PURCHASE AGREEMENT

Exhibit 10.1

      PURCHASE AGREEMENT
AND ESCROW INSTRUCTIONS

between

H OPE M INING AND M ILLING C OMPANY

and

A URELIO R ESOURCES I NC .

May 15, 2006

5/17/2006

Table of Contents
Section	Heading	Page
1.	Definitions	1
2.	Sale	2
3.	Purchase Price	2
4.	Transfer of Title and Title Insurance	3
5.	Escrow Agent and Escrow	4
6.	Closing	4
7.	Conditions	4
8.	Seller’s Warranties	6
9.	Buyer’s Warranties	8
10.	Real Estate Commissions	9
11.	Default	9
12.	Resolution of Disputes	10
13.	Apportionment	10
14.	Risk of Loss	10
15.	Condemnation	10
16.	Section 1445 Affidavit	10
17.	1031 Exchange	11
18.	Royalty	11
19.	Force Majeure	11
20.	Representations and Assigns	11
21.	Singular to Include Plural	11
22.	Assignment	11
23.	Notice	12
24.	Additional Documents	12
25.	Entire Agreement	12
26.	Miscellaneous Provisions	12
27.	Attorney’s Fees	13
28.	Counterparts, Duplicate Originals and Facsimile Signatures	13
29.	Binding Effect	13
30.	Holidays	13
31.	Extension of Closing	13
32.	Document Size	13
33.	Arizona Law	13
34.	Time for Acceptance	13
35.	Counterparts	13
36.	Condemnation	13
37.	Vacant Land Disclosure Affidavit	14

 

Exhibit A	Legal Description of Subject Property
Exhibit B	Form of Promissory Note
Exhibit C	Form of Deed of Trust and Fixture Filing
Exhibit D	Form of Deed of Trust and Assignment of Rents
Exhibit E1	Copy of Existing Lease
Exhibit E2	Copy of Tenant’s Waiver of Right of First Refusal
Exhibit F	Deed of Net Smelter Returns Production Royalty
Exhibit G	Resolution of Disputes

 

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TOC - 2

PURCHASE AGREEMENT
AND ESCROW INSTRUCTIONS

THIS PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS (the “Agreement”) is entered into as of the _____day of May, 2006, by and between HOPE MINING AND MILLING COMPANY , an Arizona corporation (“Seller”), and AURELIO RESOURCES INC. , a Colorado corporation, as (“Buyer”).

RECITALS

WHEREAS, Seller is the owner of the Subject Property consisting of patented mining claims commonly known as Courtland Mines, located in Cochise County AZ with total acreage of approximately 545 acres, more or less, as described on Exhibit “A” attached hereto and by this reference incorporated herein, and any rights, water rights, privileges and appurtenances thereto, if any. Further, Seller desires to sell this Subject Property, including any mineral rights (the “Subject Property”).

A.	Buyer desires to purchase the Subject Property from Seller.
B.	The Buyer and Seller desire to enter into this Agreement to delineate their respective rights and obligations with respect to the purchase and sale of the Subject Property.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and for other good and valuable consideration, the parties agree as follows:

AGREEMENT

1. Definitions.

“Appurtenances” shall have the meaning described in Paragraph 2(A).

“Closing Date” shall have the meaning described in Paragraph 6.

“Deed of Trust and Fixture Filing” shall have the meaning described in Paragraph 3(D). “Deed of Trust and Assignment of Rents” shall have the meaning described in Paragraph 3(D). “Earnest Money” shall have the meaning described in Paragraph 3(A).

“Escrow Agent” and “Escrow Instructions” shall have the meanings described in Paragraph 5.

“Existing Lease” shall have the meaning described in Paragraph 7(E).

“Feasibility Date” shall be the last day of the Inspection Period. “Inspection Period” shall have the meaning described in Paragraph 7(B). “Lenders’ Title Policy” shall have the meaning described in Paragraph 4. “Opening of Escrow” shall have the meaning described in Paragraph 5. “Permitted Encumbrances” shall have the meaning described in Paragraph 4.

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“Promissory Note” shall have the meaning described in Paragraph 3(B).

“Purchase Price” is defined in Paragraph 3.

“Right of First Refusal” shall have the meaning described in Paragraph 7(E).

“Subject Property” shall have the meaning described in Exhibit “A”.

“Survey” shall have the meaning described in Paragraph 4.

“Tenant” shall have the meaning described in Paragraph 7(E).

“Title Company” shall have the meaning described in Paragraph 4.

“Title Commitment” shall have the meaning described in Paragraph 7(A).

“Title Documents” shall have the meaning described in Paragraph 7(A) and specifically including those records and files of Seller mentioned in the last paragraph of Paragraph 7.

“Water Rights” and “Water Rights Transfers” shall have the meanings described in Paragraph 4.

        2. Sale. Seller agrees to sell, transfer, convey, and assign to Buyer, and Buyer agrees to purchase and

accept from Seller, for the Purchase Price (as hereinafter defined), on and subject to the terms and conditions herein set forth, the following:

      A. That certain Subject Property generally known as Courtland Mine located in the County of Cochise, State of Arizona and more particularly described on Exhibit “A” attached hereto and incorporated herein by reference for all purposes (the “Subject Property”), together with all rights and interests appurtenant thereto and/or located thereon, including without limitation any and all water rights of any kind, grazing leases and patented and unpatented mining claims pertaining to or used in connection with the Subject Property (the “Appurtenances”), subject to any and all valid and existing covenants, conditions, easements, restrictions, and reservations of record as of the Effective Date (defined below), including, without limitation, any oil, gas or other minerals (except to the extent such have been retained or reserved by prior grantors or owners) on, in and under the Subject Property held by Seller; and

      B. All improvements and fixtures of any kind owned by Seller and attached to or used in connection with the ownership, maintenance, or operation of the Subject Property or improvements located thereon (collectively, the “Improvements”), together with all rights, title and interest appurtenant thereto. Seller shall deliver to Buyer a written schedule of the Improvements at least forty-five (45) days prior to the Closing.

The Improvements, Appurtenances and Subject Property are herein collectively called the “Property”. All of the Property shall be conveyed, assigned, and transferred to Buyer at Closing, free and clear of all liens, claims, easements, and encumbrances whatsoever, by, through or under Seller, except for the Permitted Encumbrances, as hereinafter defined.

      3. Purchase Price. The purchase price for the Subject Property shall be One Million, Two Hundred Thousand Dollars ($1,200,000.00) (“Purchase Price”), payable as follows:

      A. Earnest Money. The sum of Ten Thousand Dollars ($10,000.00) shall be deposited by Buyer with Escrow Agent (hereinafter defined) as Earnest Money (the “Earnest Money”) upon execution of this Agreement by both parties. The Earnest Money shall be in the form of cash, check or wire transfer, and shall be deposited by Escrow

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Agent in an interest bearing account. The Earnest Money shall be applied to the purchase price at Closing (as defined below). Upon Closing, interest earned on the Earnest Money shall be paid to Buyer. If this Agreement is terminated prior to the expiration of the Feasibility Date, the Earnest Money shall be refunded to Buyer. If this Agreement is terminated after the Inspection Period, the Earnest Money shall be nonrefundable to Buyer and shall be paid to Seller unless the termination is pursuant to a provision of this Agreement expressly providing for the payment of the Earnest Money to Buyer. Any fees owed to Escrow Agent in the event of a default and termination shall be the responsibility of the defaulting party.

B.   Balance of Purchase Price.   Buyer shall pay the balance of the purchase price at Closing as   follows:
		Down Payment:		Amount
	Earnest Money Deposit			$ 10,000.00
	Balance of Down Payment at closing			$ 240,000.00
	Total Down Payment			$250,000.00
	Balance Carried 6% straight line annual			$950,000.00
	interest - 4 year term (“Promissory Note”)
	Interest only payments during note term
	($57,000 per annum), payable in arrears
	each month with balloon payment at the
	end of year 4

 

The balance of Promissory Note may be prepaid in whole or in part without penalty. The balance of the Promissory Note shall become due and payable immediately upon the commencement of commercial production from the Property.

