Document:

EXHIBIT 4.3

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THIS  WARRANT  AND  THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF  THIS  WARRANT
(COLLECTIVELY,  THE "SECURITIES")  HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE  SKY LAWS  ("BLUE  SKY  LAWS").  NO  TRANSFER,  SALE,  ASSIGNMENT,  PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES OR ANY INTEREST THEREIN MAY
BE MADE EXCEPT (A) PURSUANT TO AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
SECURITIES ACT AND ANY APPLICABLE  BLUE SKY LAWS OR (B) IF THE  CORPORATION  HAS
BEEN FURNISHED BOTH WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND
COUNSEL  SHALL  BE  SATISFACTORY  TO THE  CORPORATION,  TO THE  EFFECT  THAT  NO
REGISTRATION  IS  REQUIRED  BECAUSE OF THE  AVAILABILITY  OF AN  EXEMPTION  FROM
REGISTRATION  UNDER THE SECURITIES  ACT AND  APPLICABLE  BLUE SKY LAWS, AND WITH
ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT,  PLEDGE,  HYPOTHECATION OR OTHER
DISPOSITION  WILL BE MADE ONLY IN  COMPLIANCE  WITH THE  CONDITIONS  OF ANY SUCH
REGISTRATION OR EXEMPTION.
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                   WARRANT TO PURCHASE SHARES OF COMMON STOCK
                                       OF
                        EL CAPITAN PRECIOUS METALS, INC.

Warrant No.:  ____________                              Date:  __________, _____

      THIS CERTIFIES THAT, for value received, ____________ or his successors or
assigns  (collectively,  the  "Holder") is entitled to purchase  from El Capitan
Precious Metals, Inc. (the "Corporation"), ____________ (_______) fully paid and
nonassessable  shares (the  "Shares")  of the  Corporation's  common  stock (the
"Common  Stock"),  at an exercise  price of Fifty  Cents  ($0.50) per Share (the
"Exercise Price"), subject to adjustment as herein provided. This Warrant may be
exercised  by Holder at any time from and after the date  hereof  until the date
three years from the date hereof, at which time all of Holder's rights hereunder
shall expire.

      This Warrant is subject to the following provisions, terms and conditions:

      1.  Exercise of Warrant.  The rights  represented  by this  Warrant may be
exercised  by the  Holder,  in  whole or in part  (but not as to any  fractional
shares of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Corporation's  principal office, or such other office or agency
of the  Corporation as the Corporation may designate by notice in writing to the
Holder at the address of such Holder appearing on the Corporation's books at any
time within the period  above  indicated),  and upon  payment to it by certified
check, bank draft or cash of the purchase price for such Shares. The Corporation
agrees that the Shares so  purchased  shall be deemed to be issued to the Holder
as the record  owner of such  Shares as of the close of  business on the date on
which this Warrant shall have been surrendered and payment for such Shares shall
have been made as aforesaid.  Certificates  for the Shares so purchased shall be
delivered to the Holder within a reasonable  time, not exceeding 30 days,  after
the rights  represented by this Warrant shall have been so exercised and, unless
this Warrant has expired,  a new Warrant  representing the number of Shares,  if
any, with respect to which this Warrant shall not then have been exercised shall
also be delivered to the Holder within such time.  The  Corporation  may require
that any such new  Warrant  or any  certificate  for Shares  purchased  upon the
exercise hereof bear a legend  substantially  similar to that which is contained
on the face of this Warrant.
<PAGE>

      2.  Transferability.  This Warrant is issued upon the following  terms, to
which Holder consents and agrees:

            (a)  Until  this  Warrant  is   transferred  on  the  books  of  the
      Corporation,  the  Corporation  will  treat the  Holder  of this  Warrant,
      registered as such on the books of the Corporation,  as the absolute owner
      hereof  for  all  purposes  without  effect  given  to any  notice  to the
      contrary.

            (b) This  Warrant  may not be  exercised,  and this  Warrant and the
      Shares  underlying  this  Warrant  shall  not be  transferable,  except in
      compliance  with  all  applicable  state  and  federal   securities  laws,
      regulations and orders,  and with all other applicable  laws,  regulations
      and orders.

            (c) The Warrant may not be transferred, and the Shares issuable upon
      exercise  of this  Warrant,  may not be  transferred  without  the  Holder
      obtaining   an  opinion  of  counsel,   which   opinion  and  counsel  are
      satisfactory  to the  Corporation,  stating that the proposed  transaction
      will not result in a prohibited  transaction  under the Securities Act and
      applicable Blue Sky Laws. By accepting this Warrant,  the Holder agrees to
      act in accordance with any conditions imposed on such transfer by any such
      opinion of counsel.

            (d) Neither the  issuance  of this  Warrant nor the  issuance of the
      Shares issuable upon exercise of this Warrant have been  registered  under
      the Securities Act.

      3. Certain  Covenants of the  Corporation.  The Corporation  covenants and
agrees  that all  Shares  which may be issued  upon the  exercise  of the rights
represented  by this  Warrant,  upon issuance and full payment for the Shares so
purchased,  will be duly authorized and issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue hereof,  except
those that may be created by or imposed  upon the Holder or its  property;  and,
without limiting the generality of the foregoing,  the Corporation covenants and
agrees  that it will from time to time take all such  actions as may be required
to ensure that the par value per share of the Common Stock is at all times equal
to or less than the Exercise Price per Share issuable  pursuant to this Warrant.
The Corporation further covenants and agrees that during the period within which
the rights represented by this Warrant may be exercised, the Corporation will at
all times have authorized and available, free of preemptive or other rights, for
the purpose of issue upon  exercise of the  purchase  rights  evidenced  by this
Warrant,  a  sufficient  number of shares of its Common Stock to provide for the
full exercise of the rights represented by this Warrant.

      4.  Adjustment of Exercise Price and Number of Shares.  The Exercise Price
and number of Shares are subject to the following adjustments:

            (a) Stock  Dividend,  Stock Split or Stock  Combination.  If (i) any
      dividends  on any class of the  Corporation's  capital  stock  payable  in
      Common Stock or  securities  convertible  into or  exercisable  for Common
      Stock  (collectively,  "Common  Stock  Equivalents")  shall be paid by the
      Corporation, (ii) the Corporation shall divide its then-outstanding shares
      of Common Stock into a greater number of shares,  or (iii) the Corporation
      shall combine its outstanding shares of Common Stock, by  reclassification
      or  otherwise,  then,  in any such  event,  the  Exercise  Price in effect
      immediately  prior to such event  shall  (until  adjusted  again  pursuant
      hereto) be adjusted immediately after such event to a price (calculated to
      the nearest  full cent) equal to the  quotient of (x) the number of shares
      of Common Stock outstanding immediately prior to such event, multiplied by
      the Exercise Price in effect  immediately prior to such event,  divided by
      (y) the total  number of shares of Common  Stock  outstanding  immediately
      after such event. No adjustment of the Exercise Price shall be made if the
      amount of such adjustment  shall be less than $.05 per Share; but any such
      adjustment not required then to be made shall be carried forward and shall
      be made at the time and  together  with the any  subsequent  adjustment(s)
      which, together with any adjustment(s) so carried forward, shall amount to
      not less than $.05 per Share.

                                        2
<PAGE>

            (b) Number of Shares  Issuable on Exercise  of  Warrants.  Upon each
      adjustment  of the Exercise  Price  pursuant to this  Section,  the Holder
      shall thereafter  (until another such adjustment) be entitled to purchase,
      at the adjusted  Exercise Price,  the number of Shares,  calculated to the
      nearest  full Share,  equal to the  quotient of (i) the product of (A) the
      number of Shares  issuable  under this Warrant (as then adjusted  pursuant
      hereto prior to the current  adjustment),  multiplied  by (B) the Exercise
      Price in effect  prior to such  adjustment,  divided by (ii) the  adjusted
      Exercise Price.

            (c) Notice of Adjustment.  Upon any adjustment of the Exercise Price
      and any  increase  or  decrease  in the  number of Shares of Common  Stock
      issuable  upon the exercise of the Warrant,  then,  and in each such case,
      the  Corporation  shall  within 30 days  thereafter  give  written  notice
      thereof, by first-class mail, postage prepaid, addressed to each Holder as
      shown on the books of the  Corporation.  Any such  notice  shall state the
      adjusted  Exercise Price and adjusted  number of Shares  issuable upon the
      exercise  of the  Warrant,  and shall set forth in  reasonable  detail the
      methods of calculation of such  adjustments  and the facts upon which such
      calculations were based.

