Charles E. and Jacquelyn Yates - Page 4




                                        - 4 -                                         
          Pursuant to Mr. Yates’ direction, Mr. Adams transferred funds               
          from Adena to Fox Trot and recorded the transactions as follows1:           

          Date               Amount    Adena’s Books      Fox Trot’s Books            
          1993              $1,920,112 Distribution to Mr.Contribution to capital        
                                     Yates                                            
          1993              1,037 Accumulated          Contribution to capital        
                                     Adjustments Account                              
          Jan. 1 through    853,557 Loans to Mr. Yates Accounts Payable – Mr.         
          Sept. 1, 1994                                Yates                          
          Sept. 1 through   415,279 Loans to Mr. Yates Accounts Payable – Mr.         
          Dec. 31, 1994                                Yates                          
          Jan. 1 through Oct.293,360 Accounts Receivable –Accounts Payable - Yates       
          15, 1995                   Yates                                            
          Jan. 1 through Oct.543,447 Accumulated        Accounts Payable - Yates       
          15, 1995                   Adjustments Account                              

               A loan agreement entered in 1994 relating to the mining debt           
          limited Mr. Yates’ dividends from Adena to 90 percent of Adena’s            
          earnings, but did not restrict his ability to borrow from Adena.            
          In response, Mr. Yates directed Mr. Adams to change the posting             
          procedure, beginning on October 1, 1994, so that subsequent                 
          transfers of funds from Adena to Fox Trot were posted as either             
          distributions or loans from Adena to Mr. Yates and as either                
          capital contributions or loans from Mr. Yates to Fox Trot.  Mr.             
          Adams recorded, in Adena’s books, the 1995 transfers of funds               

               1From 1993 through Sept. 30, 1994, Mr. Adams initially                 
          recorded transfers in the “Due to/from Fox Trot” account of                 
          Adena’s books, and the “Due to/from Adena” account in Fox Trot’s            
          books.  Mr. Adams, at the end of 1993, reposted the 1993                    
          transfers in Adena’s books as distributions or loans from Adena             
          to Mr. Yates and in Fox Trot’s books as contributions to capital.           
          Similarly, prior to the end of 1994, Mr. Adams posted the 1994              
          transfers in Adena’s books as loans to Mr. Yates and in Fox                 
          Trot’s books as accounts payable to (i.e., loans from) Mr. Yates.           





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