries to directly
      or
      indirectly:

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
       

      
        
          a)
            Indebtedness.
            Enter
            into, create, incur, assume or suffer to exist any indebtedness or Liens,
            on or
            with respect to any of its property or assets now owned or hereafter
            acquired or
            any interest therein or any income or profits therefrom that is
            senior
            to, or pari passu
            with, in
            any respect, the Company’s secured obligations under the Debentures;
            provided,
            however,
            that
            this provision shall not prevent the Company from entering into any transaction,
            the purpose of which is to repay this Debenture, provided all proper
            notices are
            given in accordance herewith; provided
            further,
            that
            nothing contained in this Section shall preclude the Company from incurring
            purchase money indebtedness or capital lease obligations or other indebtedness
            in connection with the acquisition of an interest in property, equipment,
            or
            other assets if such indebtedness or capital lease obligation is secured
            solely
            by the property, equipment or assets acquired.

        

         

      

    

    
      
        
          b)
            Repayment
            of Indebtedness.
            Repay
            any principal due and owing on any promissory notes, debentures, or other
            forms
            of indebtedness, other than (i) periodic interest payments due and owing
            thereunder; (ii) repayment due of any principal amount or interest due
            or
            becoming due under this Debenture, and (iii) repayment of the indebtedness,
            if
            any, set forth in Schedule 4.8 to the Purchase Agreement; provided, nothing
            contained in this section shall prohibit the Company from making any
            payments
            with respect to trade payables made in the ordinary course of the Company’s
            business;

           

        

      

    

    
      
        
          c)
            Repurchase
            of Shares.
            Repurchase or offer to repurchase or otherwise acquire more than a de
            minimus
            number of shares of its Common Stock or other equity securities or as
            otherwise
            permitted by the Transaction Documents; 

           

        

      

    

    
      
        
          d)
            Bylaws.Amend
            its
            certificate of incorporation, bylaws or other charter documents so as
            to
            adversely affect any rights of the Holder in its capacity as a holder
            of the
            Debentures;

        

      

    

    
       

      
        e)
Loans
          and Investments.
          Except
          for the loan to DIA described in Schedule 4.8 to the Purchase Agreement,
          lend or
          advance money, credit or property to any person or entity, or invest in
          (by
          capital contribution or otherwise), or purchase or repurchase the stock
          or
          indebtedness or assets or properties of any person or entity, or agree
          to do any
          of the foregoing, other than in the ordinary course of
          business;

         

      

    

    
      
        f)
Guarantees.
          Assume,
          endorse or otherwise become or remain liable in connection with the obligations
          (including accounts payable) of any other person or entity, other than
          in the
          ordinary course of business.

         

      

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
       

      
        g)
Sale
          of Assets, Dissolution, Etc.
          Transfer, sell, assign, lease or otherwise dispose of any of its properties
          or
          assets, or any assets or properties necessary or desirable for the proper
          conduct of its business, or transfer, sell, assign or otherwise dispose
          of any
          of its accounts, or contract rights to any person or entity, or change
          the
          nature of its business, wind-up, liquidate or dissolve, or agree to any
          of the
          foregoing, other than in the ordinary course of
          business;

      

    

    
       

      
        h)
Other
          than in accordance herewith, create, issue or permit the issuance of any
          additional securities of the Company or of any of its Subsidiaries (including
          with respect to any Qualifying Transaction), if any, or any rights, options
          or
          warrants to acquire any such securities for no consideration or in excess
          of
          500,000 Common Shares for services rendered, and in the event that Company
          desires to issue securities with preferences or rights greater than that
          which
          the Common Stock has, the Holder will have the option of converting into
          such
          stock in lieu of the Common Stock hereby;

      

    

    
       

      
        i)
No
          Dividends; No Redemption.
          Declare
          any dividend, pay or set aside for payment any dividend or other distribution,
          in cash, stock, or other property, or make any payment to any related parties,
          including to any preferred stockholders, as a dividend, redemption, or
          otherwise, other than the payment of salaries in the ordinary course of
          business.

         

        j)
Stock
          Splits.
          Other
          than the forward stock split describe in Schedule 1.1 of the Purchase Agreement,
          undertake a reverse or forward stock split or reclassification of the Common
          Stock; or

      

    

     

    
      
        k)
Agreement. Enter
          into any agreement obligating the Company to undertake any of the matters
          set
          forth in this Section 5.

         

        
          Section
            6. Affirmative
            Covenants.
            Other
            than with respect to actions taken that are described in the merger agreement
            approved by Holder in connection with the DIA Transaction, so long as
            any
            portion of this Debenture is outstanding and unless the Holder otherwise
            consents in writing, which consent may be withheld in the sole discretion
            of the
            Holder, the Company will:

           

          a)
Taxes
            and Liens.
            Promptly pay, or cause to be paid, all taxes, assessments and other governmental
            charges which may lawfully be levied or assessed upon the income or profits
            of
            the Company, or upon any property, real, personal or mixed, belonging
            to the
            Company, or upon any part thereof, and also any lawful claims for labor,
            material and supplies which if unpaid, might become a lien or charge
            against any
            such property; provided,
            however,
            the
            Company shall not be required to pay any such tax, assessment, charge,
            levy or
            claim so long as the validity thereof shall be actively contested in
            good faith
            by proper proceedings; but, provided further
            that any
            such tax, assessment, charge, levy or claim shall be paid or bonded in
            a manner
            satisfactory to the Holder upon the commencement of proceedings to foreclose
            any
            lien securing the same.

        

      

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
       

      
        
          b) Business
            and Existence.
            Do or
            cause to be done all things necessary to preserve and to keep in full
            force and
            effect any licenses necessary to the business of the Company, its corporate
            existence and rights of its franchises, trade names, trademarks, and
            permits
            which are reasonably necessary for the continuance of its business; and
            continue
            to engage principally in the business currently operated by the
            Company.

        

        
           

          
            c) Insurance
              and Properties.
              Keep
              its business and properties insured at all times with responsible insurance
              companies and carry such types and amounts of insurance as are required
              by all
              federal, state and local governments in the areas which the Company
              does
              business and as are usually carried by entities engaged in the same
              or similar
              business similarly situated. In addition, the Company shall maintain
              in full
              force and effect policies of liability insurance in amounts at least
              equal to
              that currently in effect.

          

        

      

    

    
       

      
        d) Maintain
          Property and Assets.
          Maintain its property and assets in good order and repair and, from time
          to
          time, make all needed and proper repairs, renewals, replacements, additions
          and
          improvements thereto, so that the business carried on may be properly and
          advantageously conducted at all times in accordance with prudent business
          management, and maintain annually adequate reserves for maintenance
          thereof.

         

      

    

    
      
        
          e) True
            Books.
            Keep
            true books of record and account in which full, true and correct entries
            will be
            made of all of its dealings and transactions, and set aside on its books
            such
            reserves as may be required by GAAP, consistently applied, with respect
            to all
            taxes, assessments, charges, levies and claims referred to in (a) above,
            and
            with respect to its business in general, and include such reserves in
            interim as
            well as year-end financial statements.

           

          f) Right
            of Inspection.
            Permit
            any person designated by the Holder, at the Holder’s expense, to visit and
            inspect any of the properties, books and financial reports of the Company,
            all
            at such reasonable times upon three (3) Business Days prior notice to
            Company,
            and as often as the Holder may reasonably request, provided the Holder
            does not
            unreasonably interfere with the daily operations of the Company.

           

          g)
            Observance
            of Laws.
            Conform
            to and duly observe all laws, regulations and other valid requirements
            of any
            regulatory authority with respect to the conduct of its business except
            those
            that would not cause a Material Adverse Effect, as determined in the
            reasonable
            discretion of the Holder.

        

      

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
       

      
        h)
          Company’s
          Knowledge of Default.
          Upon an
          officer or director of the Company obtaining knowledge of, or threat of,
          an
          Event of Default hereunder, cause such officer to promptly, within no more
          than
          five (5) Business Days, deliver to the Holder notice thereof specifying
          the
          nature thereof, the period of existence thereof, and what action the Company
          has
          taken and/or proposes to take with respect thereto. 