      C. Promissory Note . The Promissory Note shall be a non-recourse, purchase money, promissory note in favor of Seller in the form attached hereto as Exhibit B . Buyer shall execute and deliver the Promissory Note on the Closing Date.

      D. Deed of Trust . The Promissory Note shall be secured by a purchase money Deed of Trust and Assignment of Rents with Security Agreement and Fixture Filing (Financing Statement) on the Subject Property in one of the forms, or a combination of the two, attached hereto as Exhibits C and D (the “Deed of Trust and Fixture Filing (With Assignment of Rents and Security Agreement)” and “Deed of Trust and Assignment of Rents”, respectively). Buyer shall execute, acknowledge and deliver the Deed of Trust on the Closing Date.

      4. Transfer of Title and Title Insurance. Conveyance of the Subject Property at Closing shall be by Warranty Deed, subject to the encumbrances approved by Buyer under the provisions of Paragraph 6A prior to Closing (the “Permitted Encumbrances”). The Subject Property will be deeded at Closing. Seller shall cause to be prepared, at Seller’s expense, a standard owner’s policy of title insurance issued by Lawyers Title Agency (“Title Company”) insuring title to the Subject Property for the full amount of the purchase price in the name of Buyer or Buyer’s nominee, subject only to the Permitted Encumbrances. The owner’s policy will be issued effective as of the Closing Date. Without delaying the Closing, Buyer shall have the option to upgrade such policy to an ALTA extended owner’s policy. Seller shall provide Buyer an ALTA survey of the Property (the “Survey”) at Seller’s expense during the Inspection Period no later than sixty (60) days from opening of Escrow, provided, however, that Seller shall not be in default hereunder if the surveyor preparing the Survey shall require more than sixty (60) days from opening of Escrow to complete the Survey. The Feasibility Date shall be extended by the number of additional days the surveyor requires to complete the Survey. Seller shall pay the first One Thousand Dollars ($1,000.00) of the Survey; Buyer shall pay the

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balance of the cost of the Survey. The Survey shall be obtained through Arizona Land Surveyors or any other licensed Arizona surveyor. All amounts Buyer pays for the Survey shall be credited against and reduce the Purchase Price.

Buyer, at Buyer’s expense shall cause Escrow Agent to provide Seller with a standard coverage lender’s policy of title insurance (the “Lender’s Title Policy”) at the Closing. The Lender’s Title Policy shall be issued by the Title Company in the original principal amount of the Promissory Note, be effective as of the Closing Date, and shall insure Seller that the Deed of Trust is a first priority lien on the Subject Property subject only to: (i) the usual printed exceptions and exclusions contained in such title insurance policy; (ii) the exceptions contained in the title report or commitment issued as part of the Title Documents, as that term is defined in Paragraph 7(A); and (iii) any other matter approved in writing by Seller or resulting from the acts of Seller or Seller’s agents.

At the Closing, Seller shall also transfer all well registrations for wells located on the Subject Property, all rights to any unregistered wells located on the Subject Property, all grandfathered groundwater rights associated with, or used in connection with the operation of, the Subject Property, and all similar water rights belonging to the Seller and pertaining to the Subject Property (collectively, the “Water Rights”) by execution and delivery of transfer documents required to transfer such Water Rights on the records of the Arizona Department of Water Resources and in the Official Records of Pinal County, Arizona (collectively, the “Water Rights Transfers”). Payment of any filing fees in connection with the Water Rights Transfers shall be split between Seller and Buyer at Closing. Seller hereby advises Buyer that Seller does not have specific information regarding any Water Rights with respect to the Property and, accordingly, Buyer shall be solely responsible to obtain during the Inspection Period all documentation regarding any such Water Rights as well processing all transfer documentation required in order to transfer to Buyer any such Water Rights and to grant Seller at Closing a lien on any such Water Rights to secure Buyer’s Payment of the Promissory Note.

      5. Escrow Agent and Escrow. The Escrow Agent for Closing of this transaction shall be Lawyers Title Agency (Agent: Susan Kirk) (the “Escrow Agent”). The telephone number is 520-529-1544 and the fax number of the Escrow Agent is 520-202-6276. This Agreement shall constitute escrow instructions to the Escrow Agent. Buyer and Seller shall execute such additional reasonable escrow instructions as shall be consistent with this Agreement and reasonably required by Escrow Agent (the “Escrow Instructions”). The Escrow Instructions shall not supersede, modify or amend any of the terms of this Agreement, and in the event of any conflict or ambiguity between the terms of this Agreement and those of the Escrow Instructions, this Agreement shall take precedence. Escrow Agent shall open Escrow and sign and date the acceptance of the last page of this Agreement and the copies (the date of which shall be the “Opening of Escrow”); fill in the Escrow Number, Escrow Officer, Opening Date and Closing date and mail executed copies to the Buyer and Seller.

      6. Closing . Closing shall occur thirty (30) days after the Inspection Period expiration (the “Closing Date”), unless an extension of this Closing Date is agreed to by the parties. Closing means the date the deed to Buyer is recorded and shall occur at the office of the Escrow Agent.

      7. Conditions. Buyer’s obligations hereunder shall be subject to the following:

      A. Title Report . Seller shall use its best efforts to cause Escrow Agent to provide Buyer, at Buyer’s expense, a current standard coverage preliminary report of title, otherwise known as a commitment for title insurance or “Title Commitment” for the property, together with legible copies of all documents shown as exceptions in the report and a title commitment for a standard owner’s title insurance policy (collectively the “Title Documents”). Within fifteen (15) days after receipt of the last of the Title Documents, Buyer may disapprove the report by written notice to Escrow Agent and Seller specifying the matters shown in the report which are disapproved by Buyer. If Amendments to Title Commitments are issued, Buyer will have fifteen (15) days after receipt to review and object to any amendment, including any survey exception added to the title commitment. Any time taken relating to the objection and curing of title matters shall extend the Feasibility Date by the number of days of required for the objection and curing. Failure of Seller and Escrow Agent to receive written notice within fifteen (15) days of receipt of Buyer’s timely

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objections, shall be conclusively deemed to constitute Buyer’s approval of the report. Within fifteen (15) days of Buyer’s timely objections, Seller will provide Buyer with notice of Seller’s election either to attempt to cure the matter to which an objection has been raised or to do nothing. If Seller elects to attempt to cure the matter but is unable to do so on or before the fifteenth (15th) day before the last business day before the Closing, then Buyer may elect by written notice to Seller and Escrow Agent either (i) to waive the matter to which objection has been raised or (ii) to terminate this Agreement and Escrow and Seller shall reimburse and return to Buyer the Earnest Money. An absence of notice shall be deemed conclusively to be Buyer’s election to waive the matter to which objection has been raised. If the Seller elects to do nothing when Buyer has raised a timely objection, then Buyer shall within five (5) days of receipt of notice of such election notify Seller and Escrow Agent of its election to (i) waive the matter to which objection has been raised or (ii) to terminate this Agreement and Escrow. An absence of notice shall be deemed conclusively to be Buyer’s election to waive the matter to which objection has been raised. If this Agreement and Escrow are terminated because Seller has failed to cure a matter to which objection has been raised or has elected to do nothing, then Escrow Holder shall without further instructions from either party return the Buyer’s Earnest Money and any interest earned thereon.

      B. Conditions of Property.

      (i) Inspection Period. Buyer shall have Ninety Days (90) days following the Opening of Escrow (the “Inspection Period”) to inspect the Subject Property and to conduct such studies and investigations regarding feasibility, utilities, access, zoning, governmental approvals, public use, hazardous waste, the condition of the improvements and any other terms which it wishes to investigate or study. Buyer shall have the right to enter on the Subject Property at any reasonable time during this Inspection Period for the purpose of inspecting and/or surveying the Subject Property and for any other purpose related to this Agreement. All such inspections, investigations or studies shall be at the sole expense of Buyer. Buyer shall repair all damage caused by its investigations, studies and inspections and shall indemnify and hold Seller harmless from and against any and all losses, damages, costs or expenses incurred by Seller, resulting from such investigations, studies or inspections. Seller agrees to cooperate with Buyer during the Inspection Period and to furnish Buyer such documents, instruments and other information concerning the Subject Property as Buyer may, from time to time, reasonably request.