            (d) Effect of Reorganization,  Reclassification or Merger. If at any
      time  while  this  Warrant  is   outstanding   there  should  be  (i)  any
      reorganization  of the  Corporation's  capital stock (other than splits or
      combinations  of Common Stock  contemplated by and provided for in Section
      4(a)),  (ii) any  consolidation  or merger of the Corporation with another
      corporation, limited liability Corporation,  partnership or other business
      entity,  or  any  sale,  conveyance,   lease  or  other  transfer  by  the
      Corporation  of all or  substantially  all of its  property  to any  other
      corporation, limited liability Corporation,  partnership or other business
      entity,  which is  effected  in such a manner  that the  holders of Common
      Stock shall be entitled to receive cash, stock,  securities or assets with
      respect to or in exchange for Common  Stock,  or (iii) any dividend or any
      other  distribution  upon any  class of the  Corporation's  capital  stock
      payable in capital  stock of a different  class,  other  securities of the
      Corporation,  or other Corporation  property (other than cash), then, as a
      part of such  transaction,  lawful  provision shall be made so that Holder
      shall have the right thereafter to receive,  upon the exercise hereof, the
      number  of  shares  of  stock  or  other  securities  or  property  of the
      Corporation or of the successor  entity  resulting from a consolidation or
      merger, or of the entity to which the property of the Corporation has been
      sold, conveyed, leased or otherwise transferred, as the case may be, which
      the  Holder  would  have  been  entitled  to  receive  upon  such  capital
      reorganization,  reclassification of capital stock, consolidation, merger,
      sale,  conveyance,  lease  or other  transfer,  if this  Warrant  had been
      exercised    immediately    prior   to   such   capital    reorganization,
      reclassification   of  capital   stock,   consolidation,   merger,   sale,
      conveyance,  lease  or  other  transfer.  In any  such  case,  appropriate
      adjustments (as determined by the Corporation's  board of directors) shall
      be made in the  application  of the  provisions of this Warrant to the end
      that the  provisions set forth herein shall  thereafter be applicable,  as
      near as  reasonably  may be, in relation  to any shares or other  property
      thereafter  deliverable upon the exercise of the Warrant as if the Warrant
      had  been  exercised  immediately  prior to such  capital  reorganization,
      reclassification  of capital  stock,  such  consolidation,  merger,  sale,
      conveyance,  lease or other  transfer  and the Holder had  carried out the
      terms of the  exchange as  provided  for by such  capital  reorganization,
      consolidation or merger.

      5. Right to Call and Redeem.  The Corporation shall have the right, at any
time upon 30 days prior written notice, to call and redeem all or any portion of
this Warrant (in any such case, the "Call Right")  provided that (a) the closing
sale price of the Corporation's  Common Stock on the  Over-the-Counter  Bulletin
Board (or other market,  exchange or listing  service) remains at or above $1.25
per share (as appropriately  adjusted for stock splits,  stock dividends,  stock
combinations  or the  like) of  Common  Stock  for a period  of ten  consecutive
trading  days,  and (b) the resale of the Shares  issuable upon exercise of this
Warrant are covered by a  then-effective  registration  statement filed with the
SEC. The Corporation shall exercise the Call Right by delivering  written notice
to the Holder, indicating the Corporation's exercise of the Call Right described
herein.  Upon any  exercise  of the Call  Right,  the  purchase  price  for such
redemption  shall  equal  one-tenth  of One Cent  ($0.001)  per  Share  issuable
hereunder and redeemed pursuant to the Call Right.

                                       3
<PAGE>

      6. No Rights as  Shareholder.  This  Warrant  shall not entitle the Holder
hereof to any voting rights or other rights as a shareholder of the Corporation.

      7. Loss or  Mutilation.  Upon  receipt by the  Corporation  from Holder of
evidence reasonably  satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably  satisfactory
to the  Corporation,  and in case of mutilation upon surrender and  cancellation
hereof, the Corporation will execute and deliver in lieu hereof a new Warrant of
like tenor to Holder; provided,  however, in the case of mutilation no indemnity
shall be required if this Warrant in  identifiable  form is  surrendered  to the
Corporation for cancellation.

      8.  Governing  Law.  This  Warrant  shall be governed by and  construed in
accordance  with  the  laws  of  the  State  of  Nevada  without  regard  to its
conflicts-of-law provisions.

      9.  Amendments  and  Waivers.  The  provisions  of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Corporation agrees in writing and
has obtained the written consent of the Holder.

      10.  Successors and Assigns.  All the terms and conditions of this Warrant
shall be binding upon and inure to the benefit of the permitted  successors  and
assigns of the Corporation and Holder.

      11.  Headings  and  References.  The  headings  of  this  Warrant  are for
convenience only and shall not affect the interpretation of this Warrant. Unless
the  context  indicates  otherwise,   all  references  herein  to  Sections  are
references to Sections of this Warrant.

      12. Notices.  All notices or  communications  hereunder,  except as herein
otherwise specifically provided, shall be in writing. Notices sent to the Holder
shall be mailed, hand delivered or faxed and confirmed to the Holder at his, her
or its  address  set forth in the  Corporation's  records.  Notices  sent to the
Corporation shall be mailed, hand delivered or faxed and confirmed to El Capitan
Precious Metals,  Inc., c/o Charles C. Mottley,  14301 North 87th Street,  Suite
216,  Scottsdale,  AZ 85260,  or to such other address as the Corporation or the
Holder shall notify the other as provided in this Section.

      13. Counterparts.   This warrant  may be  executed by the  Corporation and
attested to in counterparts.

                             Signature Page Follows

                                       4
<PAGE>

      IN WITNESS  WHEREOF,  the Corporation has caused this Warrant to be signed
by its duly authorized officer on the date first set forth above.

                                            EL CAPITAN PRECIOUS METALS, INC.:

                                            By:
                                                --------------------------------
                                                CHARLES C. MOTTLEY
                                                President

ATTEST:

By:
    -----------------------------------
     JAMES G. RICKETTS, Secretary

                      Signature Page - Warrant No. _______
<PAGE>

                                SUBSCRIPTION FORM

                  (To be signed only upon exercise of Warrant)

         THE UNDERSIGNED, the holder of the Warrant referenced below, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, _______________________________ shares of
common stock of El Capitan Precious Metals, Inc. (the "Shares") to which such
Warrant relates, herewith makes payment of $_____________________ therefor in
cash, certified check or bank draft, and hereby requests that a certificate
evidencing the Shares be delivered to _______________________________________,
the address of whom is set forth below the signature of the undersigned:

Dated:
        ----------------------         -----------------------------------------
                                       (Signature)

                                       -----------------------------------------
                                       (Printed Name)

                                       -----------------------------------------
                                       (Address)

                                       -----------------------------------------
                                       (Address)

Warrant No._________, dated ____________, 2005 (the "Warrant")
<PAGE>

                                 ASSIGNMENT FORM

             (To be signed only upon authorized transfer of Warrant)

      FOR VALUE RECEIVED,  the undersigned hereby sells, assigns,  transfers and
conveys unto  _________________________________  the right to purchase shares of
common stock of El Capitan Precious Metals,  Inc. (the  "Corporation")  to which
the    Warrant     referenced    below    relates,     and    hereby    appoints
_________________________________  as his, her or its attorney to transfer  said
right on the books of the  Corporation  with full power of  substitution  in the
premises.

Dated:
        ----------------------         -----------------------------------------
                                       (Signature)

                                       -----------------------------------------
                                       (Printed Name)

                                       -----------------------------------------
                                       (Address)

                                       -----------------------------------------
                                       (Address)

Warrant No._________, dated ____________, 2005 (the "Warrant")EXHIBIT 10.1
                               PURCHASE AGREEMENT

      THIS PURCHASE  AGREEMENT (the  "Agreement") is entered into as of the 28th
day of October,  2005, by and among El Capitan Precious  Metals,  Inc., a Nevada
corporation (the "Company"),  and Whitebox Intermarket Partners, L.P., a British
Virgin Islands limited partnership (the "Purchaser").