         

        i)
          Notice
          of Proceedings.
          Upon an
          officer or director of the Company obtaining knowledge of any material
          litigation, dispute or proceedings being instituted or threatened against
          the
          Company, or any attachment, levy, execution or other process being instituted
          against any assets of the Company, cause such officer to promptly, within
          no
          more than five (5) Business Days, give the Holder written notice of such
          litigation, dispute, proceeding, levy, execution or other process.

         

        j) Certificate
          of Covenant Compliance
          Within
          30 days of the last day of each March, June, September and December, the
          Company
          will issue a Certificate of Covenant Compliance, executed by either the
          Chief
          Executive Officer or Chief Financial Officer in the form of Exhibit
          A
          attached
          hereto. If the Company is not in compliance with the covenants specified
          in this
          Section 5, the Company will modify the Certificate of Covenant Compliance
          by
          stating the exception and providing a detailed explanation of the
          non-compliance.

         

        k)
          Payment
          of Holder’s Expenses.
          If at
          any time or times hereafter, Holder employs counsel in connection with
          the
          execution and consummation of the transactions contemplated by this Debenture
          or
          to commence, defend or intervene, file a petition, complaint, answer, motion
          or
          other pleading, or to take any action in or with respect to any suit or
          proceeding (bankruptcy or otherwise) relating to this Debenture or any
          other
          Transaction Document, or any other agreement, guaranty, note, instrument
          or
          document heretofore, now or at any time or times hereafter executed by
          the
          Company and delivered to Holder, or to enforce any rights of Holder hereunder
          whether before or after the occurrence of any Event of Default, or to collect
          any of the Liabilities, then in any of such events, all of the reasonable
          attorneys’ fees arising from such services, and any expenses, costs and charges
          relating thereto, shall be part of the Liabilities, payable on
          demand.

         

        l)
          Financial
          Reporting.
          The
          Company shall provide to Holder audited annual financial statements, audited
          by
          its independent certified public accounting firm. Said financial statements
          shall be prepared in accordance with GAAP, consistently applied, and shall
          be
          delivered to Holder within ninety (90) days after the close of the Company’s
          fiscal year. The Company’s fiscal year ends on March 31, and shall not be
          changed without the prior written consent of the Holder. The Company shall
          provide to Holder unaudited quarterly financial statements (including period
          to
          date and year to date actual to prior periods) presented in accordance
          with
          GAAP, consistently applied (subject to such exceptions for interim financials
          as
          may be noted by the Company thereon), and shall be delivered to Holder
          within
          forty-five (45) days after the close of each fiscal quarter of the
          Company.

         

        
          
            
            

          

          
            13

            
              

            

          

          
            
            

          

        

         

        m) Financial
          Covenants.
          Commencing upon the date two hundred seventy (270) days following the date
          of
          this Agreement and thereafter continuing until the Termination Date, the
          Company
          must maintain the following ratios:

      

    

     

    (i) Cash
      Interest Coverage.
      Until
      this Debenture is repaid in full, the Company shall maintain a Consolidated
      EBITDA ratio, based on any of the Company’s quarterly financial statements (as
      determined on the last day of each fiscal quarter for the immediately preceding
      quarter), of 2.0 or greater. The Consolidated EBITDA ratio is defined as
      Consolidated EBITDA divided by Interest Expense (Consolidated EBITDA ÷ Interest
      Expense).

    

    (ii) Cash
      Flow Coverage Ratio.
      The
      ratio of (a) the Company’s Cash Flow to (b) the sum of (i) the Company’s
      consolidated Interest Expense plus (ii) the Company’s scheduled payments of
      principal (including the principal component of Capital Leases) to be paid
      during the 12 months following any date of determination shall at all times
      exceed (1) 1.5 to 1.0. Compliance with the ratio will be tested as of the last
      day of each month, with Cash Flow and Interest Expense being calculated for
      the
      twelve months then ended.

     

    (iii) Current
      Ratio.
      The
      Company will at all times maintain a Current Ratio of not less than 1.5 to
      1.0.
      The Current Ratio shall be calculated and tested quarterly as of the last day
      of
      each fiscal quarter of the Company.

    

    (iv) Actual
      versus Budget.
      The
      Company shall on a quarterly basis achieve 75 percent of its budgeted revenue
      and income. Budget numbers shall be those delivered to Holder contemporaneously
      herewith and then on an annual calendar basis. 

     

    Section
      7. Events
      of Default.
      

    
       

      
        a)
          “Event
          of Default”,
          wherever used herein, means any one of the following events (whatever the
          reason
          and whether it shall be voluntary or involuntary or effected by operation
          of law
          or pursuant to any judgment, decree or order of any court, or any order,
          rule or
          regulation of any administrative or governmental body):

         

        
          i.  any
            default in the payment of (A) the principal amount of any Debenture,
            or (B)
            interest (including Late Fees) on, or liquidated damages in respect of,
            any
            Debenture, in each case free of any claim of subordination, as and when
            the same
            shall become due and payable (whether on the Maturity Date or by acceleration
            or
            otherwise) which is not cured within three (3) Business
            Days;

        

         

        
          
            
            

          

          
            14

            
              

            

          

          
            
            

          

        

         

        
          ii.  the
            Company shall fail to observe or perform any other covenant or agreement
            contained in this Debenture or any of the other Transaction Documents
            which
            failure is not cured, if possible to cure, within the earlier to occur
            of (A) 10
            Business Days after notice of such default sent by the Holder or by any
            other
            Holder and (B) 10 Business Days after the Company shall become or should
            have
            become aware of such failure;

           

          iii.  a
            default
            or event of default (subject to any grace or cure period provided for
            in the
            applicable agreement, document or instrument) shall occur under (A) any
            of the
            Transaction Documents or (B) any other material agreement, lease, document
            or
            instrument to which the Company or any Subsidiary is bound and not
            cured;

           

          iv.  any
            representation or warranty made herein, in any other Transaction Documents,
            in
            any written statement pursuant hereto or thereto, or in any other report,
            financial statement or certificate made or delivered to the Holder or
            any other
            holder of Debentures shall be untrue or incorrect in any material respect
            as of
            the date when made or deemed made;

        

      

    

     

    v.  there
      shall have occurred a Bankruptcy Event;

    
       

      vi.  the
        Company or any Subsidiary shall default in any of its obligations under any
        mortgage, credit agreement or other facility, indenture agreement, factoring
        agreement or other instrument under which there may be issued, or by which
        there
        may be secured or evidenced any indebtedness for borrowed money or money
        due
        under any long term leasing or factoring arrangement of the Company in an
        amount
        exceeding $100,000, whether such indebtedness now exists or shall hereafter
        be
        created and such default shall result in such indebtedness becoming or being
        declared due and payable prior to the date on which it would otherwise become
        due and payable.

       

      vii.  the
        Company shall be a party to any Change of Control Transaction or Fundamental
        Transaction, shall agree to sell or dispose of all or in excess of 33% of
        its
        assets in one or more transactions (whether or not such sale would constitute
        a
        Change of Control Transaction) or shall redeem or repurchase any its outstanding
        shares of Common Stock or Common Stock Equivalents;

       

      viii.  the
        Company shall fail to have available a sufficient number of authorized and
        unreserved shares of Common Stock to issue to such Holder upon exercise of
        the
        Warrants in full and not remedied as permitted in the Transaction Documents;
        

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    
      ix.  the
        Company shall redeem any of the Common Stock Equivalents;
        or

       

      x.  the
        occurrence of an Activity Event of Default (as defined in Section 5.1(f)(ii)
        of
        the Purchase Agreement).