      C. Delivery of Documents . As soon as possible following the execution of this Agreement by both parties Seller shall deliver to Buyer, at Seller’s expense, for Buyer’s information only, the original or legible copies of each of the following documents relating to the Subject Property to the extent Seller has any such documents in Seller’s possession or control:

(i) All lease and occupancy agreements for the Subject Property, if any.

(ii) All documents in Seller’s possession concerning the nature, quality, quantity, scope or ownership of wells or water rights on or appurtenant to the Subject Property.

(iii) All documents in Seller’s possession concerning the zoning of the Subject Property.

(iv) All existing surveys, soils reports, production records, engineering studies, environmental audits or reports, any Phase I Environmental Study, or any similar types of information that are in Seller’s possession or control pertaining to the Subject Property.

(v) All existing environmental information relating to the Subject Property.

Buyer shall have the right to obtain from the local county assessor’s office copies of Subject Property valuation notices and tax statements.

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      D. Cancellation . If Buyer determines for any reason, in its sole and absolute discretion, that it does not desire to purchase the Subject Property, Buyer may elect at any time prior to the expiration of the Inspection Period to cancel this Agreement by written notice to Escrow Agent, in which case Escrow Agent shall refund to Buyer all Earnest Money plus any accrued interest, less Buyer’s share of the cost of the Survey. Upon cancellation the Escrow Agent shall also return to the respective parties any documents they deposited with the Escrow Agent and this Agreement shall then be deemed to be null and void; and neither party shall have any further obligation or liability under this Agreement except liabilities or obligations arising under the Indemnity provisions of this Agreement. In the event said written notice is not deposited by Buyer into Escrow on or before expiration of the Inspection Period then it will be presumed that Buyer has waived its right to cancel this Agreement under this paragraph.

      E. Existing Lease . The Subject Property is subject to that certain Lease Agreement dated May 20, 2005 (the “Existing Lease”) by and between Seller, as lessor, and Source Management, as lessee (the “Tenant”), a copy of which is attached hereto as Exhibit E1 . As set forth in Paragraph 14 of the Lease, the Tenant has a right of first refusal to purchase the Subject Property in accordance with the terms and conditions set forth in the Lease (the “Right of First Refusal”). In connection with a previous offer by a third-party to purchase the Subject Property, Seller sent Tenant the notice required to be sent pursuant to Paragraph 14 of the Lease, and Tenant declined to exercise its Right of First Refusal. Such waiver by Tenant is attached hereto as Exhibit E2. The term of the Existing Lease expires May 20, 2006.

      8. Seller’s Warranties . Seller warrants, represents and covenants that:

      A. Suits and Other Matters Affecting Property . As of the date of this Agreement and without independent investigation by Seller, Seller has received no notice of any claims, actions, suits or other proceedings (including, but not limited to, condemnation proceedings) pending or, to the knowledge of Seller, threatened that may adversely affect the Subject Property or Buyer’s right, title, use or interest in and to the Subject Property. Subject to the terms and provisions of the Existing Lease, the execution, delivery and performance of the Agreement will not result in a breach or constitute a default under the provisions of any other agreement or instrument by which the Subject Property is bound; result in a creation or imposition of a lien; result in a violation or breach by Seller of any judgment, order, writ, injunction or decree issued against or imposed upon Seller; or result in a violation of any applicable law, rule or regulation of any governmental authority. Other than the Tenant, there are no leases or rights of parties in possession.

      B. New Liens . Seller shall not cause or permit any new liability, lien, encumbrance or obligation to be placed or imposed upon all or any party of the Subject Property from the date hereof without Buyer’s prior written consent (excluding any lien for non-delinquent property taxes).

      C. Authority . Seller has full power and authority to enter into and perform this Agreement with its terms. The individual(s) executing this Agreement on behalf of Seller are authorized to do so and, upon their executing this Agreement, this Agreement shall be binding and enforceable upon Seller in accordance with its terms.

      D. Title . To the actual knowledge of Seller without independent investigation, Seller holds fee simple title to the Subject Property, subject only to the matters disclosed by the preliminary title report. Prior to the Closing Date, except as set forth in the Existing Lease, Seller will not sell, assign, transfer, lease or convey any right, title or interest whatsoever in and to the Subject Property. Seller has not received any notice that the Subject Property is currently or in the past, is or was in violation of any law, rule, ordinance or regulation, whether federal, state or local.

      E. Ownership . Seller holds and will convey at the Close of Escrow good and marketable fee simple title to the Subject Property.

      F. No Third Party Claims . The Subject Property is now and will be at the Close of Escrow free of all leases and other claims to possession by any third party, except for the matters set forth in the Title Report or disclosed in writing to Buyer by Seller.

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      G. No Conflict . With the exception of the Existing Lease, the execution, delivery, and performance by Seller of this Agreement and any other instruments and documents to be executed and delivered in connection with this Agreement by Seller do not, and will not, result in any violation of, or conflict with, or constitute a default under, the provisions of any mortgage, deed of trust, indenture, lease, security agreement, or other instrument or agreement or any law, regulation, rule, requirement, agreement, restriction, order, writ, decree, or judgment to which Seller or by which Seller is bound or to which Seller is subject.

      H. Environmental . Buyer is aware of the Subject Property’s history as a mining property. Buyer acknowledges that it shall be Buyer’s sole responsibility to satisfy itself regarding: (i) the scope and extent of mining-related activity on the Subject Property; (ii) the extent of environmental conditions, reclamation or remediation activity, if any, with respect thereto; (iii) the impact of such operations on the suitability of the Subject Property for Buyer’s intended purposes or any other purpose. Seller expressly disclaims any and all representations and warranties with respect to the suitability of the Subject Property for Buyer’s intended purposes. Other than the foregoing and without limiting the generality of the foregoing, Buyer acknowledges that Seller has not made and does not make any representation or warranty as to: (i) the value of the Subject Property or any part thereof; (ii) the physical or environmental condition of the Subject Property or any part thereof (including soils, geological conditions, the presence or absence of radioactive, petroleum-based, hazardous or toxic substances, and availability or quality of water); (iii) the sufficiency or suitability of the Subject Property for Buyer’s intended purposes or any purpose; (iv) the square footage, acreage or configuration of the Subject Property or any portion thereof; (v) the sufficiency or completeness of any plans for the Subject Property; (vi) zoning or land use controls affecting the Subject Property; (vii) the state of repair, including, but limited to, the structural integrity of any Improvements; (viii) the compliance of any improvements on the Subject Property or the compliance of any activities previously conducted thereon or therein with any federal, state or local laws, ordinances, regulations or requirements (including those relating to the sale of subdivided lands); (ix) the environmental status or condition of the Subject Property; and (x) the extent to which the Subject Property or Seller has complied with any permits or approvals.

      I. Leases and Unpatented Mining Claims . To Seller’s knowledge without independent investigation, no default exists (or would exist but for the giving of notice and the passage of time) under any grazing lease or unpatented mining claim pertaining to the Subject Property. Without Buyer’s written approval, which shall not unreasonably be withheld or delayed, Seller shall not terminate or permit to lapse any grazing lease or into any new grazing lease or other lease or agreement affection the Subject Property, except that Seller may renew or extend grazing leases and unpatented mining claims in the ordinary course of business consistent with past practice. Seller will provide Buyer with all documentation relating to any mines on the Subject Property within fifteen (15) days after Closing.

      J. Exceptions to Seller’s Warranties.

Except as set forth herein, Seller makes no warranty as to the following:

      (i) the physical condition or any other aspect of the Subject Property, including, but not limited to, the uses to which the Subject Property may be put, the ability to construct additional improvements or modify existing improvements on any portion of the Subject Property or the ability to obtain building permits for any portion of the Subject Property, the conformity of the Subject Property to past, current or future applicable landscaping, parking, zoning or building code requirements, the existence of soil instability, past soil repairs, soil additions or conditions of soil fill, susceptibility to landslides, sufficiency of undershoring, water retention characteristics of the Subject Property, drainage onto or off of the Subject Property, the location of the Subject Property either wholly or partially in a flood plain or a flood hazard boundary or similar area, or any other matter affecting the stability or integrity of the land or any improvements constituting the Subject Property; or

      (ii) the sufficiency of the Subject Property for Buyer’s purposes or as to its continued operating condition or usefulness. All implied warranties, including, without limitation, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE are hereby expressly disclaimed.