                                R E C I T A L S :

      WHEREAS,  in consideration  of $750,000,  the Company proposes to issue to
the  Purchaser,  and the  Purchaser  desires to  purchase,  a  $750,000  secured
convertible promissory note in the form attached as Exhibit A (the "Note") and a
warrant  in the form of  Exhibit B (the  "Warrant")  to  purchase  shares of the
Company's common stock, $0.001 par value (the "Common Stock"); and

      WHEREAS,  the Company  desires to grant to Purchaser  and it affiliates an
option to purchase an  additional  secured  convertible  promissory  note in the
aggregate  principal  amount of up to $550,000  ("Additional  Note" and together
with the Note, the "Notes") and an additional  warrant to purchase up to 366,667
shares of common stock ("Additional  Warrant" and together with the Warrant, the
"Warrants").

      NOW, THEREFORE,  in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:

SECTION 1. AGREEMENT TO SELL AND PURCHASE

      1.1  Authorization  of  Transactions.  On or prior to the  closing  of the
transactions  contemplated in this Agreement (the "First Closing"),  the Company
shall have  authorized the sale and issuance to the Purchaser of the Notes,  the
Warrants and the shares of Common Stock  issuable  upon  conversion of the Notes
and upon exercise of the Warrants (collectively, the "Shares").

      1.2  Sale  and  Purchase  at  First  Closing.  Subject  to the  terms  and
conditions hereof, at the First Closing,  the Company hereby agrees to issue and
sell to the  Purchaser,  and the Purchaser  agrees to purchase from the Company,
the Note and the Warrant for an aggregate purchase price of $750,000.

      1.3 Option to  Purchase  Additional  Note.  The Company  hereby  grants to
Purchaser and its affiliates an option (the "Option") to purchase the Additional
Note and the Additional Warrant at a second closing (the "Second Closing"),  for
an aggregate  purchase  price of $550,000.  The  Additional  Note and Additional
Warrant shall have  substantially  the same terms and provisions as those in the
Note and Warrant,  respectively.  To the fullest extent, the Additional Note and
Additional Warrant will be covered by the provisions of the Registration  Rights
Agreement (as defined below) and the Security  Agreement (as defined below). The
Purchaser may exercise all or a portion of the Option by giving  written  notice
(the "Option Notice") of its intention to exercise the Option on or prior to the
expiration date of the Option. The Option shall expire on April 28, 2006.

<PAGE>

SECTION 2. CLOSING, DELIVERY AND PAYMENT

      2.1 First Closing. The First Closing shall take place at 10:00 a.m. on the
date hereof at the offices of the Purchaser's  legal counsel,  Messerli & Kramer
P.A., in Minneapolis,  Minnesota,  or at such other time or place as the Company
and the Purchaser may mutually  agree (the "First Closing  Date").  At the First
Closing,  subject to the terms and  conditions  hereof,  the Company will issue,
sell and deliver to the Purchaser the Note and the Warrant,  against  payment of
the $750,000  purchase price by certified  check or wire transfer of immediately
available funds. At that time, the Company shall also execute and deliver to the
Purchaser the  Registration  Rights  Agreement in the form attached as Exhibit C
(the  "Registration  Rights  Agreement") and the Security  Agreement in the form
attached as Exhibit D (the "Security Agreement").

      2.2 Second Closing.  If the Purchase timely  exercises all or a portion of
the Option,  the Second  Closing shall take place at 10:00 a.m. on the date that
is  within  ten (10)  business  days  after  the  Option  Notice is given to the
Company.  The date on which the  Second  Closing  occurs is  referred  to as the
"Second  Closing  Date".  The closing of the  transactions  contemplated  at the
Second closing shall be conditioned  on each party  reconfirming  its respective
representations, warrants and agreements contained herein, the Company's payment
to Whitebox  Advisors,  LLC of a $7,500 cash  origination fee, and the Company's
counsel  providing a legal  opinion  covering  the matters  specified in Section
5.1(d). At the Second Closing,  subject to the terms and conditions  hereof, the
Company will issue,  sell and deliver to the Purchaser the  Additional  Note and
the Additional Warrant against payment by the Purchaser of the purchase price in
the  aggregate  amount of up to $550,000 by certified  check or wire transfer of
immediately available funds.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      The Company  hereby  represents  and  warrants to the  Purchaser as of the
First Closing Date, and agrees, as follows:

      3.1  Organization,  Good  Standing  and  Qualification.  The  Company is a
corporation duly organized, validly existing and in good standing under the laws
of the  State  of  Nevada.  The  Company's  only  active  subsidiaries  are  the
subsidiaries listed on Schedule 3.1 (the "Subsidiaries"). Except as indicated on
Schedule 3.1, each  Subsidiary is duly organized,  validly  existing and in good
standing under the laws of its jurisdiction of organization. Each of the Company
and the Subsidiaries has all requisite  corporate power and authority to own and
operate  its  respective  properties  and assets and to carry on its  respective
business as presented  conducted and as presently proposed to be conducted.  The
Company has all requisite  corporate  power and authority to execute and deliver
this Agreement,  the Notes, the Warrants,  the Registration Rights Agreement and
the Security Agreement (together,  the "Transaction  Documents"),  to pledge the
Company's  assets as  described  in the  Security  Agreement as security for the
Notes (the  "Collateral"),  to issue and sell the Shares upon  conversion of and
payment  on the Notes and upon  exercise  of the  Warrants  and to carry out the
provisions of the  Transaction  Documents.  The Company is duly qualified and is
authorized  to do  business  and is in good  standing  in each U.S.  and foreign
jurisdiction  in  which  the  nature  of its  respective  activities  and of its
respective   properties  (both  owned  and  leased)  makes  such   qualification
necessary,  except for those  jurisdictions  in which failure to be so qualified
would not have a materially adverse effect on the Company or its business, taken
as a whole.

                                       2
<PAGE>

      3.2 Capitalization.  The Company is authorized to issue 300,000,000 shares
of Common Stock,  par value $0.001 per share,  of which  70,313,980  shares were
issued and outstanding as of October 27, 2005, and 5,000,000 shares of preferred
stock,  par  value  $0.001  per  share,  of  which no  shares  were  issued  and
outstanding  as of October 27,  2005.  Except as set forth on Schedule 3.2 or in
the Company's  current,  quarterly,  annual and other periodic filings (the "SEC
Reports") with the U.S.  Securities and Exchange  Commission (the "Commission"),
the Company has no outstanding options,  warrants or other rights to acquire any
capital stock, or securities  convertible or  exchangeable  for capital stock or
for  securities  themselves   convertible  or  exchangeable  for  capital  stock
(together,  "Convertible Securities"). Except as set forth on Schedule 3.2 or in
the SEC Reports, the Company has no agreement or commitment to sell or issue any
shares of capital stock or Convertible  Securities.  All issued and  outstanding
shares of the Company's  capital stock (i) have been duly authorized and validly
issued,  (ii)  are  fully  paid  and  nonassessable,  (iii)  are  free  from any
preemptive  and  cumulative  voting  rights and (iv) were issued  pursuant to an
effective  registration statement filed with the Commission and applicable state
securities  authorities or pursuant to valid  exemptions under federal and state
securities  laws.  Except as set forth on Schedule 3.2, there are no outstanding
rights of first refusal or proxy or shareholder  agreements of any kind relating
to any of the Company's  securities to which the Company or any of its executive
officers  and  directors  is a party or as to which the  Company  otherwise  has
knowledge of. When issued in compliance with the provisions of the Notes and the
Warrants  (and upon  payment as  provided  by the  Warrant),  the Shares will be
validly issued,  fully paid and nonassessable,  and will be free of any liens or
encumbrances;  provided, however, that the Shares may be subject to restrictions
on transfer under state and/or federal securities laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed.

      3.3 Authorization;  Binding Obligations.  All corporate action on the part
of the Company,  its  officers,  directors  and  shareholders  necessary for the
authorization of the Transaction  Documents,  the performance of all obligations
of the Company hereunder and thereunder at the Closing,  including the pledge of
the Collateral as security for the Notes, and the authorization,  sale, issuance
and delivery of the Shares upon conversion of the Notes and upon exercise of the
Warrants,  has  been  taken.  The  Transaction  Documents,   when  executed  and
delivered,  will be valid and binding  obligations of the Company enforceable in
accordance  with their terms,  except (i) as limited by  applicable  bankruptcy,
insolvency,  reorganization,  moratorium  or other laws of  general  application
affecting enforcement of creditors' rights, (ii) according to general principles
of equity that restrict the availability of equitable  remedies and (iii) to the
extent  that  the  enforceability  of  the  indemnification  provisions  of  the
Registration Rights Agreement may be limited by applicable laws. The sale of the
Shares upon  exercise of the Warrants or upon  conversion of (or payment on) the
Notes is not and will not be subject to any preemptive rights or rights of first
refusal.