    

    
       

      
        b)
          Remedies
          Upon Event of Default.
          If any
          Event of Default occurs, the full principal amount of this Debenture, together
          with interest and other amounts owing in respect thereof, to the date of
          acceleration shall become, at the Holder’s election, immediately due and payable
          in cash. Commencing 5 days after the occurrence of any Event of Default
          that
          results in the eventual acceleration of this Debenture, the interest rate
          on
          this Debenture while such Event of Default is continuing shall accrue at
          the
          rate of 18% per annum, or such lower maximum amount of interest permitted
          to be
          charged under applicable law or regulation. All Debentures for which the
          full
          principal amount hereunder shall have been paid in accordance herewith
          shall
          promptly be surrendered to or as directed by the Company. The Holder need
          not
          provide and the Company hereby waives any presentment, demand, protest
          or other
          notice of any kind, and the Holder may immediately and without expiration
          of any
          grace period enforce any and all of its rights and remedies hereunder and
          all
          other remedies available to it under applicable law. Such declaration may
          be
          rescinded and annulled by Holder at any time prior to payment hereunder
          and the
          Holder shall have all rights as a Debenture holder until such time, if
          any, as
          the full payment under this Section shall have been received by it. No
          such
          rescission or annulment shall affect any subsequent Event of Default or
          impair
          any right consequent thereon.

      

    

    

    Section
      8. Miscellaneous.
      

    
      
        
           

        

        a)
          Notices.
          Any and
          all notices or other communications or deliveries to be provided by the
          Holders
          hereunder shall be in writing and delivered personally, by facsimile, sent
          by a
          nationally recognized overnight courier service, addressed to the Company,
          at
          the address set forth above, or such other address or facsimile number
          as the
          Company may specify for such purposes by notice to the Holders delivered
          in
          accordance with this Section. Any and all notices or other communications
          or
          deliveries to be provided by the Company hereunder shall be in writing
          and
          delivered personally, by facsimile, sent by a nationally recognized overnight
          courier service addressed to each Holder at the facsimile number or address
          of
          such Holder appearing herein, or such other address or facsimile number
          as such
          Holder may specify in accordance with this Section. Any notice or other
          communication or deliveries hereunder shall be deemed given and effective
          on the
          earliest of (i) the date of transmission, if such notice or communication
          is
          delivered via facsimile at the facsimile telephone number specified in
          this
          Section prior to 5:30 p.m. (Dallas, Texas time), (ii) the date after the
          date of
          transmission, if such notice or communication is delivered via facsimile
          at the
          facsimile telephone number specified in this Section later than 5:30 p.m.
          (Dallas, Texas time) on any date and earlier than 11:59 p.m. (Dallas, Texas
          time) on such date, (iii) the second Business Day following the date of
          mailing,
          if sent by nationally recognized overnight courier service, or (iv) upon
          actual
          receipt by the party to whom such notice is required to be given.

         

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

         

        b)
          Absolute
          Obligation.
          Except
          as expressly provided herein, no provision of this Debenture shall alter
          or
          impair the obligation of the Company, which is absolute and unconditional,
          to
          pay the principal of, interest and liquidated damages (if any) on, this
          Debenture at the time, place, and rate, and in the coin or currency, herein
          prescribed. This Debenture is a direct debt obligation of the Company.
          This
          Debenture ranks pari passu
          with all
          other Debentures now or hereafter issued under the terms set forth
          herein.

         

        c)
          Security
          Interest.
          This
          Debenture is a direct debt obligation of the Company and, pursuant to the
          Security Documents, is secured by a first priority security interest in
          all of
          the assets of the Company and certain other collateral for the benefit
          of the
          Holders.

         

        d)
          Lost
          or Mutilated Debenture.
          If this
          Debenture shall be mutilated, lost, stolen or destroyed, the Company shall
          execute and deliver, in exchange and substitution for and upon cancellation
          of a
          mutilated Debenture, or in lieu of or in substitution for a lost, stolen
          or
          destroyed Debenture, a new Debenture for the principal amount of this Debenture
          so mutilated, lost, stolen or destroyed but only upon receipt of evidence
          of
          such loss, theft or destruction of such Debenture, and of the ownership
          hereof,
          and indemnity, if requested, all reasonably satisfactory to the
          Company.

         

        e)
          Governing
          Law.
          All
          questions concerning the construction, validity, enforcement and interpretation
          of this Debenture shall be governed by and construed and enforced in accordance
          with the internal laws of the State of Texas, without regard to the principles
          of conflicts of law thereof, except to the extent that the General Corporation
          Law of the State of Nevada (excluding any provisions thereof relating to
          conflict of laws) governs the affairs and operation of the Company. Each
          party
          agrees that all legal proceedings concerning the interpretations, enforcement
          and defense of the transactions contemplated by any of the Transaction
          Documents
          (whether brought against a party hereto or its respective affiliates, directors,
          officers, shareholders, employees or agents) shall be commenced in the
          state and
          federal courts sitting in the City of Dallas, Texas (the “Dallas
          Courts”).
          Each
          party hereto hereby irrevocably submits to the exclusive jurisdiction of
          the
          Dallas Courts for the adjudication of any dispute hereunder or in connection
          herewith or with any transaction contemplated hereby or discussed herein
          (including with respect to the enforcement of any of the Transaction Documents),
          and hereby irrevocably waives, and agrees not to assert in any suit, action
          or
          proceeding, any claim that it is not personally subject to the jurisdiction
          of
          any such court, or such Dallas Courts are improper or inconvenient venue
          for
          such proceeding. Each party hereby irrevocably waives personal service
          of
          process and consents to process being served in any such suit, action or
          proceeding by mailing a copy thereof via registered or certified mail or
          overnight delivery (with evidence of delivery) to such party at the address
          in
          effect for notices to it under this Debenture and agrees that such service
          shall
          constitute good and sufficient service of process and notice thereof. Nothing
          contained herein shall be deemed to limit in any way any right to serve
          process
          in any manner permitted by law. Each party hereto hereby irrevocably waives,
          to
          the fullest extent permitted by applicable law, any and all right to trial
          by
          jury in any legal proceeding arising out of or relating to this Debenture
          or the
          transactions contemplated hereby. If either party shall commence an action
          or
          proceeding to enforce any provisions of this Debenture, then the prevailing
          party in such action or proceeding shall be reimbursed by the other party
          for
          its attorneys fees and other costs and expenses incurred with the investigation,
          preparation and prosecution of such action or proceeding.

         

        
          
            
            

          

          
            17

            
              

            

          

          
            
            

          

        

         

        f)
          Waiver.
          Any
          waiver by the Company or the Holder of a breach of any provision of this
          Debenture shall not operate as or be construed to be a waiver of any other
          breach of such provision or of any breach of any other provision of this
          Debenture. The failure of the Company or the Holder to insist upon strict
          adherence to any term of this Debenture on one or more occasions shall
          not be
          considered a waiver or deprive that party of the right thereafter to insist
          upon
          strict adherence to that term or any other term of this Debenture. Any
          waiver
          must be in writing.

         

        g)
          Severability.
          If any
          provision of this Debenture is invalid, illegal or unenforceable, the balance
          of
          this Debenture shall remain in effect, and if any provision is inapplicable
          to
          any person or circumstance, it shall nevertheless remain applicable to
          all other
          persons and circumstances. If it shall be found that any interest or other
          amount deemed interest due hereunder violates applicable laws governing
          usury,
          the applicable rate of interest due hereunder shall automatically be lowered
          to
          equal the maximum permitted rate of interest. The Company covenants (to
          the
          extent that it may lawfully do so) that it shall not at any time insist
          upon,
          plead, or in any manner whatsoever claim or take the benefit or advantage
          of,
          any stay, extension or usury law or other law which would prohibit or forgive
          the Company from paying all or any portion of the principal of or interest
          on
          this Debenture as contemplated herein, wherever enacted, now or at any
          time
          hereafter in force, or which may affect the covenants or the performance
          of this
          indenture, and the Company (to the extent it may lawfully do so) hereby
          expressly waives all benefits or advantage of any such law, and covenants
          that
          it will not, by resort to any such law, hinder, delay or impeded the execution
          of any power herein granted to the Holder, but will suffer and permit the
          execution of every such as though no such law has been enacted.

         

        h)
          Next
          Business Day.
          Whenever any payment or other obligation hereunder shall be due on a day
          other
          than a Business Day, such payment shall be made on the next succeeding
          Business
          Day.