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The foregoing representations, warranties and covenants shall be true as of the date hereof and as of Close of Escrow and shall survive the Close of Escrow and delivery of the Deed for a period of one (1) year and then terminate, except that any claim for which legal action is filed and served within such time period shall survive until resolution of such action. All references in this paragraph to Seller’s knowledge shall mean the actual (and not imputed or constructive) knowledge of Nancy Fournier, without having made, or being under any duty to make any further investigation or inquiry with respect to such knowledge and without reviewing Seller’s files or records for purposes of making these representations. In no event shall Nancy Fournier have any personal liability or obligation hereunder and Buyer agrees not to attempt to assert any liability against Nancy Fournier personally by reason of any of the foregoing representations or warranties proving to be incorrect. If Buyer or Seller discovers that any of the foregoing representations or warranties is incorrect prior to Closing, the discovering party shall promptly give notice thereof to the other party. Any such incorrect representation or warranty (other than a knowing intentional misrepresentation or a change occurring by reason of an intentional wrongful act by Seller, which knowing intentional misrepresentation or intentional wrongful act shall constitute a default by Seller and the provisions of Paragraph 10(a) shall apply) shall be automatically amended to conform to the discovered information; and if such change is material, Buyer may elect to terminate this Agreement by sending written notice of termination to Seller and Escrow Agent within five (5) days following the date Buyer learned of such change, in which event Buyer shall be entitled to a refund of the Earnest Money; failure of Buyer to timely terminate shall be deemed to be an election to accept the change.

      9. Buyer’s Warranties . Buyer expressly represents and warrants as follows:

      A. Financial Ability . Buyer has, or has the ability to secure, the financial resources necessary to close this escrow and to satisfy the contingencies described herein.

      B. Authority . Buyer has full power and authority to enter into and perform this Agreement in accordance with its terms.

      C. Authorization . The individual executing this Agreement on behalf of Buyer is authorized to do so, and, upon execution, this Agreement shall be binding and enforceable upon Buyer. Buyer agrees that all of the representations and warranties contained in this paragraph will be true and correct as of the date of the Closing.

      D. Seller’s Representations and Warranties . Buyer agrees that the Subject Property shall be purchased with no representation or warranty being made by Seller of any type or nature, except as expressly stated in writing herein. Buyer acknowledges and agrees that it is purchasing the Subject Property upon the basis of its own investigation of the Subject Property and not solely on the basis of any representation, express or implied, written or oral, made by Seller or its agents or employees, except as set forth in writing herein.

      E. On the condition and subject to the decision of Buyer to proceed with the purchase of the Subject Property in accordance with this Agreement after its investigation and due diligence during the Inspection Period, Buyer acknowledges that consummation of this transaction shall constitute its acknowledgment that it has independently inspected and investigated the Subject Property and has made and entered into this Agreement based upon such inspection and investigation and its own examination of the condition of the Subject Property, and Seller is hereby released from all responsibility regarding the valuation or condition of the Subject Property.

      F. Buyer acknowledges that no person acting on behalf of Seller is authorized to make, and by execution hereof Buyer acknowledges that no person has made, any representation, warranty, guaranty or promise, whether oral or written, except as set forth in this Agreement, and any agreement, statement, representation or promise made by any person which is not contained in this Agreement may not be relied upon and shall not be valid or binding upon Seller. The only representations or warranties outstanding with respect to the subject matter of this transaction, either express or implied by law, are set forth in this Agreement. Consistent with the foregoing and not in limitation thereof, Seller shall not be responsible for any negligent misrepresentation or failure to investigate the Subject Property

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on the part of Seller, any real estate broker, sales agent or any other agent or employee of Seller or affiliate of Seller, or any third party.

      G. Buyer, on behalf of itself, its successors and assigns, hereby releases Seller, and its partners, employees, and agents from and against any and all liabilities, claims, demands, suits, judgments, causes of action (including, but not limited to, causes of action arising under the Comprehensive Environmental Response Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601 et . seq .), losses, costs, damages, injuries, penalties, enforcement actions, fines, taxes, remedial actions, removal and disposal costs, investigation and remediation costs and expenses (including, without limit, attorneys’ fees, litigation, arbitration and administrative proceeding costs, expert and consultant fees and laboratory costs), sums paid in settlement of claims, whether direct or indirect, known or unknown, arising out of, related in any way to, or resulting from or in connection with, in whole or in part, the presence or suspected presence of hazardous materials in, on, under, or about the Subject Property.

The foregoing representations, warranties and covenants shall be true as of the date hereof and as of Close of Escrow and shall survive the Closing until such time as the Promissory Note has been paid in full.

      10. Real Estate Commissions . Buyer and Seller each represent to the other that no real estate brokers or other parties have been involved in connection with this transaction and are “entitled to” a commission other than CB Richard Ellis (Andrew Brodkey) (“Seller’s Broker”), whose commission shall be paid by Seller pursuant to a separate agreement between Seller and Buyer. Buyer and Seller do each hereby agree to indemnify and hold the other harmless from and against any costs, expenses or liability for compensation, commissions or charges which may be claimed by any broker, finder or other similar party, by reason of any dealings or actions of the indemnifying party with anyone. The indemnities contained in this Paragraph 9 shall survive the Closing or the earlier cancellation or termination of this Agreement.

      11. Default .

      A. If Buyer learns prior to Closing of a failure by Seller to meet any of its obligations under this Agreement, Buyer’s exclusive remedies for such failure shall be to (i) terminate this Agreement and receive a refund of the Earnest Money, (ii) waive such failure and proceed with Closing, or (iii) institute an action for specific performance. Seller hereby acknowledges that the Subject Property is unique and that, accordingly, it would be equitable for any court of competent jurisdiction or arbitration board to order the specific performance by Seller of Seller’s obligations hereunder; however, Buyer shall have no right to seek specific performance unless such action or submission for arbitration is filed and served on Seller within ninety (90) days following Buyer’s knowledge of Seller’s breach. Buyer hereby specifically waives any right to seek monetary damages of any kind (including, but not limited to, consequential or punitive damages) for any default of Seller occurring and discovered prior to the Close of Escrow; provided, however, that if, as a result of a breach of this Agreement that is intentional or due to the gross negligence of Seller after the Opening of Escrow, specific performance shall not be available as a remedy to Buyer, but in either of those events, and in addition to the return of the Earnest Money to Buyer, Seller shall be liable to Buyer for all out-of-pocket costs and expenses incurred by Buyer in connection with the pursuit of the acquisition of the Subject Property pursuant to this Agreement.

      B. In the event Seller learns prior to Closing of a failure by Buyer to meet all of its obligations under this Agreement, Seller may, as its sole and exclusive remedy, either waive the default and proceed with Closing or terminate this Agreement and retain the Earnest Money as liquidated damages. In the event of any termination under this Paragraph 11(b), neither party shall have any further obligation or liability to the other in connection with the Escrow or under this Agreement. Buyer and Seller acknowledge that Seller’s actual damages for a breach of this Agreement by Buyer would be difficult to determine and that the Earnest Money deposited into Escrow represents a reasonable and good faith estimate of Seller’s damages in the event of a default by Buyer prior to the Closing.

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      C. Notwithstanding the provisions of subparagraphs (a) and (b) above, neither party shall take any action or remedy as a result of a breach by the other party hereto unless the non-breaching party first gives written notice to the other party, who shall have thirty (30) business days to cure the condition of default, or commence and diligently pursue activities if the breach cannot reasonably be cured within thirty (30) days. This section shall not apply to a failure by Buyer to take any action required for Closing or a failure by Buyer to pay or deposit any monies required to be paid or deposited under this Agreement.

      D. If Closing occurs, each party waives any claim for damages or other remedies based on a breach or default under this Agreement known to such party as of the Closing. Each party shall have all rights and remedies for defaults occurring or discovered after Closing if the defaulting party fails to cure within thirty (30) days after receipt of written notice; except that each party waives any right to seek rescission or any consequential or punitive damages for any breaches or defaults on the part of the other party.