      3.4  Financial  Statements.  Except  as set  forth on  Schedule  3.4,  the
Company's  audited  consolidated  balance  sheet at  September  30, 2004 and the
audited  consolidated  statements of  operations,  cash flows and  stockholders'
deficit of the Company for the year ended September 30, 2004 and for the periods
from July 26, 2002 through September 30, 2004 (including the related notes), and
the  Company's  unaudited  consolidated  balance  sheet  at,  and the  unaudited
consolidated statements of operations and cash flows of the Company for the nine
months  ended  June 30,  2005 (all of the  foregoing  together,  the  "Financial
Statements,"  with June 30,  2005  being  the  "Latest  Statement  Date" and the
consolidated financial statements at and for the nine months ended June 30, 2005
being the "Latest  Financial  Statements"),  as  contained  in the SEC  Reports,
fairly present in all material  respects the consolidated  financial  condition,
results of operations and cash flows of the Company as of the  respective  dates
and  for  the  respective  periods  covered  thereby  (subject,  in the  case of
unaudited   consolidated   financial   statements,   to  normal  year-end  audit
adjustments)  and have been  prepared  in  accordance  with  generally  accepted
accounting principles in the United States applied on a consistent basis (except
as may be  indicated in the notes  thereto) and comply in all material  respects
with  applicable  accounting  requirements  and the rules and regulations of the
Commission.

                                       3
<PAGE>

      3.5  Liabilities.  Except as set forth on Schedule 3.5, the Company has no
material liabilities and, to the best of its knowledge,  the Company knows of no
material  contingent   liabilities,   not  disclosed  in  the  Latest  Financial
Statements or SEC Reports,  except current liabilities  incurred in the ordinary
course of business  subsequent to the Latest  Statement Date that have not been,
either in any individual case or in the aggregate, materially adverse.

      3.6  Certain  Agreements  and  Actions.  Except  as  disclosed  in the SEC
Reports,  the Company has not (i) declared or paid any dividends,  or authorized
or made any  distribution  upon or with  respect  to any  class or series of its
capital stock,  (ii) since the Latest Statement Date,  incurred any indebtedness
for money borrowed or any other material  liabilities out of the ordinary course
of business, (iii) made any loans or advances to any person, other than ordinary
advances  for  travel or  entertainment  expenses  or (iv)  sold,  exchanged  or
otherwise  disposed of any of its assets or rights,  other than in the  ordinary
course of business.

      3.7 Obligations of or to Related  Parties.  Except as disclosed in the SEC
Reports,  there  are no  obligations  of the  Company  to  officers,  directors,
shareholders,  employees or  consultants  of the  Company,  or to any members of
their  immediate  families  or other  affiliates,  other than (i) for payment of
salary for services rendered since the commencement of the Company's most recent
payroll period, (ii) reimbursement for expenses reasonably incurred on behalf of
the  Company  and (iii) for other  standard  employee  benefits  made  generally
available to all employees (including stock option agreements  outstanding under
any stock option plan approved by the Board of Directors of the Company). Except
as disclosed in the SEC Reports, none of the officers, directors,  shareholders,
employees  or  consultants  of the  Company,  or any members of their  immediate
families or other affiliates,  are indebted to the Company or have any direct or
indirect ownership interest in any firm,  corporation or other entity with which
the Company is affiliated or with which the Company has a business relationship,
or any firm, corporation or other entity that competes with the Company,  except
that such  officers,  directors,  shareholders,  employees  or  consultants,  or
members of their immediate families or other affiliates may own securities (with
beneficial ownership not exceeding 2%) in publicly traded companies that compete
with the Company. Except as disclosed in the SEC Reports, no officer,  director,
shareholder,  employee  or  consultant  of the  Company,  or,  to the  Company's
knowledge,  any member of their  immediate  families  or other  affiliates,  is,
directly or indirectly,  interested in or a party to any material  contract with
the  Company.  Except as  disclosed  in the SEC  Reports,  the  Company is not a
guarantor  or  indemnitor  of any  indebtedness  of any  other  person,  firm or
corporation.

                                       4
<PAGE>

      3.8 Changes.  Since the Latest  Statement Date, and except as disclosed in
the SEC Reports,  there has not been, to the Company's  knowledge,  any event or
condition of any  character  that,  either  individually  or  cumulatively,  has
materially and adversely affected the business, assets,  liabilities,  financial
condition, operations or prospects of the Company.

      3.9 Title to Properties and Assets;  Liens. Except as set forth in the SEC
Reports, the Company has good and marketable title to its properties and assets,
including the properties and assets reflected in the Latest Financial Statements
and mining  claims  rights  (whether  held  directly or through a joint  venture
interest),  and good title to its leasehold estates,  in each case subject to no
mortgage,  pledge,  lien,  lease,  encumbrance  or charge,  other than (i) those
resulting from taxes that have not yet become  delinquent,  (ii) minor liens and
encumbrances  that do not  materially  detract  from the  value of the  property
subject  thereto or  materially  impair the  operations of the Company and (iii)
those  that have  otherwise  arisen in the  ordinary  course  of  business.  All
facilities, machinery, equipment, fixtures and other properties owned, leased or
used  by the  Company  are in  good  operating  condition  and  repair  and  are
reasonably  fit and  usable  for the  purposes  for which  they are being  used,
reasonable wear and tear excepted.

      3.10 Patents and Trademarks.  Except as set forth in the SEC Reports,  the
Company owns or licenses all patents,  trademarks,  service marks,  trade names,
copyrights,   trade  secrets,  information  and  other  proprietary  rights  and
processes  necessary  for its  business as now  conducted  and as proposed to be
conducted,  without any known  infringement of the rights of others. The Company
is  not  aware  that  any of its  employees  is  obligated  under  any  contract
(including licenses, covenants or commitments of any nature) or other agreement,
or  subject  to any  judgment,  decree or order of any  court or  administrative
agency,  that would  interfere  with their  duties to the  Company or that would
conflict  with the Company's  business as proposed to be conducted.  None of the
execution or delivery of, or the  performance of the  transactions  contemplated
by, the  Transaction  Documents,  the pledge of the Collateral by the Company to
secure the Note,  the carrying on of the Company's  business by the employees of
the Company nor the conduct of the Company's business as currently  conducted or
proposed will  conflict  with or result in a breach of the terms,  conditions or
provisions  of, or  constitute  a  default  under,  any  contract,  covenant  or
instrument  under which any  employee  is now  obligated.  The Company  does not
believe it is or will be necessary to utilize any  inventions,  trade secrets or
proprietary  information of any of its employees made prior to their  employment
by the Company, except for inventions,  trade secrets or proprietary information
that have been assigned to the Company.

                                       5
<PAGE>

      3.11  Compliance  with Other  Instruments.  Except as disclosed in the SEC
Reports,  the Company is not in violation or default of any term of its Articles
of  Incorporation  or Bylaws,  or of any provision of any  mortgage,  indenture,
contract, agreement,  instrument or contract to which it is party or by which it
is bound or of any  judgment,  decree,  order,  writ or, to its  knowledge,  any
statute,  rule or regulation applicable to the Company that would materially and
adversely  affect  the  business,  assets,  liabilities,   financial  condition,
operations  or prospects of the Company.  The execution and delivery of, and the
performance  of and  compliance  with  the  transactions  contemplated  by,  the
Transaction  Documents,  and the issuance and sale of the Shares upon conversion
of or payment on the Notes or upon exercise of the  Warrants,  will not, with or
without  the  passage of time or giving of notice,  result in any such  material
violation,  or be in conflict  with or constitute a default under any such term,
or result in the creation of any mortgage,  pledge, lien,  encumbrance or charge
upon  any  of  the  properties  or  assets  of the  Company  or the  suspension,
revocation,  impairment,  forfeiture  or  nonrenewal  of  any  permit,  license,
authorization or approval applicable to the Company,  its business or operations
or any of its  assets or  properties,  except  for such  results  that would not
materially and adversely  affect the business,  assets,  liabilities,  financial
condition, operations or prospects of the Company.