         

        i)
          Headings.
          The
          headings contained herein are for convenience only, do not constitute a
          part of
          this Debenture and shall not be deemed to limit or affect any of the provisions
          hereof.

         

        
          
            
            

          

          
            18

            
              

            

          

          
            
            

          

        

         

        j)
          Usury.
          To the
          extent it may lawfully do so, the Company hereby agrees not to insist upon
          or
          plead or in any manner whatsoever claim, and will resist any and all efforts
          to
          be compelled to take the benefit or advantage of, usury laws wherever enacted,
          now or at any time hereafter in force, in connection with any claim, action
          or
          proceeding that may be brought by any Purchaser in order to enforce any
          right or
          remedy under any Transaction Documents. Notwithstanding any provision to
          the
          contrary contained in any Transaction Documents, it is expressly agreed
          and
          provided that the total liability of the Company under the Transaction
          Documents
          for payments in the nature of interest shall not exceed the Maximum Rate,
          and,
          without limiting the foregoing, in no event shall any rate of interest
          or
          default interest, or both of them, when aggregated with any other sums
          in the
          nature of interest that the Company may be obligated to pay under the
          Transaction Documents exceed such Maximum Rate. It is agreed that if the
          maximum
          contract rate of interest allowed by law and applicable to the Transaction
          Documents is increased or decreased by statute or any official governmental
          action subsequent to the date hereof, the new maximum contract rate of
          interest
          allowed by law will be the Maximum Rate applicable to the Transaction Documents
          from the effective date of such increase or decrease forward, unless such
          application is precluded by applicable law. If under any circumstances
          whatsoever, interest in excess of the Maximum Rate is paid by the Company
          to any
          Purchaser with respect to indebtedness, if any, evidenced by the Transaction
          Documents, such excess shall be applied by such Purchaser to the unpaid
          principal balance of any such indebtedness or be refunded to the Company,
          the
          manner of handling such excess to be at such Purchaser’s election in the event
          any principal amount remains outstanding.

         

        k)
          Amendment.
          This
          Agreement may not be amended, supplemented or modified, except by an agreement
          in writing signed by each of the parties
          hereto.

      

    

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      Zone
      Mining has caused this Debenture to be duly executed by a duly authorized
      officer as of the date first above indicated.

    

    
      	 	 	 
	 	
              ZONE
                MINING LIMITED

            
	 
 	 
 	 
 
	 	By:  	/s/ Stephen
              P. Harrington
	 	
              
                

              

              Stephen P. Harrington

              President

            

    

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    

    The
      undersigned, hereby represents that Zone Mining Limited is in compliance with
      all of its covenants
      specified in Sections 5 and 6
      of that
      certain 12% Senior Secured Convertible Debenture originally dated as of
      September 21, 2006, executed by such party with its principal place of business
      located at 111 Presidential Blvd., Suite 165, Bala Cynwyd, PA 19004, in favor
      of
      Trident Growth Fund, L.P., with its principal place of business at 700 Gemini,
      Houston, Texas 77058.

    

    
      

      
        	 	 	 
	 	
                ZONE
                  MINING LIMITED

              
	 
 	 
 	 
 
	 	By:  	/s/ Stephen
                P. Harrington
	 	
                
                  

                

                Stephen P. Harrington

                President

              

      

       
21Stock Purchase Warrant

    
      

      

    

    Exhibit
      4.2

     

    NEITHER
      THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      AND,
      ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
      SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
      LOAN SECURED BY SUCH SECURITIES AS PERMITTED BY LAW AND THE SECURITIES
PURCHASE
      AGREEMENT PURSUANT TO WHICH THE SECURITIES WERE ISSUED.

     

     

    COMMON
      STOCK PURCHASE WARRANT
NO.1

     

    To
      Purchase Shares of Common Stock of

     

    ZONE
      MINING LIMITED

     

    This
      COMMON STOCK PURCHASE WARRANT (this “Warrant”)
      certifies that, for value received, TRIDENT GROWTH FUND, L.P., a Delaware
      limited partnership (the “Holder”),
      is
      entitled, upon the terms and subject to the limitations on exercise and the
      conditions hereinafter set forth, at any time on or after the date hereof,
      September 21, 2006 (the “Initial
      Exercise Date”),
      and
      on or prior to the close of business on the fifth anniversary of the Initial
      Exercise Date (the “Termination
      Date”),
      to
      subscribe for and purchase from ZONE MINING LIMITED, a Nevada corporation (the
      “Company”),
      five
      hundred thousand (500,000) shares of common stock, par value $.00001 per share
      (or such lesser number of shares as shall be equal to one-half share for each
      dollar advanced by the Holder to the Company pursuant to the Debentures), of
      the
      Company (the “Common
      Stock”),
      subject to adjustment herein (the “Warrant
      Shares”)
      as
      provided below. In addition, in the event the first Qualifying Transaction
      occurring after the Initial Exercise Date includes attached warrants for the
      common stock of Company, Holder shall receive the same number of Warrants as
      would be issued to a person receiving 500,000 shares of Common Stock in the
      Qualifying Transaction (or such lesser number of shares as shall be equal to
      one-half share for each dollar advanced by the Holder to the Company pursuant
      to
      the Debentures).  

     

    The
      purchase price of one share of Common Stock under this Warrant shall be equal
      to
      the Exercise Price, as defined in Section 2(b), as adjusted.

     

    Section
      1. Definitions.
      Capitalized terms used and not otherwise defined herein shall have the meanings
      set forth in that certain Securities Purchase Agreement (the “Purchase
      Agreement”),
      of
      even date herewith, entered into by and among the Company and the
      Holder.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    Section
      2. Exercise.

     

    a)  Exercise
      of Warrant.
      Exercise of the purchase rights represented by this Warrant may be made at
      any
      time or times on or after the Initial Exercise Date and on or before the
      Termination Date (each, an “Exercise
      Date”)
      by
      delivery to the Company of a duly executed facsimile copy of the Notice of
      Exercise Form annexed hereto (or such other office or agency of the Company
      as
      it may designate by notice in writing to the registered Holder at the address
      of
      such Holder appearing on the books of the Company); provided,
      however,
      within
      five Business Days of the date said Notice of Exercise is delivered to the
      Company, the Holder shall have surrendered this Warrant to the Company and
      the
      Company shall have received payment of the aggregate Exercise Price of the
      shares thereby purchased by wire transfer or cashier’s check drawn on a United
      States bank. 

     

    b)  Exercise
      Price.
      The
Exercise
      Price
      (so
      called herein) of each share of Common Stock under this Warrant shall be equal
      to the lesser of:

     

    
      	 	
              (i)  
                 

            	
              100%
                of
                the average price per share of the Common Stock and Common Stock
                Equivalents sold to any Person in the Qualifying Transaction to be
                consummated following the Initial Exercise Date (determined by dividing
                the total number of shares of Common Stock issued plus shares issuable
                under Common Stock Equivalents in such Qualifying Transaction, by
                the
                aggregate consideration received by the Company plus all consideration
                to
                be received upon exercise or conversion of all Common Stock
                Equivalents issued in such Qualifying Transaction);
                or

            

    

     

    
      	 	
              (ii) 
                  

            	
              $1.25
                per share (post
                the stock split described in Schedule 1.1 of the Purchase
                Agreement).

            

    

     

    c)  Cashless
      Exercise.
      If at
      any time after one year from the date of issuance of this Warrant there is
      no
      effective Registration Statement registering the resale of the Warrant Shares
      by
      the Holder, then this Warrant may also be exercised at such time by means of
      a
“cashless exercise” in which the Holder shall be entitled to receive a
      certificate for the number of Warrant Shares equal to the quotient obtained
      by
      dividing [(A-B) (X)] by (A), where:

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (A)  
      =    the price of said Common Stock determined by reference
      to the last reported sale price for the Common Stock on such day on the
      principal securities exchange on which the Common Stock is listed or admitted
      to
      trading or if no such sale takes place on such date, the average of the closing
      bid and asked prices thereof as officially reported, or, if not so listed or
      admitted to trading on any securities exchange, the last sale price for the
      Common Stock on the National Association of Securities Dealers national market
      system on such date, or, if there shall have been no trading on such date or
      if
      the Common Stock shall not be listed on such system, the average of the closing
      bid and asked prices in the over-the-counter market as furnished by any NASD
      member firm selected from time to time by the Company for such purpose or,
      if
      the Common Stock is not traded, then such price as is reasonably determined
      by
      the Company’s Board of Directors (the “Market
      Value”);

     

    (B) 
        =    the Exercise Price of this Warrant, as adjusted; and

    

    (X)  
      =    the number of Warrant Shares issuable upon exercise of this
      Warrant in accordance with the terms of this Warrant by means of a cash exercise
      rather than a cashless exercise.