      12. Resolution of Disputes. The parties agree that any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be resolved in accordance with the procedures described in Exhibit G, which is attached and by reference made part of this Agreement.

      13. Apportionment . All escrow fees charged by Escrow Agent shall be shared equally by Buyer and Seller. All recording fees and miscellaneous closing costs shall be paid by the parties in accordance with customary commercial real estate practices in the local area. All real estate taxes, special assessments, bonds, liens, and any and all personal property taxes due and owing as of the close of escrow, and all penalties and interest thereon, if any, shall be paid by Seller. Current real estate taxes, special assessments, bonds, liens, and personal property taxes which are not yet due and owing shall be prorated based upon the most recent tax bill, so that the portion of current taxes allocable to the period from the beginning of such tax year through the Proration Date shall be charged to and paid by Seller and the portion of the current taxes allocable to the portion of such tax year from the Proration Date to the end of such tax year shall be charged to and paid by Buyer. All terms typically apportioned in accordance with customary real estate practices shall be apportioned at the close of escrow as of 12:00 a.m. on the day of Closing (the “Adjustment Date”), including, but not limited to, the real estate taxes due and payable on the Subject Property.

      14. Risk of Loss . Seller shall bear the risk of loss during the term of this escrow and shall immediately notify Buyer of damage or destruction. Buyer shall then have the right, at Buyer’s option, to cancel this Agreement within seven (7) day after receipt of said notice. If Buyer terminates this Agreement, Buyer will receive a refund of the Earnest Money. If Buyer does not elect to cancel, Seller shall assign to Buyer all insurance proceeds and rights to insurance proceeds arising from such damage or destruction.

      15. Condemnation . In the event of condemnation or inverse condemnation of all or any portion of the Subject Property during the term of this escrow, Buyer shall then have the right, at Buyer’s option, to cancel this Agreement at any time within seven (7) days after notice from Seller of such condemnation. If Buyer cancels this Agreement, Buyer will receive a refund of the Earnest Money. If Buyer does not elect to cancel, Seller shall assign to Buyer all condemnation proceeds or rights to condemnation proceeds arising from such condemnation.

      16. Section 1445 Affidavit . Seller shall furnish to Buyer and Escrow Agent prior to Closing, a sworn affidavit stating under penalty of perjury that Seller is not a “foreign person” as such terms is defined in the Internal Revenue Code of 1954, as amended (the “Code”). In the event Seller does not furnish an affidavit or other evidence deemed satisfactory by Buyer as described above, Buyer may withhold (or direct Escrow Agent to withhold) from the cash payable to Seller pursuant to this Agreement, an amount equal to the amount required to be so withheld pursuant to Section 1445(a) of the Code, and such withheld refunds shall be deposited with the Internal Revenue Service as required by Section 1445(a) and the regulations promulgated thereunder.

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      17. 1031 Exchange . Buyer and Seller acknowledge that in connection with closing the transaction which is the subject of this Agreement, either party hereto, may be participating in and/or consummating a tax-deferred, like kind exchange of property under Section 1031 of the Internal Revenue Code. Each party agrees to reasonably cooperate with the other and to execute all documents reasonably necessary to accomplish such exchange, provided (I) that the cooperating party’s costs, expenses, and obligations in connection with such exchange do not exceed its obligations under this Agreement, (ii) that such exchange does not delay the closing of this transaction beyond the scheduled Close of Escrow (except as described in Paragraph 31 of this Agreement), and (iii) that the party effectuating such exchange shall indemnify, defend and hold the cooperating party harmless from any costs, expenses, obligations, claims or liabilities arising from such exchange in excess of the cooperating party’s obligations under this Agreement. Notwithstanding anything to the contrary herein, Buyer shall have the right to nominate, assign and convey its rights and interests hereunder to any “accommodator” for purposes of effectuating an exchange contemplated under this Paragraph 15, but shall not otherwise have the right to assign this Agreement except as provided in Paragraph 20 hereof.

      18. Royalty. A net smelter return royalty, as defined in the deed in Exhibit F, which is attached and by reference made part of this Agreement, the total amount of which Seller has a right to receive shall not exceed a cumulative total of US$3 million, is to be reserved by or conveyed to Seller at Closing pursuant to such documents as are mutually approved by Seller and Buyer. The royalty shall be three percent (3%) for precious metals, and one and one-half percent (1.5%) for base metals produced from the Subject Property. Buyer shall have the right, at any time prior to the commencement of commercial production, to purchase this royalty from Seller for the amount of US$2 million.

      19. Force Majeure.

      A. If either Buyer or Seller shall be prevented by an event of force majeure from timely performing any of the acts or obligations under this Agreement, the failure, if any, shall be excused and the period for performance shall be extended for a period equal to the duration of the force majeure condition. The party who is prevented from performing shall promptly give the other party notice of the commencement and termination of the force majeure condition. The party who is prevented from performing shall exercise reasonable efforts to remove or overcome the force majeure condition but shall not be required against its will to institute legal proceedings, adjust any labor dispute or challenge the validity of any law, regulation, action or inaction of government. This paragraph shall not excuse any obligation of Buyer to pay any amounts due Seller under the terms and conditions of this Agreement.

      B. An event or condition of force majeure shall include any cause beyond either Buyer or Seller's reasonable control, whether or not foreseeable, including but not limited to a: law, regulation, action or inaction of government; the inability to obtain any public or private license, permit or authorization which may be required for activities in connection with the Property or other property, including the removal and disposal of water, wastes and tailings and reclamation; a mining casualty; damage to or destruction of a mine or mill, plant or facility; a fire; an explosion; severe inclement weather; a flood; civil commotion; a labor dispute; an inability to obtain workmen, material, insurance or bonding surety; any delay in transportation; and any other traditional act of God.

      20. Representations and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns.

      21. Singular to Include Plural . Whenever used, the singular number shall include the plural, the plural the singular, and the use of any gender shall be applicable to all genders.

      22. Assignment . Buyer shall have the right to transfer or assign its interest in this Agreement without Seller’s consent. An assignment under this paragraph shall not relieve the Buyer from its obligations under this Agreement.

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      23. Notice . Any notices hereunder must be in writing and shall be hand delivered, delivered by facsimile machine (with hard copy to follow by regular mail) or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the following address or at such other address as either party may designate by written notice:

Buyer’s Address:	Aurelio Resources Inc.
	Suite 209, 5554 South Prince Street
	Littleton, Colorado 80120
	Ph.   303-797-3137
with a copy to:	Mark T. Nesbitt
	216 Sixteenth St., Ste. 1300
	Denver, CO 80202-5127
	Ph.   303-302-3097
Seller’s Address:	Hope Mining and Milling Company
	C/o Ms. Nancy Fournier
	115 E. Country Club Drive
	Phoenix, Arizona 85014
	Tel.: 602-320-1324
	Fax: 602-404-7611
with a copy to:	Helen D. Shapiro
	Brier, Irish & Hubbard
	2400 E. Biltmore Circle, Suite 1300
	Phoenix, Arizona 85016
	Tel.: 602-515-1062
	Fax: 602-522-3945
Escrow:	Lawyers Title Agency
	Attn: Susan Kirk
	1650 E. River Road, Suite 105
	Tucson, Arizona 85718
	Tel.: 520-529-1944
	Fax: 520-202-6276

 

For purposes hereof, the effective commencement date of any notice required herein shall be the date of hand delivery or facsimile machine transmittal or three (3) business days following the date of mailing.

      24. Additional Documents . The parties shall execute and deposit in escrow any other documents reasonably required by the Escrow Agent as a condition to the issuance of the title insurance policy or that are required for the consummation of this transaction.

      25. Entire Agreement . This Agreement represents the entire agreement between the parties covering everything agreed upon or understood in this transaction. There are no oral promises, conditions representations, understandings, interpretations or terms of any kind as conditions or inducements to the execution hereof or in effect between the parties, except as may otherwise be provided herein. No change or addition is to be made to this Agreement except by a written statement executed by the parties.

      26. Miscellaneous Provisions . Time is of the essence hereof. This Agreement is the product of negotiation between Buyer and Seller and each party has the opportunity to review it with the attorneys and advisors of their choice.