      3.12  Litigation.  Except as  disclosed  in the SEC  Reports,  there is no
action,  suit,   proceeding  or  investigation  pending  or,  to  the  Company's
knowledge,  currently threatened against the Company that questions the validity
of this Agreement or the other  agreements  contemplated  hereby or the right of
the  Company  to  enter  into  any of  such  agreements,  or to  consummate  the
transactions  contemplated  hereby or thereby.  Except as  disclosed  in the SEC
Reports,  there is no  action,  suit,  proceeding  or  investigation  or, to the
Company's knowledge, currently threatened against the Company that might result,
either  individually or in the aggregate,  in any material adverse change in the
assets, condition,  affairs or prospects of the Company, financial or otherwise,
or any change in the current equity ownership of the Company, nor is the Company
aware that there is any basis for the foregoing. The foregoing includes, without
limitation,  actions  pending or threatened  (or any basis therefor known to the
Company)  involving the prior employment of any of the employees of the Company,
their use in  connection  with the  Company's  business  of any  information  or
techniques  allegedly  proprietary  to any of their  former  employers  or their
obligations  under any agreements with prior  employers.  Except as disclosed in
the SEC Reports,  the Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality.

      3.13 Tax Returns and Payments.  Except as set forth on Schedule 3.13 or in
the SEC Reports,  the Company has timely filed all tax returns  (federal,  state
and local)  required to be filed by it. All taxes shown to be due and payable on
such returns,  any assessments  imposed,  and, to the Company's  knowledge,  all
other taxes due and  payable by the  Company on or before the Closing  have been
paid or will be paid prior to the time they become  delinquent.  The Company has
not been advised (i) that any of its returns, federal, state or other, have been
or are  being  audited  as of the  date  hereof  or  (ii) of any  deficiency  in
assessment  or  proposed  judgment to its  federal,  state or other  taxes.  The
Company has no  knowledge  of any  liability  of any tax to be imposed  upon the
properties or assets of the Company as of the date of this Agreement that is not
adequately provided for.

                                       6
<PAGE>

      3.14 Employees.  The Company has no collective  bargaining agreements with
any of its employees. There is no labor union organizing activity pending or, to
the Company's knowledge,  threatened with respect to the Company.  Except as set
forth in the SEC Reports, no employee has any agreement or contract,  written or
verbal,  regarding his employment.  Except as disclosed in the SEC Reports,  the
Company  is not a  party  to or  bound  by any  currently  effective  employment
contract, deferred compensation arrangement,  bonus plan, incentive plan, profit
sharing  plan,  retirement  agreement  or other  employee  compensation  plan or
agreement.  To the  Company's  knowledge,  no employee of the  Company,  nor any
consultant with whom the Company has contracted, is in violation of any material
term of any employment contract,  proprietary information agreement or any other
agreement  relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and, to the Company's knowledge, the continued employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent  contractors,  will not result in any such  violation.  The
Company  has not  received  any  notice  alleging  that any such  violation  has
occurred. Except as disclosed in the SEC Reports, no employee of the Company has
been granted the right to continued employment by the Company or to any material
compensation  following  termination of employment with the Company. The Company
is not  aware  that  any  officer  or key  employee,  or that  any  group of key
employees,  intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any officer, key
employee or group of key employees.

      3.15 Registration  Rights.  Except as disclosed on Schedule 3.15 or in the
SEC  Reports or required  pursuant to the  Registration  Rights  Agreement,  the
Company is presently not under any  obligation,  and has not granted any rights,
to  register  (as  defined  in the  Registration  Rights  Agreement)  any of the
Company's  presently  outstanding  securities or any of its securities  that may
hereafter be issued.

      3.16  Compliance  with  Laws;  Permits.  Except  as  disclosed  in the SEC
Reports,  the  Company is not in  violation  of any  applicable  statute,  rule,
regulation,  order or restriction  of any domestic or foreign  government or any
instrumentality  or agency  thereof in respect of the conduct of its business or
the ownership of its properties that would  materially and adversely  affect the
business, assets, liabilities,  financial condition,  operations or prospects of
the  Company.  No  governmental  orders,  permissions,  consents,  approvals  or
authorizations  are required to be obtained and no registrations or declarations
are required to be filed in  connection  with the execution and delivery of, and
the performance of the transactions  contemplated by, the Transaction Documents,
the pledge of the  Collateral  to secure the Notes or the issuance of the Shares
upon conversion of the Notes,  payment on the Notes or exercise of the Warrants,
except such as has been duly and validly  obtained or filed,  or with respect to
any filings  that must be made after the  Closing,  as will be filed in a timely
manner.  The  Company  has all  franchises,  permits,  licenses  and any similar
authority  necessary  for the conduct of its business as now being  conducted by
it, the lack of which  could  materially  and  adversely  affect  the  business,
properties,  prospects  or  financial  condition  of the Company and the Company
believes it can (and  covenants  to  Purchaser  that it will) obtain any similar
authority for the conduct of its business as planned to be conducted.

      3.17  Environmental  and  Safety  Laws.  Except  as  disclosed  in the SEC
Reports,  to the  Company's  knowledge,  the Company is not in  violation of any
applicable   statute,   law  or  regulation   relating  to  the  environment  or
occupational  health and safety,  and to the  Company's  knowledge,  no material
expenditures  are or will be required in order to comply with any such  existing
statute,  law or  regulation.  Without  limiting  the  foregoing,  and except as
disclosed in the SEC Reports:

                                       7
<PAGE>

      (a) with respect to any real property owned,  leased or otherwise utilized
by the Company ("Real Property"), the Company is not or has not in the past been
in violation of any Hazardous  Substance Law which violation could reasonably be
expected to result in a material  liability to the Company or its properties and
assets;

      (b) the Company nor, to the knowledge of the Company,  any third party has
used, Released, generated,  manufactured,  produced or stored, in, on, under, or
about any Real  Property,  or  transported  thereto or therefrom,  any Hazardous
Substances that could  reasonably be expected to subject the Company to material
liability, under any Hazardous Substance Law;

      (c) to the  knowledge  of the  Company,  there are no  underground  tanks,
whether  operative or  temporarily or  permanently  closed,  located on any Real
Property  that could  reasonably  be expected to subject the Company to material
liability under any Hazardous Substance Law;

      (d) there are no Hazardous  Substances used,  stored or present at, or on,
or to the knowledge of the Company that could  reasonably be expected to migrate
onto any Real Property, except in compliance with Hazardous Substance Laws; and

      (e) to the  knowledge  of the Company,  there  neither is nor has been any
condition,  circumstance,  action,  activity or event that could  reasonably  be
expected to be a material  violation by the Company of any  Hazardous  Substance
Law, or to result in liability to the Company under any Hazardous Substance Law.

      For purposes hereof,  "Hazardous Substances" means (statutory acronyms and
abbreviations  having  the  meaning  given  them  in  the  definition  below  of
"Hazardous  Substances  Laws")  substances  defined as  "hazardous  substances,"
"pollutants" or  "contaminants"  in Section 101 of the CERCLA;  those substances
defined as "hazardous waste," "hazardous materials" or "regulated substances" by
the RCRA; those  substances  designated as a "hazardous  substance"  pursuant to
Section 311 of the CWA;  those  substances  defined as "hazardous  materials" in
Section 103 of the HMTA;  those  substances  regulated  as a hazardous  chemical
substance or mixture or as an imminently hazardous chemical substance or mixture
pursuant  to  Sections  6  or  7  of  the  TSCA;  those  substances  defined  as
"contaminants"  by Section 1401 of the SDWA, if present in excess of permissible
levels;  those  substances  regulated by the Oil Pollution Act; those substances
defined as a pesticide  pursuant to Section 2(u) of the FIFRA;  those substances
defined as a source, special nuclear or by-product material by Section 11 of the
AEA; those substances defined as "residual  radioactive material" by Section 101
of the  UMTRCA;  those  substances  defined  as "toxic  materials"  or  "harmful
physical agents" pursuant to Section 6 of the OSHA; those substances  defined as
hazardous wastes in 40 C.F.R. Part 261.3;  those substances defined as hazardous
waste constituents in 40 C.F.R. Part 260.10, specifically including Appendix VII
and VIII of Subpart D of 40 C.F.R.  Part 261;  those  substances  designated  as
hazardous  substances  in 40 C.F.R.  Parts  116.4 and  302.4;  those  substances
defined as hazardous  substances or hazardous materials in 49 C.F.R. Part 171.8;
those substances  regulated as hazardous  materials,  hazardous  substances,  or
toxic  substances  in 40  C.F.R.  Part  1910;  any  chemical,  material,  toxin,
pollutant,  or waste regulated by or in any other Hazardous Substances Laws; and
in the regulations adopted and publications  promulgated  pursuant to said laws,
whether or not such  regulations or  publications  are  specifically  referenced
herein.