    

    Notwithstanding
      anything herein to the contrary, on the Termination Date, this Warrant shall
      be
      automatically exercised via cashless exercise pursuant to this Section
      2(c).

    

    d)  Exercise
      Limitations.
      The
      Holder shall not have the right to exercise any portion of this Warrant,
      pursuant to Section 2 or otherwise, to the extent that after giving effect
      to
      such issuance after exercise, the Holder (together with the Holder’s
      affiliates), as set forth on the applicable Notice of Exercise, would
      beneficially own in excess of 4.99% (or as applicable, 9.99%) of the number
      of
      shares of the Common Stock outstanding immediately after giving effect to such
      issuance.  For purposes of the foregoing determination, the number of
      shares of Common Stock beneficially owned by the Holder and its affiliates
      shall
      include the number of shares of Common Stock issuable upon such exercise of
      this
      Warrant less the number of shares of Common Stock which would be issuable upon
      (A) exercise of the remaining, nonexercised portion of this Warrant and (B)
      exercise or conversion of the unexercised or unconverted portion of any other
      Securities (including, without limitation, any other Debentures or Warrants)
      subject to a limitation on conversion or exercise analogous to the limitation
      contained herein beneficially owned by the Holder.  Except as set forth in
      the preceding sentence, for purposes of this Section 2(d), beneficial ownership
      shall be calculated in accordance with Section 13(d) of the Exchange Act. To
      the
      extent that the limitation contained in this Section 2(d) applies, the
      determination of whether this Warrant is exercisable (in relation to other
      securities owned by the Holder) and of which a portion of this Warrant is
      exercisable shall be in the sole discretion of such Holder. For purposes of
      this
      Section 2(d), in determining the number of outstanding shares of Common Stock,
      the Holder may rely on the number of outstanding shares of Common Stock as
      reflected in (x) Schedule
      3.1(g)
      to the
      Purchase Agreement, (y) a more recent public announcement by the Company,
      including the most recent annual or quarterly report of Form 10-KSB or 10-QSB
      filed with the Commission; or (z) any other notice by the Company or the
      Company’s transfer agent setting forth the number of shares of Common Stock
      outstanding.  Upon the written or oral request of the Holder, the Company
      shall within five Business Days confirm orally and in writing to the Holder
      the
      number of shares of Common Stock then outstanding.  The provisions of this
      Section 2(d) may be waived by the Holder upon, at the election of the Holder,
      not less than 61 days’ prior notice to the Company, and the provisions of this
      Section 2(d) shall continue to apply until such 61st day (or such later date,
      as
      determined by the Holder, as may be specified in such notice of
      waiver).

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    e)  Mechanics
      of Exercise.
      

     

    i.  Authorization
      of Warrant Shares.
      The
      Company covenants that all Warrant Shares which may be issued upon the exercise
      of the purchase rights represented by this Warrant will, upon exercise of the
      purchase rights represented by this Warrant, be duly authorized, validly issued,
      fully paid and nonassessable and free from all taxes, liens and charges in
      respect of the issuance thereof (other than taxes in respect of any transfer
      occurring contemporaneously with such issuance). The Company covenants that
      during the period the Warrant is outstanding, it will reserve from its
      authorized and unissued Common Stock a sufficient number of shares to provide
      for the issuance of the Warrant Shares upon the exercise of any purchase rights
      under this Warrant. The Company further covenants that its issuance of this
      Warrant shall constitute full authority to its officers who are charged with
      the
      duty of executing stock certificates to execute and issue the necessary
      certificates for the Warrant Shares upon the exercise of the purchase rights
      under this Warrant. The Company will take all such reasonable action as may
      be
      necessary to assure that such Warrant Shares may be issued as provided herein
      without violation of any applicable law or regulation, or of any requirements
      of
      the Trading Market upon which the Common Stock may be listed.

     

    ii.  Delivery
      of Certificates Upon Exercise.
      To the
      extent permitted by applicable federal securities laws, certificates for shares
      purchased hereunder shall be transmitted by the transfer agent of the Company
      to
      the Holder by crediting the account of the Holder’s prime broker with the
      Depository Trust Company through its Deposit Withdrawal Agent Commission
      (“DWAC”)
      system
      if the Company is a participant in such system and if the certificates may
      be
      issued without a restrictive legend in accordance with applicable federal
      securities laws, and otherwise by physical delivery to the address specified
      by
      the Holder in the Notice of Exercise within five (5) Business Days from the
      delivery to the Company of the Notice of Exercise Form, surrender of this
      Warrant and payment of the aggregate Exercise Price as set forth above
      (“Warrant
      Share Delivery Date”).
      This
      Warrant shall be deemed to have been exercised on the date the Exercise Price
      is
      received by the Company. The Warrant Shares shall be deemed to have been issued,
      and Holder or any other person so designated to be named therein shall be deemed
      to have become a holder of record of such shares for all purposes, as of the
      date the Warrant has been exercised by payment to the Company of the Exercise
      Price and all taxes required to be paid by the Holder, if any, pursuant to
      Section 2(d)(vii) prior to the issuance of such shares, have been paid.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    iii.  Delivery
      of New Warrants Upon Exercise.
      If this
      Warrant shall have been exercised in part, the Company shall, at the time of
      delivery of the certificate or certificates representing Warrant Shares, deliver
      to Holder a new Warrant evidencing the rights of Holder to purchase the
      unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
      in all other respects be identical with this Warrant.

     

    iv.  Rescission
      Rights.
      If the
      Company fails to cause its transfer agent to transmit to the Holder a
      certificate or certificates representing the Warrant Shares pursuant to this
      Section 2(d)(iv) by the Warrant Share Delivery Date, then the Holder will have
      the right to rescind such exercise.

     

    v.  Failure
      to Timely Deliver Certificates Upon Exercise.
      In
      addition to any other rights available to the Holder, if the Company or the
      Company’s transfer agent fails to cause delivery to the Holder of a certificate
      or certificates representing the Warrant Shares or if the Company or its
      transfer agent fails to deliver such certificates without the restrictive legend
      (if applicable) on or before the Warrant Share Delivery Date, the Company shall
      pay to Purchaser, in cash, as partial liquidated damages and not as a penalty,
      the greater of (i) $500 for each Business Day after the Warrant Share Delivery
      Date until such certificate is delivered with an appropriate legend or without
      a
      restrictive legend, as the case may be; and (ii) the difference in the Market
      Value of the Warrant Shares on the Warrant Share Delivery Date and the date
      such
      shares are actually received by the Holder. Nothing herein shall limit
      Purchaser’s right to pursue all equitable remedies for the Company’s failure to
      deliver certificates representing any Securities as required herein, including,
      without limitation, a decree of specific performance and/or injunctive relief.
      

     

    vi.  No
      Fractional Shares or Scrip.
      No
      fractional shares or scrip representing fractional shares shall be issued upon
      the exercise of this Warrant. As to any fraction of a share which Holder would
      otherwise be entitled to purchase upon such exercise, the Company shall round
      such fractional share up to the next whole number. 

     

    vii.  Charges,
      Taxes and Expenses.
      Issuance of certificates for Warrant Shares shall be made without charge to
      the
      Holder for any issue or transfer tax or other incidental expense in respect
      of
      the issuance of such certificate, all of which taxes and expenses shall be
      paid
      by the Company, and such certificates shall be issued in the name of the Holder
      or in such name or names as may be directed by the Holder; provided,
      however,
      that in
      the event certificates for Warrant Shares are to be issued in a name other
      than
      the name of the Holder, this Warrant when surrendered for exercise shall be
      accompanied by the Assignment Form attached hereto duly executed by the Holder;
      and the Company may require, as a condition thereto, the payment of a sum
      sufficient to reimburse it for any transfer tax incidental thereto.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    viii.  Closing
      of Books.
      The
      Company will not close its stockholder books or records in any manner which
      prevents the timely exercise of this Warrant, pursuant to the terms
      hereof.