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This Agreement shall not be interpreted in favor of one party or the other because one party may have drafted all or a major portion hereof. Buyer and Seller hereby agree to indemnify, defend and hold harmless the other from any and all loss, liability, damage, cost or expense (including, without limitation, attorneys’ fees) resulting from any inaccuracy in or breach of any representation, warranty or covenant by the indemnifying party.

      27. Attorney’s Fees . In the event of any arbitration, litigation, dispute or other proceeding concerning this Agreement, the prevailing party shall be entitled to recover its costs, reasonable attorney’s fees and reasonable other expenses.

      28. Counterparts, Duplicate Originals and Facsimile Signatures . The parties shall execute three (3) duplicate originals of this Agreement so that each shall have an original and one shall be provided to Escrow Agent. Each duplicate original may be executed in one or more counterparts, all of which shall be deemed equal and to be the same Agreement. This Agreement may also be executed by facsimile signatures, each of which for all purposes hereunder shall be deemed to be an original signature.

      29. Binding Effect . This Agreement is binding upon and shall insure to the benefit of the personal representatives, heirs, successors and permitted assigns of the parties hereto. This Agreement shall also supersede and replace all prior agreements between Buyer and Seller, whether written or oral.

      30. Holidays . If the date of performance of any obligation or the last day of any time period provided for herein shall fall on a Saturday, Sunday or legal holiday recognized in the State of Arizona, then said obligation shall be due and owing, and said time period shall expire, on the first day thereafter which is not a Saturday, Sunday or legal holiday recognized in the State of Arizona.

      31. Extension of Closing . Closing may be extended by mutual written agreement between Buyer and Seller.

      32. Document Size . Unless specifically required by law, all documents generated by the Buyer, Seller, and Escrow Agent shall be of letter size (8.5 inches by 11.0 inches). If necessary to comply with this requirement, Escrow Agent shall convert any standard forms to letter size.

      33. Arizona Law . This Agreement shall be construed and enforced in accordance with the laws of the State of Arizona.

      34. Time for Acceptance . This is an offer to purchase the Subject Property. Unless acceptance is signed by Seller and a signed copy received by Buyer either in person, by mail or by facsimile by May 19, 2006 at 5:00PM PST or unless this offer has been previously withdrawn by Buyer, this offer to purchase shall be deemed withdrawn and the Buyer’s Earnest Money shall be returned.

      35. Counterparts . This Agreement may be executed simultaneously or in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. A party’s signature on this Agreement or any amendment hereto may be provided by facsimile and shall be effective upon transmission to the other party hereto.

      36. Condemnation . If, prior to Closing, any portion of the Subject Property shall be condemned or become the subject of any pending or threatened condemnation action, Seller shall promptly notify Buyer thereof. This Agreement shall remain in full force and effect, regardless of such condemnation or threatened or pending action, and if any condemnation award is received by Seller prior to Closing, the amount of such award shall be applied as a credit against the Purchase Price. Any condemnation awards received by Seller on or after Closing shall be promptly delivered by Seller to Buyer. Notwithstanding the foregoing, in the event such condemnation involves five percent (5%) or more

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of the Subject Property, Buyer shall be entitled to terminate this Agreement by written notice thereof to Seller given within five (5) business days after Buyer shall have been notified of such condemnation, in which event the Earnest Money shall be returned to Buyer. Buyer’s failure to timely deliver such notice to Seller shall constitute Buyer’s election to proceed to Closing.

      37. Vacant Land Disclosure Affidavit . Buyer and Seller acknowledge that pursuant to A.R.S. §33-422, an affidavit of disclosure (the “Affidavit”) will be required if the Subject Property is located in an unincorporated area. Pursuant to A.R.S. §33-422, any required Affidavit must be completed by Seller and delivered to Buyer at least seven (7) days prior to the Closing and must be recorded with the Deed. If the completed and executed Affidavit is provided to Escrow Agent prior to Closing, Escrow Agent will record the Affidavit with the Deed. If an Affidavit is required, Escrow Agent shall provide the Affidavit form to the parties within ten (10) days following the Opening of Escrow.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth below each such party’s signature.

SELLER:					BUYER:
Hope Mining   and Milling   Company ,   an   Arizona   corporation					Aurelio Resources Inc., a Colorado corporation
By:					By:
Printed Name:   Nancy Fournier					Printed Name: Dr. Fred W. Warnaars
Title: President					Title: President

 

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ACCEPTANCE OF ESCROW AGENT

The undersigned Escrow Agent hereby (a) accepts the Escrow created by the foregoing Agreement, (b) agrees to act in accordance with the terms of this Agreement, (c) agrees to be the person responsible for closing the transaction within the meaning of Section 6045(e)(2)(A) of the Internal Revenue Code of 1986 (the “Code”) and filing all necessary information reports, returns and statements (collectively, the “Tax Reports”) regarding the transaction required by the Code and, promptly upon the filing of the Reports, transmit copies of the Reports to Buyer and Seller, (d) agrees to indemnify and hold harmless Seller, Buyer and their respective attorneys and brokers from and against all claims, costs, liabilities, penalties, or expenses resulting from Escrow Agent’s failure to file the Reports, (e) agrees to deliver to Buyer, within five (5) days after the Opening of Escrow, an insured closing protection letter from  _________________________, and (f) confirms that the Opening of Escrow occurred on __________________________, 2006.

LAWYERS TITLE AGENCY

By:
__________________________________
Its:
__________________________________

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EXHIBIT A

to that
Purchase Agreement and Escrow Instructions
between
Hope Mining and Milling Company, and Aurelio Resources Inc.

Description of Subject Property

Patented Mining Claims, Turquoise Mining District
Cochise County, Arizona

Cochise County, Arizona Deeds of Mines, Book 26, page 172
Mineral Survey No. 2458

Alice
Billie
Chance (also known as Grace)
Chicago
Climax
Clinton
Dorothy
Edith
Ester
Fair View
Fraction
Handy
Hawke Eye
Highland
Home
Humbolt
Iowa
Iron
Mame
Mary Mine
Monarch
Sampson
Starr

Cochise County, Arizona Deeds of Mines, Book 26, page 104
Mineral Survey No. 2608

Copper Bug
Northern Light
Gray Mule
Head Light
Leadville
Turquoise King
Western Belle

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EXHIBIT B

to that
Purchase Agreement and Escrow Instructions
between
Hope Mining and Milling Company, and Aurelio Resources Inc.

Promissory Note

NON-RECOURSE NOTE SECURED BY DEED OF TRUST

$950,000.00

  Tucson, Arizona 
_________________, 2006

      For value received, Aurelio Resources Inc., a Colorado corporation (“Maker”), promises to pay to Hope Mining and Milling Company, or order, at the sum of Nine Hundred Fifty Thousand and No/100 Dollars ($950,000.00), payable as follows:

The outstanding principal under this Note shall bear interest at the rate of six percent (6%) per annum. Interest only payments during the note term of $57,000 per annum on anniversary of closing date will be paid for 4 years. All outstanding principal and interest together with all other sums provided for herein shall be due and payable on the date that is thirty-six (36) months after the first (1 ^st ) (12 months after closing) annual installment of interest is due hereunder.

A default hereunder shall occur only if Maker shall fail to make any payment hereunder within ten (10) days after written notice from the holder of this note that such payment is past due. Upon any default, all outstanding principal hereunder shall bear interest at the rate of ten percent (10%) per annum until such default is cured.

Principal and interest shall be payable in lawful money of the United States of America.

This Note may be prepaid in full or in part at any time and from time to time without penalty.

This Note shall become immediately due and payable upon the commencement of commercial production from the Property referred to in the Deed of Trust below.

Should suit be brought to recover on this Note, the undersigned promises to pay as attorneys’ fees a reasonable amount additional to the amount due hereunder.

The Maker and endorsers hereof severally waive diligence, demand, presentment for payment and protest, and consent to the extension of time of payment of this Note without notice.

      This Note is secured by a Deed of Trust and Assignment of Rents with Security Agreement and Financing Statement (Fixture Filing) of even date herewith (the “Deed of Trust”), to , as Trustee.

All notices shall be given and deemed received as described in the Deed of Trust.