                                       8
<PAGE>

      "Hazardous Substances Law" means any of:

      (i)   the  Comprehensive   Environmental   Response,   Compensation,   and
            Liability Act of 1980,  as amended (42 U.S.C.  Section 9601 et seq.)
            ("CERCLA");

      (ii)  the Federal Water Pollution  Control Act (33 U.S.C.  Section 1251 et
            seq.) ("Clean Water Act" or "CWA");

      (iii) the Solid Waste Disposal Act, as amended (42 U.S.C.  Section 6901 et
            seq.) ("RCRA");

      (iv)  the  Atomic  Energy  Act of 1954 (42  U.S.C.  Section  2011 et seq.)
            ("AEA");

      (v)   the Clean Air Act (42 U.S.C. Section 7401 et seq.) ("CAA");

      (vi)  the Emergency  Planning and  Community  Right to Know Act (42 U.S.C.
            Section 11001 et seq.) ("EPCRA");

      (vii) the Federal  Insecticide,  Fungicide,  and Rodenticide Act (7 U.S.C.
            Section 136 et seq.) ("FIFRA");

      (viii) the Oil Pollution Act of 1990 (33 U.S.C.A. Section 2701 et seq.);

      (ix)  the  Safe  Drinking  Water  Act (42  U.S.C.  Sections  300f et seq.)
            ("SDWA");

      (x)   the Surface  Mining Control and  Reclamation  Act of 1974 (30 U.S.C.
            Sections 1201 et seq.) ("SMCRA");

      (xi)  the Toxic  Substances  Control Act (15 U.S.C.  Section 2601 et seq.)
            ("TSCA");

      (xii) the Hazardous Materials  Transportation Act (49 U.S.C.  Section 5101
            et seq.) ("HMTA");

      (xiii) the Uranium Mill Tailings  Radiation Control Act of 1978 (42 U.S.C.
            Section 7901 et seq.) ("UMTRCA");

      (xiv) the  Occupational  Safety and Health Act (29 U.S.C.  Section  651 et
            seq.) ("OSHA"); and

      (xv)  all other federal,  state and local  governmental rules which govern
            Hazardous  Substances,  and the regulations adopted and publications
            promulgated pursuant to all such foregoing laws.

                                       9
<PAGE>

      3.18   Private   Offering.   Assuming   the  truth  and  accuracy  of  the
representations  and  warranties  of the  Purchaser  contained in Section 4, the
offer,  sale and issuance of the Note and the Warrant  (and the Shares  issuable
upon  conversion  of, or payment on, the Note or upon  exercise of the  Warrant)
will be exempt from the registration requirements of the Securities Act of 1933,
as amended (the  "Securities  Act"),  and will have been registered or qualified
(or are exempt from  registration  and  qualification)  under the  registration,
permit or qualification requirements of the State of Minnesota.

      3.19  Full  Disclosure.  None  of the  Transaction  Documents  nor the SEC
Reports  contain any untrue  statement of a material  fact nor, to the Company's
knowledge and belief,  omit to state a material fact  necessary in order to make
the statements  contained  herein or therein not misleading.  There are no facts
that  (individually  or  in  the  aggregate)  materially  adversely  affect  the
business, assets, liabilities,  financial condition or operations of the Company
that have not been set forth in the Transaction Documents, the SEC Reports or in
other  documents  delivered  to the  Purchaser  or its  attorneys  or  agents in
connection herewith.

      3.20 Insurance.  The Company has fire and casualty insurance policies with
coverage customary for companies similarly situated to the Company.

      3.21  Investment  Company  Act.  The Company is not,  and will not use the
proceeds from the Notes in a manner so as to become, an "investment company," or
a company  "controlled"  by an "investment  company,"  within the meaning of the
Investment Company Act of 1940, as amended.

      3.22  Security  Interest  in  Collateral.  Except for a priority  security
interest in 1,000,000 shares of U.S. Canadian  Minerals,  Inc. ("UCAD") in favor
of a third party as disclosed in the SEC Reports (the "UCAD Security Interest"),
the  Company  owns  the  Collateral  free  and  clear  of all  claims,  liens or
encumbrances of any kind. Upon  consummation of the transactions as contemplated
hereby,  the  Purchaser  will have a first  priority  security  interest  in the
Collateral,  except for the UCAD Security  Interest.  The Purchaser shall have a
secondary  security  interest in the  1,000,000  shares of UCAD  pledged to such
third party.

      3.23 NASDAQ Compliance.  The Company's Common Stock is registered pursuant
to  Section  12(g) of the  Securities  Exchange  Act of 1934,  as  amended  (the
"Exchange  Act"),  and  is  listed  on  the   Over-the-Counter   Bulletin  Board
administered  by The Nasdaq Stock Market,  Inc. (the  "OTCBB").  The Company has
taken  no  action  designed  to,  or  likely  to have  the  effect  of,  and the
transactions  contemplated  by this  Agreement  will  not have  the  effect  of,
terminating  the  registration  of the Common  Stock under the  Exchange  Act or
de-listing of the Common Stock from the OTCBB.  The Company has not received any
notification  that  the  Commission,  the  National  Association  of  Securities
Dealers,  Inc., the OTCBB or any other  self-regulatory  organizational  body is
contemplating  terminating  such  registration or listing.  Without limiting the
foregoing,  the Transaction Documents and the transactions  contemplated by them
require no shareholder approval under the rules or interpretations of the OTCBB.

                                       10
<PAGE>

      3.24  Reporting  Status.  The  Company  has filed in a timely  manner  all
documents  that the Company was  required to file under the  Exchange Act during
the 12 months preceding the date of this Agreement.  The SEC Reports complied in
all material respects with the applicable  requirements of the Securities Act or
the Exchange Act, as the case may be, and the applicable  rules and  regulations
promulgated  thereunder as of their respective filing dates, and the information
contained  therein as of the date thereof did not contain an untrue statement of
a material fact or omit to state a material  fact required to be stated  therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.  The Company maintains disclosure controls
and procedures  required by Rule 13a-15 under the Exchange Act and such controls
and procedures are effective to ensure that all material information  concerning
the Company is made known on a timely basis to the  individuals  responsible for
the  preparation  of the Company's  filings with the Commission and other public
disclosure  documents.  As  of  the  date  hereof,  the  Company  satisfies  the
eligibility requirements for the use of Form SB-2 under the Securities Act.

      3.25  No  Manipulation  of  Stock.  Neither  the  Company,  nor any of its
directors,  officers or controlling  persons, has taken or will, in violation of
applicable  law,  take,  any  action  designed  to or that might  reasonably  be
expected  to cause or  result  in, or which has  constituted,  stabilization  or
manipulation  of the price of the Common Stock to facilitate  the sale or resale
of the  securities  issued  or  issuable  in  connection  with the  transactions
contemplated hereunder.

      3.26 Foreign Corrupt Practices; Sarbanes-Oxley.

      (a) Neither the Company, nor to the knowledge of the Company, any agent or
other person  acting on behalf of the Company,  has (i) directly or  indirectly,
used any corrupt funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political  activity,  (ii) made
any unlawful payment to foreign or domestic government officials or employees or
to any foreign or domestic  political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution  made by the Company (or made by
any  person  acting on its  behalf of which the  Company  is aware)  which is in
violation of law, or (iv) violated in any material  respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.

      (b) The  Company  is in  compliance  in all  material  respects  with  all
provisions  of  the  Sarbanes-Oxley  Act  of  2002  (and  related  rules  of the
Commission) that are applicable to it as of the Closing Date.

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

      The  Purchaser  hereby  represents  and  warrants to the Company as of the
First Closing Date, and agrees, as follows:

      4.1  Authorization.  The  Purchaser  has full power and authority to enter
into  this  Agreement  and each of the  Transaction  Documents,  and  each  such
agreement,  when executed and delivered by the  Purchaser,  will  constitute the
valid and binding obligation of the Purchaser enforceable in accordance with its
terms,   except   (i)  as   limited  by   applicable   bankruptcy,   insolvency,
reorganization,  moratorium  or  other  laws of  general  application  affecting
enforcement of creditors' rights, (ii) according to general principles of equity
that  restrict the  availability  of equitable  remedies and (iii) to the extent
that the  enforceability of the  indemnification  provisions of the Registration
Rights Agreement may be limited by applicable laws.