     

    Section
      3. Certain
      Adjustments.

     

    a)  Stock
      Dividends and Splits.
      Except
      for the forward split of stock described in Schedule 1.1 of the Purchase
      Agreement, if the Company, at any time while this Warrant is outstanding: (A)
      pays a stock dividend or otherwise make a distribution or distributions on
      shares of its Common Stock or any other equity or equity equivalent securities
      payable in shares of Common Stock, (B) subdivides outstanding shares of Common
      Stock into a larger number of shares, (C) combines (including by way of reverse
      stock split) outstanding shares of Common Stock into a smaller number of shares,
      or (D) issues by reclassification of shares of the Common Stock any shares
      of
      capital stock of the Company, then in each case the Exercise Price shall be
      multiplied by a fraction of which the numerator shall be the number of shares
      of
      Common Stock (excluding treasury shares, if any) outstanding before such event
      and of which the denominator shall be the number of shares of Common Stock
      outstanding after such event and the number of shares issuable upon exercise
      of
      this Warrant shall be proportionately adjusted. Any adjustment made pursuant
      to
      this Section 3(a) shall become effective immediately after the record date
      for
      the determination of stockholders entitled to receive such dividend or
      distribution and shall become effective immediately after the effective date
      in
      the case of a subdivision, combination or re-classification.

     

    b)  Subsequent
      Equity Sales.
      Subject
      to Section 3(e) below, if the Company at any time while this Warrant is
      outstanding, shall offer, sell, grant any option to purchase or offer, sell
      or
      grant any right to reprice its securities, or otherwise dispose of or issue
      any
      Common Stock or Common Stock Equivalents entitling any Person to acquire shares
      of Common Stock, at a price per share less than the then Exercise Price (such
      lower price, the “Base
      Share Price”
and
      such issuances collectively, a “Dilutive
      Issuance”),
      as
      adjusted hereunder (if the holder of the Common Stock or Common Stock
      Equivalents so issued shall at any time, whether by operation of purchase price
      adjustments, reset provisions, floating conversion, exercise or exchange prices
      or otherwise, or due to warrants, options or rights per share which is issued
      in
      connection with such issuance, be entitled to receive shares of Common Stock
      at
      an effective price per share which is less than the Exercise Price, such
      issuance shall be deemed to have occurred for less than the Exercise Price),
      then, the Exercise Price shall be reduced to equal the Base Share Price. Such
      adjustment shall be made whenever such Common Stock or Common Stock Equivalents
      are issued. The Company shall notify the Holder in writing, no later than the
      Business Day following the issuance of any Common Stock or Common Stock
      Equivalents subject to this section, indicating therein the applicable issuance
      price, or of applicable reset price, exchange price, conversion price and other
      pricing terms (such notice the “Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Company provides a Dilutive
      Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
      Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
      entitled to receive Warrant Shares based upon the Base Share Price regardless
      of
      whether the Holder accurately refers to the Base Share Price in the Notice
      of
      Exercise.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    c)  Pro
      Rata Distributions.
      If the
      Company, at any time prior to the Termination Date, shall distribute to all
      holders of Common Stock (and not to Holders of the Warrants) evidences of its
      indebtedness or assets or rights or warrants to subscribe for or purchase any
      security other than the Common Stock (which shall be subject to Section 3(b)),
      then in each such case the Exercise Price shall be adjusted by multiplying
      the
      Exercise Price in effect immediately prior to the record date fixed for
      determination of stockholders entitled to receive such distribution by a
      fraction of which the denominator shall be the closing bid price of the Common
      Stock on the then principal Trading Market determined as of the record date
      mentioned above (if the closing bid price of the Common Stock on the then
      principal Trading Market shall then be determinable and otherwise the fair
      market value per share as determined by the Board of Directors in good faith,
      and of which the numerator shall be such closing bid price of the Common Stock
      on the then principal Trading Market on such record date less the then per
      share
      fair market value at such record date of the portion of such assets or evidence
      of indebtedness so distributed applicable to one outstanding share of the Common
      Stock as determined by the Board of Directors in good faith. In either case
      the
      adjustments shall be described in a statement provided to the Holders of the
      portion of assets or evidences of indebtedness so distributed or such
      subscription rights applicable to one share of Common Stock. Such adjustment
      shall be made whenever any such distribution is made and shall become effective
      immediately after the record date mentioned above.

     

    d)  Fundamental
      Transaction.
      If, at
      any time while this Warrant is outstanding, there occurs a Fundamental
      Transaction, then, upon any subsequent conversion of this Warrant, the Holder
      shall have the right to receive, for each Warrant Share that would have been
      issuable upon such exercise absent such Fundamental Transaction (a) upon
      exercise of this Warrant, the number of shares of Common Stock of the successor
      or acquiring corporation or of the Company, if it is the surviving corporation,
      and Alternate Consideration receivable upon or as a result of such
      reorganization, reclassification, merger, consolidation or disposition of assets
      by a Holder of the number of shares of Common Stock for which this Warrant
      is
      exercisable immediately prior to such event or (b) if the Company is acquired
      in
      an all cash transaction, cash equal to the value of this Warrant as determined
      by the difference between the applicable Exercise Price and the amount of cash
      paid per share to the shareholders of the Company (the “Alternate
      Consideration”).
      For
      purposes of any such exercise, the determination of the Exercise Price shall
      be
      appropriately adjusted to apply to such Alternate Consideration based on the
      amount of Alternate Consideration issuable in respect of one share of Common
      Stock in such Fundamental Transaction, and the Company shall apportion the
      Exercise Price among the Alternate Consideration in a reasonable manner
      reflecting the relative value of any different components of the Alternate
      Consideration. If holders of Common Stock are given any choice as to the
      securities, cash or property to be received in a Fundamental Transaction, then
      the Holder shall be given the same choice as to the Alternate Consideration
      it
      receives upon any exercise of this Warrant following such Fundamental
      Transaction. To the extent necessary to effectuate the foregoing provisions,
      any
      successor to the Company or surviving entity in such Fundamental Transaction
      shall issue to the Holder a new warrant consistent with the foregoing provisions
      and evidencing the Holder’s right to exercise such warrant into Alternate
      Consideration. The terms of any agreement pursuant to which a Fundamental
      Transaction is effected shall include terms requiring any such successor or
      surviving entity to comply with the provisions of this Section 3(d) and insuring
      that this Warrant (or any such replacement security) will be similarly adjusted
      upon any subsequent transaction analogous to a Fundamental
      Transaction.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    e)  Exempt
      Issuance.
      Notwithstanding the foregoing, no adjustments, Alternate Consideration, nor
      notices shall be made, paid, or issued under this Section 3 in respect of an
      Exempt Issuance.

     

    f)  Calculations.
      All
      calculations under this Section 3 shall be made to the nearest cent or the
      nearest 1/100th of a share, as the case may be. The number of shares of Common
      Stock outstanding at any given time shall not includes shares of Common Stock
      owned or held by or for the account of the Company, and the description of
      any
      such shares of Common Stock shall be considered on issue or sale of Common
      Stock. For purposes of this Section 3, the number of shares of Common Stock
      deemed to be issued and outstanding as of a given date shall be the sum of
      the
      number of shares of Common Stock (excluding treasury shares, if any) issued
      and
      outstanding.

     

    g)  Voluntary
      Adjustment By Company.
      The
      Company may at any time during the term of this Warrant reduce the then current
      Exercise Price to any amount and for any period of time deemed appropriate
      by
      the Board of Directors of the Company.

     

    h)  Intentionally
      Omitted.

     

    i)  Notice
      to Holders.