      The obligations represented by this Note and the Deed of Trust are without recourse to Maker. Notwithstanding anything contained in this Note or the Deed of Trust to the contrary, the sole and exclusive remedy of the holder of this Note for any breach or default under this Note or the Deed of Trust shall be to cause the sale of the property that is encumbered by the Deed of Trust by judicial foreclosure or other legal means, and Maker shall not be subject to any suit or action or have any personal liability under this Note or the Deed of Trust, and no property or assets of Maker, other than the property that is encumbered by the Deed of Trust, shall be subject to attachment, levy or other process on account of any breach or default by Maker under this Note or the Deed of Trust.

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MAKER:

AURELIO RESOURCES INC., a Colorado corporation


By:     ____________________________________

Name: ____________________________________

Title:   ____________________________________

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EXHIBIT C

to that
Purchase Agreement and Escrow Instructions
between
Hope Mining and Milling Company, and Aurelio Resources Inc.

Deed of Trust and Fixture Filing

When Recorded, Return To:

Helen D. Shapiro, Esq.
Brier, Irish & Hubbard L.L.P.
2400 E. Biltmore Circle, Suite 1300
Phoenix, Arizona 85016

Recorder’s Use

DEED OF TRUST AND FIXTURE FILING
(With Assignment of Rents and Security Agreement)

                              TRUSTOR’S ORGANIZATIONAL IDENTIFICATION NUMBER: [_______________]

                              THIS IS A PURCHASE MONEY DEED OF TRUST.

THIS DEED OF TRUST AND FIXTURE FILING (With Assignment of Rents and Security Agreement) (as it may be amended and modified from time to time, the “ Deed of Trust ”) is made as of ___________________, 2006, by and among AURELIO RESOURCES INC., a Colorado corporation (the “ Trustor ”), whose mailing address is Suite 209, 5554 South Prince Street, Littleton, Colorado 80120,[_______________________________________] (“ Trustee ”), whose mailing address is ______________________________________, and HOPE MINING AND MILLING COMPANY, an Arizona corporation (“ Beneficiary ”), whose mailing address is 115 E. Country Club Drive, Phoenix, Ariozna 85014.

      FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE AND RIGHT OF ENTRY AND POSSESSION, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, that certain real property located in the County of Cochise, State of Arizona, more particularly described in Exhibit A attached hereto and incorporated herein by this reference (the “ Premises ”);

      TOGETHER WITH any and all buildings and other improvements now or hereafter erected on the Premises including, without limitation, fixtures, attachments, appliances, equipment, machinery, and other personal property attached to such buildings and other improvements (the “ Improvements ”), all of which shall be deemed and construed to be a part of the real property;

      TOGETHER WITH all rents, issues, profits, damages, royalties, income and other benefits now or hereafter derived from the Premises and the Improvements or any business or other activity conducted thereon (collectively the “ Rents ”), subject to the terms and provisions of Article II of this Deed of Trust

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with respect to all leases and subleases of the Premises or Improvements now or hereafter existing or entered into, or portions thereof, granted by Trustor, and further subject to the right, power and authority hereinafter given to Trustor to collect and apply such Rents;

      TOGETHER WITH all interests, estates or other claims, both in law and in equity, which Trustor now has or may hereafter acquire in the Premises or the Improvements;

      TOGETHER WITH all easements, rights-of-way and other rights now owned or hereafter acquired by Trustor used in connection with the Premises or the Improvements or as a means of access thereto (including, without limitation, all rights pursuant to any trackage agreement and all rights to the nonexclusive use of common drive entries, and all tenements, hereditaments and appurtenances thereof and thereto) and all water and water rights and shares of stock evidencing the same;

      TOGETHER WITH all leasehold estate, right, title and interest of Trustor in and to all leases or subleases covering the Premises or the Improvements or any portion thereof now or hereafter existing or entered into, and all right, title and interest of Trustor thereunder including, without limitation, all rights of Trustor against guarantors thereof, all cash or security deposits, advance rentals, and deposits or payments of similar nature (collectively, the “ Leases ”);

      TOGETHER WITH all right, title and interest now owned or hereafter acquired by Trustor in and to any greater estate in the Premises or the Improvements;

      TOGETHER WITH all right, title, and interest of Trustor in (i) the property and interests in property described on Exhibit B attached hereto and incorporated herein by reference, (ii) all other personal property now or hereafter owned by Trustor that is now or hereafter located on or used in connection with the Premises or the Improvements, (iii) all other rights and interests of Trustor now or hereafter held in personal property that is now or hereafter located on or used in connection with the Premises or the Improvements, (iv) all personal property and rights and interests in personal property of similar type or kind hereafter acquired by Trustor, and (v) all proceeds thereof (such personal property and proceeds are referred to herein collectively as the “ Personal Property ”);

      TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Premises, and any and all sidewalks, alleys and strips and gores of land adjacent to or used in connection with the Premises;

      TOGETHER WITH all the estate, interest, right, title, other claim or demand, both in law and in equity (including, without limitation, claims or demands with respect to the proceeds of insurance in effect with respect thereto) that Trustor now has or may hereafter acquire in the Premises, the Improvements, the Personal Property, or any other part of the Trust Estate (as defined below), and any and all awards made for the taking by eminent domain, or by any proceeding of purchase in lieu thereof, of the whole or any part of the Trust Estate (including, without limitation, any awards resulting from a change of grade of streets and awards for severance damages);

TOGETHER WITH all proceeds of the foregoing.

      The entire estate, property, right, title and interest hereby conveyed to Trustee may hereafter be collectively referred to as the “ Trust Estate .”

      FOR THE PURPOSE OF SECURING (in such order of priority as Beneficiary may elect) the following (the “ Obligations ”):

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      (a) payment of indebtedness in the total principal amount of Four Hundred Fifty Thousand and no/100ths Dollars ($450,000.00), with interest thereon, evidenced by that certain Secured Promissory Note dated ____________, 2006, (as it may be amended, modified, extended, and renewed from time to time, the “ Note ”) executed by Trustor pursuant to that certain Purchase Agreement between Trustor, as buyer, and Beneficiary, as seller, dated May __, 2006;

      (b) payment of all sums advanced by Beneficiary to protect the Trust Estate, with interest thereon equal to the default interest rate set forth in the Note (which rate of interest is hereinafter referred to as the “ Agreed Rate ”);

      (c) payment of all other sums, with interest thereon, that may hereafter be loaned to Trustor, or its successors or assigns, by Beneficiary, or its successors or assigns when evidenced by a promissory note or notes reciting that they are secured by this Deed of Trust;

      (d) performance of every obligation of Trustor contained in the Loan Documents (as defined below);

      (e) performance of every obligation of Trustor contained in any agreement, document, or instrument now or hereafter executed by Trustor reciting that the obligations thereunder are secured by this Deed of Trust, including, without limitation, all other obligations, agreements or indebtedness between Trustor and any affiliate of Beneficiary; and

      (f) for the benefit of Beneficiary, compliance with and performance of each and every provision of any declaration of covenants, conditions and restrictions, any maintenance, easement and party wall agreement, or any other agreement, document, or instrument by which the Trust Estate is bound or may be affected.

This Deed of Trust, the Note and any other deeds of trust, mortgages, agreements, guaranties or other instruments given to evidence or further secure the payment and performance of any or all of the Obligations, as the foregoing may be amended, modified, extended, or renewed from time to time may hereinafter be collectively referred to as the “ Loan Documents .” Any term used or defined in the Uniform Commercial Code of Arizona, as in effect from time to time (“ Uniform Commercial Code of Arizona ”), and not defined in this Deed of Trust, has the meaning given to the term in the Uniform Commercial Code of Arizona, when used in this Deed of Trust.