                                       11
<PAGE>

      4.2 Investment Representations. The Purchaser understands that neither the
offer nor the sale of the Note,  the  Warrant or the Shares has been  registered
under the  Securities  Act. The  Purchaser  also  understands  that the Note and
Warrant are being  offered and sold pursuant to an exemption  from  registration
contained   in  the   Securities   Act  based  in  part  upon  the   Purchaser's
representations  contained in the Agreement. The Purchaser hereby represents and
warrants as follows:

      (a)  Purchaser   Bears  Economic  Risk.  The  Purchaser  has   substantial
experience in  evaluating  and investing in private  placement  transactions  of
securities  in  companies  similar  to the  Company  so  that it is  capable  of
evaluating  the merits and risks of its  investment  in the  Company and has the
capacity to protect its own interests. The Purchaser must bear the economic risk
of this investment  indefinitely  unless the Note or Warrant (or the Shares) are
registered  pursuant to the Securities Act, or an exemption from registration is
available.  Except as contemplated by the  Registration  Rights  Agreement,  the
Purchaser  has no present  intention  of selling or otherwise  transferring  the
Note,  the Warrant or the Shares,  or any interest  therein.  The Purchaser also
understands  that there is no assurance  that any  exemption  from  registration
under the  Securities  Act will be available and that,  even if available,  such
exemption  may not allow the  Purchaser  to  transfer  all or any portion of the
Note,  the Warrant or the Shares under the  circumstances,  in the amounts or at
the times the Purchaser might propose.

      (b)   Acquisition   for  Own  Account.   Except  as  contemplated  by  the
Registration Rights Agreement,  the Purchaser is acquiring the Note, the Warrant
and the Shares for the Purchaser's own account for investment only, and not with
a view towards their public distribution.

      (c) Purchaser Can Protect Its Interest.  The Purchaser  represents that by
reason of its, or of its  management's,  business or financial  experience,  the
Purchaser has the capacity to protect its own  interests in connection  with the
transactions  contemplated  in this  Agreement,  the Note,  the  Warrant and the
Registration Rights Agreement. Further, the Purchaser is aware of no publication
of any  advertisement  in connection with the  transactions  contemplated in the
Agreement.

      (d) Accredited Investor. The Purchaser represents that it is an accredited
investor within the meaning of Regulation D of the Securities Act.

      (e) Residence.  The Purchaser  represents  that it is organized  under the
laws of the British Virgin  Islands and that its principal  office is located in
the State of Minnesota.

      (f) Rule 144.  The  Purchaser  acknowledges  and agrees  that the Note and
Warrant,  and, if issued, the Shares,  must be held indefinitely unless they are
subsequently  registered  under the  Securities  Act or an  exemption  from such
registration  is  available.  The  Purchaser has been advised or is aware of the
provisions  of Rule 144  promulgated  under the  Securities  Act,  which permits
limited  resale  of  shares  purchased  in a private  placement  subject  to the
satisfaction  of  certain  conditions,   including,   among  other  things:  the
availability of certain current public information about the Company, the resale
occurring  not less than one year after a party has  purchased  and paid for the
security  to  be  sold,  the  sale  being  through  an   unsolicited   "broker's
transaction"  or in  transactions  directly with a market maker (as such term is
defined  under the Exchange  Act) and the number of shares being sold during any
three-month period not exceeding specified limitations.

                                       12
<PAGE>

      4.3 Transfer Restrictions.  The Purchaser acknowledges and agrees that the
Note and Warrant  and, if issued,  the Shares,  are subject to  restrictions  on
transfer and will bear restrictive legends.

      4.4 Material Non-Public  Information.  The Purchaser  acknowledges that it
may  have  received  from  a  consultant  to  the  Company  material  non-public
information  relating to the Company and its business  and hereby  agrees not to
transact in the  purchase  or sale of the  Company's  securities  with any third
party until  November 4, 2005, by which time such  information  will be publicly
disclosed by the Company; provided that, in the event the Company discloses such
information  prior to November 4, 2005, this  representation  and warranty shall
terminate at such time.

SECTION 5. CONDITIONS FOR CLOSING

      5.1 Conditions for the Company to Satisfy at First Closing. The obligation
of the  Purchaser  to  purchase  the Note and  Warrant as  contemplated  by this
Agreement is subject to satisfaction of the following  contingencies at or prior
to the First Closing:

      (a) The Company shall have obtained all third party  consents  required in
connection  herewith,  including  consents  to  pledge  the  Collateral  to  the
Purchaser as security for the Note.

      (b) The Company  shall have  executed and  delivered to the  Purchaser the
Note, the Warrant, the Registration Rights Agreement and the Security Agreement,
including all stock  certificates  evidencing the stock pledged to the Purchaser
pursuant to the Security Agreement, together with duly executed in blank undated
stock powers attached thereto.

      (c) The Company  shall have paid  Whitebox  Advisors,  LLC a $22,500  cash
origination fee related to the  transactions  contemplated  hereby.  The Company
shall pay an additional  $7,500 cash  origination fee if the Purchaser elects to
acquire the Additional Note and Additional Warrant.

      (d) Maslon  Edelman  Borman & Brand,  LLP,  legal  counsel to the Company,
shall have  delivered an opinion to the Purchaser  with respect to the following
matters (which opinion may contain customary exclusions and limitations that are
reasonably acceptable to counsel for Purchaser):

            (i)   The Company is a corporation duly organized,  validly existing
                  and in good standing under the laws of the State of Nevada. To
                  such firm's knowledge, the Subsidiaries are the only operating
                  subsidiaries   of  the  Company.   Each   Subsidiary  is  duly
                  organized,  validly  existing and in good  standing  under the
                  laws of its jurisdiction of organization.  Each of the Company
                  and the  Subsidiaries  has all requisite  corporate  power and
                  authority  to own and operate its  respective  properties  and
                  assets and to carry on its  respective  business as  presently
                  conducted  and as  presently  proposed  to be  conducted.  The
                  Company has all  requisite  corporate  power and  authority to
                  execute and deliver the Transaction  Documents,  to pledge the
                  Collateral  as security  for the Notes,  to issue and sell the
                  Shares,  and to carry out the  provisions  of the  Transaction
                  Documents.  Each of the Company and the  Subsidiaries  is duly
                  qualified  and is  authorized  to do  business  and is in good
                  standing in each U.S.  and foreign  jurisdiction  in which the
                  nature  of its  respective  activities  and of its  respective
                  properties  (both owned and leased)  makes such  qualification
                  necessary,  except for those jurisdictions in which failure to
                  be so qualified would not have a materially  adverse effect on
                  the Company or its business, taken as a whole.

                                       13
<PAGE>

            (ii)  The  Company  is  authorized  to issue  300,000,000  shares of
                  Common  Stock,  par value $0.001 per share,  of which,  to the
                  firm's   knowledge,   70,313,980   shares   were   issued  and
                  outstanding  as of October 27, 2005,  and 5,000,000  shares of
                  Preferred  Stock, par value $0.001 per share, of which, to the
                  firm's knowledge,  no shares were issued and outstanding as of
                  October 27, 2005. To the firm's knowledge,  the Company has no
                  outstanding   Convertible   Securities  or  any  agreement  or
                  commitment  to sell or issue any  shares of  capital  stock or
                  Convertible Securities,  except as described in the Agreement.
                  All issued and  outstanding  shares of the  Company's  capital
                  stock (a) have been duly  authorized and validly  issued,  (b)
                  are  fully  paid  and  nonassessable,  (c) are  free  from any
                  preemptive  and  cumulative  voting rights and (d) were issued
                  pursuant to an effective registration statement filed with the
                  Commission  and  applicable  state  securities  authorities or
                  pursuant  to  valid   exemptions   under   federal  and  state
                  securities  laws.  To  the  firm's  knowledge,  there  are  no
                  outstanding  rights of first  refusal or proxy or  shareholder
                  agreements  of any  kind  relating  to  any  of the  Company's
                  securities  to  which  the  Company  or any  of its  executive
                  officers and  directors is a party.  When issued in compliance
                  with the  provisions  of the Note and the  Warrant  (and  upon
                  payment  as  provided  by the  Warrant),  the  Shares  will be
                  validly issued, fully paid and nonassessable, and will be free
                  of any  liens or  encumbrances;  provided,  however,  that the
                  Shares may be subject to  restrictions on transfer under state
                  and/or  federal  securities  laws as set  forth  herein  or as
                  otherwise  required  by such  laws at the time a  transfer  is
                  proposed.