    
       

    

    i.  Adjustment
      to Exercise Price.
      Whenever the Exercise Price is adjusted pursuant to this Section 3, the Company
      shall promptly mail to each Holder a notice setting forth the Exercise Price
      after such adjustment and setting forth a brief statement of the facts requiring
      such adjustment. If the Company issues a variable rate security, despite the
      prohibition thereon in the Purchase Agreement, the Company shall be deemed
      to
      have issued Common Stock or Common Stock Equivalents at the lowest possible
      conversion or exercise price at which such securities may be converted or
      exercised in the case of a Variable Rate Transaction (as defined in the Purchase
      Agreement), or the lowest possible adjustment price in the case of an MFN
      Transaction. The term “MFN
      Transaction”
shall
      mean a transaction in which the Company issues or sells any securities in a
      capital raising transaction or series of related transactions which grants
      to an
      investor the right to receive additional shares based upon future transactions
      of the Company on terms more favorable than those granted to such investor
      in
      such offering. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    ii.  Notice
      to Allow Exercise by Holder.
      If (A)
      the Company shall declare a dividend (or any other distribution) on the Common
      Stock; (B) the Company shall declare a special nonrecurring cash dividend on
      or
      a redemption of the Common Stock; (C) the Company shall authorize the granting
      to all holders of the Common Stock rights or warrants to subscribe for or
      purchase any shares of capital stock of any class or of any rights; (D) the
      approval of any stockholders of the Company shall be required in connection
      with
      any reclassification of the Common Stock, any consolidation or merger to which
      the Company is a party, any sale or transfer of all or substantially all of
      the
      assets of the Company, of any compulsory share exchange whereby the Common
      Stock
      is converted into other securities, cash or property; (E) the Company shall
      authorize the voluntary or involuntary dissolution, liquidation or winding
      up of
      the affairs of the Company; then, in each case, the Company shall cause to
      be
      mailed to the Holder at its last address as it shall appear upon the Warrant
      Register of the Company, at least 20 calendar days prior to the applicable
      record or effective date hereinafter specified, a notice stating (x) the date
      on
      which a record is to be taken for the purpose of such dividend, distribution,
      redemption, rights or warrants, or if a record is not to be taken, the date
      as
      of which the holders of the Common Stock of record to be entitled to such
      dividend, distributions, redemption, rights or warrants are to be determined
      or
      (y) the date on which such reclassification, consolidation, merger, sale,
      transfer or share exchange is expected to become effective or close, and the
      date as of which it is expected that holders of the Common Stock of record
      shall
      be entitled to exchange their shares of the Common Stock for securities, cash
      or
      other property deliverable upon such reclassification, consolidation, merger,
      sale, transfer or share exchange; provided,
      however
      that the
      failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice. The Holder is entitled to exercise this Warrant during the
      20-day period commencing the date of such notice to the effective date of the
      event triggering such notice.

     

    Section
      4. Transfer
      of Warrant.

     

    a)  Transferability.
      Subject
      to compliance with any applicable securities laws and the conditions set forth
      in Sections 5(a) and 4(d) hereof and to the provisions of Section 4.1 of the
      Purchase Agreement, this Warrant and all rights hereunder are transferable,
      in
      whole or in part, upon surrender of this Warrant at the principal office of
      the
      Company, together with a written assignment of this Warrant substantially in
      the
      form attached hereto duly executed by the Holder or its agent or attorney and
      funds sufficient to pay any transfer taxes payable upon the making of such
      transfer. Upon such surrender and, if required, such payment, the Company shall
      execute and deliver a new Warrant or Warrants in the name of the assignee or
      assignees and in the denomination or denominations specified in such instrument
      of assignment, and shall issue to the assignor a new Warrant evidencing the
      portion of this Warrant not so assigned, and this Warrant shall promptly be
      cancelled. A Warrant, if properly assigned, may be exercised by a new holder
      for
      the purchase of Warrant Shares without having a new Warrant issued.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    b)  New
      Warrants.
      This
      Warrant may be divided or combined with other Warrants upon presentation hereof
      at the aforesaid office of the Company, together with a written notice
      specifying the names and denominations in which new Warrants are to be issued,
      signed by the Holder or its agent or attorney. Subject to compliance with
      Section 4(a), as to any transfer which may be involved in such division or
      combination, the Company shall execute and deliver a new Warrant or Warrants
      in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice.

     

    c)  Warrant
      Register.
      The
      Company shall register this Warrant, upon records to be maintained by the
      Company for that purpose (the “Warrant
      Register”),
      in
      the name of the record Holder hereof from time to time. The Company may deem
      and
      treat the registered Holder of this Warrant as the absolute owner hereof for
      the
      purpose of any exercise hereof or any distribution to the Holder, and for all
      other purposes, absent actual notice to the contrary.

     

    d)  Transfer
      Restrictions.
      If,
      at the
time
      of
      the surrender of this Warrant in connection with any transfer of this Warrant,
      the transfer of this Warrant shall not be registered pursuant to an effective
      registration
      statement under the Securities Act
      and
under
      applicable state securities or blue sky laws, the Company may require, as a
      condition of allowing such transfer (i) that the Holder or transferee of this
      Warrant, as the case may be, furnish to the Company a written opinion of counsel
      (which opinion shall be in form, substance and scope customary for opinions
      of
      counsel in comparable transactions) to the effect that such transfer may be
      made
      without
      registration under
      the
      Securities Act and under applicable state securities or blue sky laws, (ii)
      that
      the holder or transferee execute and deliver to the Company an investment letter
      in form and substance acceptable to the Company and (iii) that the transferee
      be
      an “accredited
      investor” as defined in Rule 501(a) of Regulation D promulgated under the
      Securities Act or a qualified institutional buyer as defined in Rule 144A(a)
      under the Securities Act.

     

    Section
      5. Covenants.
      [Intentionally deleted].  

     

    Section
      6. Miscellaneous.
      

     

    a)  Title
      to Warrant.
      Prior
      to the Termination Date and subject to compliance with applicable laws and
      Section 4 of this Warrant, this Warrant and all rights hereunder are
      transferable, in whole or in part, at the office or agency of the Company by
      the
      Holder in person or by duly authorized attorney, upon surrender of this Warrant
      together with the Assignment Form annexed hereto properly endorsed. The
      transferee shall sign an investment letter in form and substance reasonably
      satisfactory to the Company.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    b)  No
      Rights as Shareholder Until Exercise.
      This
      Warrant does not entitle the Holder to any voting rights or other rights as
      a
      shareholder of the Company prior to the exercise hereof. Upon the surrender
      of
      this Warrant and the payment of the aggregate Exercise Price (or by means of
      a
      cashless exercise), the Warrant Shares so purchased shall be and be deemed
      to be
      issued to such Holder as the record owner of such shares as of the close of
      business on the later of the date of such surrender or payment.

     

    c)  Loss,
      Theft, Destruction or Mutilation of Warrant.
      The
      Company covenants that upon receipt by the Company of evidence reasonably
      satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
      or any stock certificate relating to the Warrant Shares, and in case of loss,
      theft or destruction, of indemnity or security reasonably satisfactory to it
      (which, in the case of the Warrant, shall not include the posting of any bond),
      and upon surrender and cancellation of such Warrant or stock certificate, if
      mutilated, the Company will make and deliver a new Warrant or stock certificate
      of like tenor and dated as of such cancellation, in lieu of such Warrant or
      stock certificate.

     

    d)  Saturdays,
      Sundays, Holidays, etc.
      If the
      last or appointed day for the taking of any action or the expiration of any
      right required or granted herein shall be a Saturday, Sunday or a legal holiday,
      then such action may be taken or such right may be exercised on the next
      succeeding day not a Saturday, Sunday or legal holiday.

     

    e)  Authorized
      Shares.
      