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TRUSTOR HEREBY COVENANTS AND AGREES AS FOLLOWS:

ARTICLE I
COVENANTS AND AGREEMENTS OF TRUSTOR

      1.01 Payment and Performance of Secured Obligations . Trustor shall pay when due and/or perform each of the Obligations.

      1.02 Maintenance, Repair, Alterations . Trustor shall keep the Trust Estate in good condition and repair. Trustor shall not remove, demolish, or substantially alter any of the Improvements, except with the prior written consent of Beneficiary. Trustor shall complete promptly and in a good and workmanlike manner any Improvement that may be now or hereafter constructed on the Premises and promptly restore in like manner any Improvements that may be damaged or destroyed from any cause whatsoever and pay when due all claims for labor performed and materials furnished therefor. Trustor shall comply with all Requirements (as defined below) and shall not suffer to occur or exist any violation of any Requirement. Trustor shall not commit or permit any waste or deterioration of the Trust Estate, and, to the extent allowed by law, shall keep and maintain abutting grounds, sidewalks, roads, parking and landscape areas in good and neat order and repair. Trustor shall perform its obligations under each Lease. “ Requirement ” and “ Requirements ” mean, respectively, each and all obligations and requirements now or hereafter in effect by which Trustor or the Trust Estate are bound or which are otherwise applicable to the Trust Estate, construction of any Improvements on the Trust Estate, or operation, occupancy or use of the Trust Estate (including, without limitation (i) such obligations and requirements imposed by common law or any law, statute, ordinance, regulation, or rule (federal, state, or local), and (ii) such obligations and requirements of, in, or in respect of (A) any consent, authorization, license, permit, or approval relating to the Trust Estate, (B) any condition, covenant, restriction, easement, or right-of-way reservation applicable to the Trust Estate, (C) any Lien or Encumbrance, (D) any other agreement, document, or instrument to which Trustor is a party or by which Trustor or the Trust Estate is bound or affected, and (E) any order, writ, judgment, injunction, decree, determination, or award of any arbitrator, other private adjudicator, court, government, or governmental authority (federal, state, or local) to which Trustor is a party or by which Trustor or the Trust Estate is bound or affected).

      1.03 Required Insurance . Trustor shall at all times provide, maintain and keep in force or cause to be provided, maintained and kept in force with respect to the Trust Estate, at no expense to Trustee or Beneficiary, policies of insurance in forms and amounts and issued by companies reasonably satisfactory to Beneficiary covering such casualties, risks, perils, liabilities and other hazards as is reasonably required by Beneficiary. All such policies of insurance required by the terms of this Deed of Trust shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy notwithstanding any act or negligence of Trustor or any party holding under Trustor that might otherwise result in forfeiture of said insurance and the further agreement of the insurer waiving all rights of setoff, counterclaim or deductions against Trustor.

      1.04 Delivery of Policies, Payment of Premiums .

      (a) At Beneficiary’s option all policies of insurance shall either have attached thereto a lender’s loss payable endorsement for the benefit of Beneficiary in form satisfactory to Beneficiary or shall name Beneficiary as an additional insured. Trustor shall furnish Beneficiary with certificates of insurance for each required policy setting forth the coverage, the limits of liability, the name of the carrier, the policy number and the period of coverage. If Beneficiary consents, Trustor may provide any of the required insurance through blanket policies carried by Trustor and covering more than one location, or by policies procured by a tenant or other party

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holding under Trustor; provided, however, all such policies shall meet the requirements referred to in Section 1.03. At least thirty (30) days prior to the expiration of each required policy, Trustor shall deliver to Beneficiary evidence reasonably satisfactory to Beneficiary of the payment of premium and the renewal or replacement of such policy continuing insurance in form as required by this Deed of Trust. All such policies shall contain a provision that, notwithstanding any contrary agreement between Trustor and insurance company, such policies will not be cancelled, allowed to lapse without renewal, surrendered or materially amended, which term shall include any reduction in the scope or limits of coverage, without at least thirty (30) days’ prior written notice to Beneficiary.

      (b) In the event Trustor fails to obtain, maintain, or deliver to Beneficiary the policies of insurance with respect to the Trust Estate required by this Deed of Trust, Beneficiary may, at Beneficiary’s election, but without any obligation so to do, procure such insurance or single-interest insurance for such risks covering Beneficiary’s interest, and Trustor will pay all premiums thereon promptly upon demand by Beneficiary, and until such payment is made by Trustor, the amount of all such premiums shall bear interest at the Agreed Rate. Upon the occurrence and during the continuation of an Event of Default and request by Beneficiary, Trustor shall deposit with Beneficiary in monthly installments, an amount equal to one-twelfth (1/12) of the estimated aggregate annual insurance premiums on all policies of insurance required by this Deed of Trust (funds deposited for this purpose are referred to as “ Insurance Impounds ”). In such event Trustor further agrees to cause all bills, statements, or other documents relating to the foregoing insurance premiums to be sent or mailed directly to Beneficiary. Upon receipt of such bills, statements, or other documents evidencing that a premium for a required policy is then payable, and provided there are sufficient Insurance Impounds, Beneficiary shall timely pay such amounts as may be due thereunder out of the Insurance Impounds. If at any time and for any reason the Insurance Impounds are or will be insufficient to pay such amounts as may be then or subsequently due, Beneficiary shall notify Trustor and Trustor shall immediately deposit an amount equal to such deficiency with Beneficiary. Notwithstanding the foregoing, nothing contained herein shall cause Beneficiary to be deemed a trustee of Insurance Impounds or to be obligated to pay any amounts in excess of the amount of the Insurance Impounds, nor shall anything contained herein modify the obligation of Trustor set forth in Section 1.03 to obtain and maintain insurance. Beneficiary may commingle Insurance Impounds with its own funds, and Trustor shall not be entitled to interest thereon. Beneficiary may reserve for future payments of premiums such portion of Insurance Impounds as Beneficiary in its absolute and sole discretion deems proper. If Trustor fails to deposit with Beneficiary sums sufficient to pay fully such premiums at least thirty (30) days before delinquency thereof, Beneficiary may, at Beneficiary’s election, but without any obligation so to do, advance any amounts required to make up the deficiency, which advances, if any, shall be secured hereby and shall be repayable to Beneficiary upon demand with interest from the date advanced at the Agreed Rate, or at the option of Beneficiary the latter may, without making any advance whatever, apply any Insurance Impounds to payment of the Obligations in such order as Beneficiary may determine, notwithstanding that such Obligations may not yet be due. Upon the occurrence of an Event of Default, Beneficiary may, at any time, at Beneficiary’s option, apply any Insurance Impounds or Impositions Impounds under this Section 1.04 or Section 1.08, any funds paid as Rents, and any other funds of Trustor held by Beneficiary to payment of any of the Obligations, in such manner and order as Beneficiary may elect, notwithstanding that such Obligations may not yet be due.

1.05 Casualties; Insurance Proceeds .

      (a) Trustor shall give prompt written notice thereof to Beneficiary after the happening of any casualty to or in connection with the Trust Estate or any part thereof, whether or

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not covered by insurance. All proceeds of insurance shall be payable to Beneficiary, and Trustor hereby authorizes and directs any affected insurance company to make payment of such proceeds directly to Beneficiary. If Trustor receives any proceeds of insurance resulting from such casualty, Trustor shall promptly pay over such proceeds to Beneficiary. All proceeds of insurance will be applied by Beneficiary to payment of the Obligations in such order as Beneficiary shall determine.

      (b) Trustor shall not be excused from repairing or maintaining the Trust Estate as provided in Section 1.02 hereof or restoring all damage or destruction to the Trust Estate, regardless of whether or not there are insurance proceeds available to Trustor or whether any such proceeds are sufficient in amount, and the application or release by Beneficiary of any insurance proceeds shall not cure or waive any default or notice of default under this Deed of Trust or invalidate any act done pursuant to such default or notice of default.

      1.06 Assignment of Policies Upon Foreclosure . In the event of foreclosure of this Deed of Trust as a mortgage, a sale under the power of sale, or any other transfer of title or assignment of the Trust Estate in extinguishment, in whole or in part, of the Obligations, all right, title and interest of Trustor in and to all policies of insurance required by Section 1.03 shall inure to the benefit of and pass to the successor in interest to Trustor or the purchaser or grantee of the Trust Estate, to the extent such policies are assignable pursuant to the terms thereof.

      1.07 Indemnification; Subrogation; Waiver of Offset .

      (a) If Beneficiary is made a party to any litigation concerning the Note, this Deed of Trust, any of the Loan Documents, the Trust Estate or any part thereof or interest therein, or the occupancy of the Trust Estate by Trustor, then Trustor shall indemnify, defend