            (iii) All corporate action on the part of the Company, its officers,
                  directors and shareholders  necessary for the authorization of
                  the Transaction Documents,  the performance of all obligations
                  of the Company under the Transaction Documents at the Closing,
                  including  the pledge of the  Collateral  as security  for the
                  Notes, and the authorization,  sale,  issuance and delivery of
                  the Shares upon  conversion  of the Notes or upon  exercise of
                  the Warrants has been taken. The Transaction  Documents,  when
                  executed and delivered,  will be valid and binding obligations
                  of the Company  enforceable  in  accordance  with their terms,
                  except (a) as limited by  applicable  bankruptcy,  insolvency,
                  reorganization,   moratorium   or   other   laws  of   general
                  application  affecting  enforcement of creditors'  rights, (b)
                  according to general  principles  of equity that  restrict the
                  availability of equitable remedies; and (c) to the extent that
                  the  enforceability of the  indemnification  provisions of the
                  Registration  Rights  Agreement  may be limited by  applicable
                  laws.  The sale of the Shares upon  exercise of the Warrant or
                  upon  conversion  of (or  payment on) the Note is not and will
                  not be  subject  to any  preemptive  rights or rights of first
                  refusal.

                                       14
<PAGE>

            (iv)  The execution and delivery to the Purchaser of the Transaction
                  Documents  does not violate or  constitute a default under the
                  Articles  of  Incorporation  or  Bylaws,  as  amended,  of the
                  Company,  or under any  agreement  known to such firm to which
                  the  Company or the  Subsidiary  is a party or by which any of
                  their respective properties or assets are bound.

            (v)   To such  firm's  knowledge,  except  as  disclosed  in the SEC
                  Reports, there is no action, suit, proceeding or investigation
                  pending or currently threatened against the Company, including
                  any that  questions the validity of the Agreement or the other
                  agreements contemplated thereby or the right of the Company to
                  enter  into  any of  such  agreements,  or to  consummate  the
                  transactions  contemplated  thereby. To such firm's knowledge,
                  except as disclosed  in the SEC  Reports,  there is no action,
                  suit,   proceeding  or   investigation   or,  to  such  firm's
                  knowledge, currently threatened against the Company that might
                  result,  either  individually  or in  the  aggregate,  in  any
                  material adverse change in the assets,  condition,  affairs or
                  prospects  of the  Company,  financial  or  otherwise,  or any
                  change in the current equity ownership of the Company,  nor is
                  such firm aware that there is any basis for the foregoing.  To
                  such  firm's  knowledge,  and except as  disclosed  in the SEC
                  Reports,  the  Company  is  not a  party  or  subject  to  the
                  provisions of any order, writ, injunction,  judgment or decree
                  of any court or government agency or instrumentality.

            (vi)  Upon  tender of the funds by the  Purchaser  to the Company as
                  contemplated  by the  Agreement  and filing of a UCC Financing
                  Statement covering the Collateral,  a security interest in the
                  Collateral will attach in favor of the Purchaser.

SECTION 6. MISCELLANEOUS

      6.1  Governing  Law. This  Agreement  shall be governed by the laws of the
State of  Minnesota  as such laws are applied to  agreements  between  Minnesota
residents entered into and performed entirely in Minnesota.

                                       15
<PAGE>

      6.2 Survival.  The representations,  warranties,  covenants and agreements
made herein shall survive any investigation  made by the parties and the closing
of the transactions  contemplated  hereby.  All statements as to factual matters
contained in any  certificate or other  instrument  delivered by or on behalf of
the Company  pursuant  hereto in connection with the  transactions  contemplated
hereby  shall be deemed to be  representations  and  warranties  by the  Company
hereunder solely as of the date of such certificate or instrument.

      6.3 Successors and Assigns. Except as otherwise expressly provided herein,
the  provisions  hereof shall inure to the benefit of, and be binding upon,  the
successors,  assigns,  heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Notes, the Warrants or the Shares from time to time.

      6.4 Entire  Agreement.  The Transaction  Documents and the other documents
delivered  pursuant  hereto  constitute  the full and entire  understanding  and
agreement  between the parties with regard to the  subjects  hereof and no party
shall be  liable or bound to any  other in any  manner  by any  representations,
warranties, covenants and agreements except as specifically set forth herein and
therein.

      6.5 Severability. In case any provision of the Agreement shall be invalid,
illegal or  unenforceable,  the  validity,  legality and  enforceability  of the
remaining provisions shall not in any way be affected or impaired thereby.

      6.6 Amendment and Waiver.  This Agreement may be amended or modified,  and
any  provision  hereunder  may be waived,  only upon the written  consent of the
Company and the Purchaser.

      6.7 Notices.  All notices,  requests,  consents,  and other communications
hereunder  shall be made in writing  and shall be deemed  given (i) when made if
made by hand  delivery,  (ii) one  business  day after being  deposited  with an
overnight courier if made by courier guaranteeing  overnight delivery,  (iii) on
the date indicated on the notice of receipt if made by first-class  mail, return
receipt requested, or (iv) upon confirmation if made by telecopier, addressed as
follows:

      (a) if to the Company, at

          El Capitan Precious Metals, Inc.
          14301 North 87th Street
          Scottsdale, Arizona  85260
          Attention:  Charles C. Mottley, President and Chief Executive Officer
          Facsimile:  (480) 607-7193

          with a copy to:

          Maslon Edelman Borman & Brand, LLP
          90 South Seventh Street, Suite 3300
          Minneapolis, Minnesota  55402
          Attention:  William M. Mower, Esq.
          Facsimile:  (612) 642-8358

                                       16
<PAGE>

      (b) if to the Purchaser, in care of:

          Whitebox Advisors, LLC
          3033 Excelsior Boulevard, Suite 300
          Minneapolis, Minnesota  55416
          Attention:  Jonathan Wood, Chief Financial Officer
          Facsimile:  (612) 253-6151

          with a copy to:

          Messerli & Kramer P.A.
          150 South Fifth Street, Suite 1800
          Minneapolis, Minnesota  55402
          Attention:  Jeffrey C. Robbins, Esq.
          Facsimile:  (612) 672-3777.

      6.8  Indemnification  by the Company.  The Company agrees to indemnify and
hold the  Purchaser  harmless  against  any loss,  liability,  damage or expense
(including  reasonable  legal fees and costs)  that the  Purchaser  may  suffer,
sustain or become subject to as a result of or in connection  with the breach by
the  Company of any  representation,  warranty,  covenant  or  agreement  of the
Company contained in any of the Transaction Documents.

      6.9 Expenses.  At Closing,  the Company shall pay the Purchaser's counsel,
Messerli & Kramer P.A.,  $10,000 for its legal fees and expenses in representing
the  Purchaser in  connection  with the  transactions  contemplated  hereby.  In
addition,  the  Company  agrees  to pay  or  reimburse  the  Purchaser  for  its
reasonable  legal fees and  expenses  that it may incur after the date hereof in
connection with the granting of any waiver with respect to, the  modification of
any of the terms or provisions of, or the  enforcement of any of the Transaction
Documents.

      6.10 Post-Closing Covenant. For a period of 45 days after the date hereof,
the Company agrees to execute and deliver such other agreements,  instruments or
other  documents  to  Purchaser as may be necessary or requested by Purchaser to
obtain a first priority lien, mortgage or security interest in and to all of the
Collateral.

      6.11 Titles and Subtitles.  The titles of the sections and  subsections of
the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.

      6.12 Counterparts.  This Agreement may be delivered via facsimile or other
means of electronic communication,  and may be executed in counterparts, each of
which shall be an  original,  but all of which  together  shall  constitute  one
instrument.

                            [Signature page follows]

                                       17
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have executed and delivered this
Purchase Agreement as of the date first above written.

El Capitan Precious Metals, Inc.             Whitebox Intermarket Partners, L.P.

By /s/ Charles C. Mottley                    By /s/ Jonathan Wood
   ----------------------------------           -----------------------------
   Charles C. Mottley, President and
   Chief Executive Officer                   Its    CFO/Director
                                                -----------------------------

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