     

    The
      Company covenants that during the period the Warrant is outstanding, it will
      reserve from its authorized and unissued Common Stock a sufficient number of
      shares to provide for the issuance of the Warrant Shares upon the exercise
      of
      any purchase rights under this Warrant. The Company further covenants that
      its
      issuance of this Warrant shall constitute full authority to its officers who
      are
      charged with the duty of executing stock certificates to execute and issue
      the
      necessary certificates for the Warrant Shares upon the exercise of the purchase
      rights under this Warrant. The Company will take all such reasonable action
      as
      may be necessary to assure that such Warrant Shares may be issued as provided
      herein without violation of any applicable law or regulation, or of any
      requirements of the Trading Market upon which the Common Stock may be listed.
      

     

    Except
      and to the extent as waived or consented to by the Holder, the Company shall
      not
      by any action, including, without limitation, amending its articles of
      incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities or any other voluntary action,
      avoid or seek to avoid the observance or performance of any of the terms of
      this
      Warrant, but will at all times in good faith assist in the carrying out of
      all
      such terms and in the taking of all such actions as may be necessary or
      appropriate to protect the rights of Holder as set forth in this Warrant against
      impairment. Without limiting the generality of the foregoing, the Company will
      (a) not increase the par value of any Warrant Shares above the amount payable
      therefor upon such exercise immediately prior to such increase in par value,
      (b)
      take all such action as may be necessary or appropriate in order that the
      Company may validly and legally issue fully paid and nonassessable Warrant
      Shares upon the exercise of this Warrant, and (c) use commercially reasonable
      efforts to obtain all such authorizations, exemptions or consents from any
      public regulatory body having jurisdiction thereof as may be necessary to enable
      the Company to perform its obligations under this Warrant.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    Before
      taking any action which would result in an adjustment in the number of Warrant
      Shares for which this Warrant is exercisable or in the Exercise Price, the
      Company shall obtain all such authorizations or exemptions thereof, or consents
      thereto, as may be necessary from any public regulatory body or bodies having
      jurisdiction thereof.

     

    f)  Jurisdiction.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant shall be determined in accordance with the provisions of the
      Purchase Agreement.

     

    g)  Restrictions.
      The
      Holder acknowledges that the Warrant Shares acquired upon the exercise of this
      Warrant, if not registered, will have restrictions upon resale imposed by state
      and federal securities laws.

     

    h)  Expenses.
      If the
      Company willfully and knowingly fails to comply with any provision of this
      Warrant, which results in any material damages to the Holder, the Company shall
      pay to Holder such amounts as shall be sufficient to cover any costs and
      expenses including, but not limited to, reasonable attorneys’ fees, including
      those of appellate proceedings, incurred by Holder in collecting any amounts
      due
      pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
      hereunder.

     

    i)  Notices.
      Any
      notice, request or other document required or permitted to be given or delivered
      to the Holder by the Company shall be delivered in accordance with the notice
      provisions of the Purchase Agreement.

     

    j)  Limitation
      of Liability.
      No
      provision hereof, in the absence of any affirmative action by Holder to exercise
      this Warrant or purchase Warrant Shares, and no enumeration herein of the rights
      or privileges of Holder, shall give rise to any liability of Holder for the
      purchase price of any Common Stock or as a stockholder of the Company, whether
      such liability is asserted by the Company or by creditors of the
      Company.

     

    k)  Remedies.
      Holder,
      in addition to being entitled to exercise all rights granted by law, including
      recovery of damages, will be entitled to specific performance of its rights
      under this Warrant. The Company agrees that monetary damages would not be
      adequate compensation for any loss incurred by reason of a breach by it of
      the
      provisions of this Warrant and hereby agrees to waive the defense in any action
      for specific performance that a remedy at law would be adequate.

     

    l)  Successors
      and Assigns.
      Subject
      to applicable securities laws, this Warrant and the rights and obligations
      evidenced hereby shall inure to the benefit of and be binding upon the
      successors of the Company and the successors and permitted assigns of Holder.
      The provisions of this Warrant are intended to be for the benefit of all Holders
      from time to time of this Warrant and shall be enforceable by any such Holder
      or
      holder of Warrant Shares.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    m)  Amendment
      and Waiver.
      This
      Warrant may be modified or amended only with the written consent of the Company
      and the Holder. No course of dealing or any delay or failure to exercise any
      right hereunder on the part of Holder shall operate as a waiver of such right
      or
      otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the
      fact that all rights hereunder terminate on the Termination Date. 

     

    n)  Severability.
      Wherever possible, each provision of this Warrant shall be interpreted in such
      manner as to be effective and valid under applicable law, but if any provision
      of this Warrant shall be prohibited by or invalid under applicable law, such
      provision shall be ineffective to the extent of such prohibition or invalidity,
      without invalidating the remainder of such provisions or the remaining
      provisions of this Warrant.

     

    o)  Headings.
      The
      headings used in this Warrant are for the convenience of reference only and
      shall not, for any purpose, be deemed a part of this Warrant.

     

    p)  Registration
      Rights.
      The
      Holder has certain rights with respect to the registration of the Warrant Shares
      upon exercise of this Warrant, such rights being specifically set forth in
      the
      Purchase Agreement entered into by and between Holder and the Company on the
      date hereof.

     

    

    [Signature
      Page Follows]

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Warrant to be executed by its officer thereunto duly
      authorized as of the date first written above.

     

    
      	 	 	 
	 	ZONE
              MINING LIMITED
	 
 	 
 	 
 
	Date: 	By:  	/s/ Stephen
              P. Harrington
	 	
              
                

              

              
                Name:
                  Stephen P. Harrington

                Title:
                  President

              

            

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    NOTICE
      OF EXERCISE

    

    TO: ZONE
      MINING LIMITED

    

    (1)  The
      undersigned hereby elects to purchase ________ Warrant Shares of Zone Mining
      Limited pursuant to the terms of the attached Warrant (only if exercised in
      full), and tenders herewith payment of the exercise price in full, together
      with
      all applicable transfer taxes, if any.

     

    (2)  Payment
      shall take the form of (check applicable box):

     

    [ 
]
      in lawful money of the United States; or

     

    [ 
]
      the cancellation of such number of Warrant Shares as is necessary, in accordance
      with the formula set forth in subsection 2(c), to exercise this Warrant with
      respect to the maximum number of Warrant Shares purchasable pursuant to the
      cashless exercise procedure set forth in subsection 2(c).

     

    (3)  Please
      issue a certificate or certificates representing said Warrant Shares in the
      name
      of the undersigned or in such other name as is specified below:

     

    _______________________________

     

    

    The
      Warrant Shares shall be delivered to the following:

    

    _______________________________

     

    _______________________________

     

    _______________________________

     

    
      (4)  Accredited
        Investor.
        The
        undersigned, and, if applicable, the person or entity identified in subsection
        3
        above, is an “accredited investor” as defined in Regulation D promulgated under
        the Securities Act of 1933, as amended.

    

    

    [SIGNATURE
      OF HOLDER]

     

    Name
      of
      Investing Entity:
      _____________________________________________________________

    Signature
      of Authorized Signatory of Investing Entity:
      _______________________________________

    Name
      of
      Authorized Signatory:
      _________________________________________________________

    Title
      of
      Authorized Signatory:
      __________________________________________________________

    Date:
      _____________________________________________________________________________

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    ASSIGNMENT
      FORM

     

    

    (To
      assign the foregoing warrant, execute

    this
      form
      and supply required information. 

    Do
      not
      use this form to exercise the warrant.)

    

    

    

    FOR
      VALUE
      RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
      assigned to

     

    

    _______________________________________________
      whose address is

    

    _______________________________________________________________.

    

    

    

    _______________________________________________________________

    

    Dated:
      ______________, _______

    
 

    
      
        	 	
                Holder’s
                  Signature:

              	
                _____________________________

              

      

      

      
        	 	
                Holder’s
                  Address:

              	
                _____________________________

              

      

      

      
        	 	 	
                _____________________________

              

      

      

 

    

    Signature
      Guaranteed: ___________________________________________

    

    

    NOTE:
      The
      signature to this Assignment Form must correspond with the name as it appears
      on
      the face of the Warrant, without alteration or enlargement or any change
      whatsoever, and must be guaranteed by a bank or trust company. Officers of
      corporations and those acting in a fiduciary or other representative capacity
      should file proper evidence of authority to assign the foregoing
      Warrant.

     

    16

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