EXHIBIT 10.3
 
PROMISSORY NOTE

$700,000
February 23, 2007

 
FOR VALUE RECEIVED, Wits Basin Precious Minerals Inc., a corporation organized
and existing under the laws of the State of Minnesota (the “Company”), hereby
unconditionally promises to pay to Andrew Green, a resident of the State of
Ohio, or his successors and assigns (the “Holder”) on or before March 31, 2007
(the “Maturity Date”), the principal sum of Seven Hundred Thousand Dollars
($700,000.00) (the “Principal”), together with accrued and unpaid interest
thereon at a rate of six percent (6%) per annum, calculated on the basis of
actual days elapsed in a year of 365 days. 
 
Article 1
PAYMENTS
 
1.1 Manner of Payment. All payments of Principal and interest on this Note,
whether in cash or upon Optional Exercise of Derivative Securities (pursuant to
the terms of Section 2.1 hereof), shall be made at such place as the Holder
shall designate to the Company in writing. If any payment of Principal or
interest on this Note is due on a day that is not a Business Day, such payment
shall be due on the next succeeding Business Day. “Business Day” means any day
other than a Saturday, Sunday or legal holiday in the State of Minnesota.
 
1.2 Prepayment. This Note may be prepaid in cash or other immediately available
funds, in whole or in part by the Company at any time and from time to time,
without premium or penalty. At Holder’s option, any payments on this Note shall
be applied first to pay Holder for all costs of collection of any kind,
including reasonable attorneys’ fees and expenses, next to the payment of
interest accrued through the date of payment, and thereafter to the payment of
Principal.
 
 
Article 2
OPTIONAL EXERCISE OF DERIVATIVE SECURITIES IN PAYMENT
 
2.1 Optional Exercise of Derivative Securities Upon Maturity. In the event the
Principal and accrued interest under this Note is not paid in full on or prior
to the Maturity Date, until such time that the this Note is satisfied in full,
the applicable portion of the outstanding balance on this Note, including
accrued and unpaid interest, as of the end of the day of the Maturity Date (the
“Maturity Balance”) may, at the option of either the Company or Holder (the
“Optional Exercise”), be converted into the payment of the aggregate exercise
price relating to the “Derivative Securities”, such term to be defined herein as
any or all, or a combination of (at the discretion of the party exercising the
option, of the (i) outstanding warrants (“Warrants”) issued in the name of
Holder to purchase an aggregate of 3,550,000 shares of the Company’s common
stock, par value $.01 per share (“Common Stock”) at an original exercise price
of $0.12 per share, but for which the parties hereby agree the exercise price
shall be reduced from $0.12 per share to $.09125 per share, and (ii) outstanding
rights of Holder to purchase up to 3,000,000 shares of the Common Stock at a
purchase price per share of $0.20, as originally provided pursuant to that
certain Amendment to Secured Convertible Promissory Note dated April 1, 2006 by
and between Holder and the Company, the term of such right as extended to March
31, 2007 by that certain Standby Joint Venture Financing Agreement dated August
18, 2006 and as further extended by the terms of this Note to December 31, 2007.
Upon the Optional Exercise, the Derivative Securities shall be deemed exercised
in accordance with their respective terms. In the event, and to the extent, the
Maturity Balance is greater than the aggregate exercise price of the Derivative
Securities, the difference between such amounts shall be due and payable by the
Company on the demand of Holder.
 
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2.2 Mechanics and Effect of Optional Exercise. In the event either Holder or the
Company shall elect an Optional Exercise, Holder shall, within a reasonable
time, be required to physically surrender this Note and, if such election
relates to the Warrants, any and all original certificates representing the
Warrants to the Company; provided that, Holder shall not be required to
physically surrender this Note to the Company unless the entire unpaid Principal
and interest of this Note, or, after the Maturity Date, the Maturity Balance
(together with accrued and unpaid interest thereon), is satisfied in full. The
Holder and the Company shall maintain records showing the outstanding Principal
and interest under the Note and the Optional Exercises, if any, in a manner
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of this Note upon any payment, in cash or pursuant to the
Optional Exercise, in an amount that does not fully satisfy the obligations of
the Company hereunder. In the event of any dispute or discrepancy, such records
of the Company shall be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, and further subject to the limitation on
transfer set forth herein, if any portion of this Note is paid in cash or by
Optional Exercise, the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note of like
tenor, registered as the Holder (upon payment by the Holder of any applicable
transfer taxes) may request, representing in the aggregate the remaining unpaid
Principal and any accrued and unpaid interest on this Note. The Holder and any
assignee, by acceptance of this Note, acknowledge and agree that, by reason of
the provisions of this paragraph, following a payment or Optional Exercise of a
portion of this Note, the unpaid Principal amount of this Note may be less than
the amount stated on the face hereof.
 
Article 3
DEFAULT
 
3.1 Default. The occurrence of any of the following events shall constitute a
“Default” under this Note:
 
a. The Company’s failure to remit to Holder the Principal or interest hereof as
the same becomes due hereunder;
 
b. The Company’s assignment for the benefit of creditors, or filing of a
petition in bankruptcy or for reorganization or to effect a plan or arrangement
with creditors;
 
c. The Company’s application for, or voluntary permission of, the appointment of
a receiver of trustee for any or all Company property;
 
d. any action or proceeding described in the foregoing paragraphs b and c is
commenced against the Company and such action or proceeding is not vacated
within 60 days of its commencement; or
 
e. The Company’s dissolution or liquidation.
 
3.2 Remedies Upon Default. Upon any Default:
 
a. Holder may without further notice declare the entire remaining Principal or
Maturity Balance of this Note, together with all accrued and unpaid interest
thereon, immediately due and payable; and Holder’s failure to declare the entire
remaining Principal or Maturity Balance of this Note, together with all accrued
and unpaid interest thereon, immediately due and payable shall not constitute a
waiver by Holder of its right to so declare at any other time;
 
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b. Holder may employ an attorney to enforce its rights and remedies hereunder
and Company hereby agrees to pay Holder’s reasonable attorneys’ fees and other
reasonable expenses incurred by Holder in exercising any of Holder’s rights and
remedies upon Default.
 
c. Holder’s rights and remedies provided hereunder shall be cumulative and may
be pursued singly, successively or together in Holder’s sole discretion; and
Holder’s failure to exercise any such right or remedy shall not be a waiver or
release of such rights or remedies or the right to exercise any of them at
another time.
 
Article 4
MISCELLANEOUS
 
4.1 Transferability. Without the prior written consent of the Company, Holder is
prohibited from transferring its right, title and interest in this Note.
 
4.2 Waiver. The Company hereby waives presentment, demand, protest and notice of
dishonor and protest. No waiver of any right or remedy of the Holder under this
Note shall be valid unless in a writing executed by the Holder and any such
waiver shall be effective only in the specific instance and for the specific
purpose given. All rights and remedies of the Holder of this Note shall be
cumulative and may be exercised singly, concurrently or successively
 
4.3 Notices. Any notice required or permitted to be given hereunder shall be
given by the Company to the Holder or the Holder to the Company in accordance
with the Purchase Agreement.
 
4.4 Severability. If any provision in this Note is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Note will
remain in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
 
4.5 Governing Law. This Note will be governed by the laws of the State of
Minnesota without regard to conflicts of laws principles.
 
4.6 Parties in Interest. The terms and conditions of this Note shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties.
 
4.7 Section Headings. Construction. The headings of Sections in this Note are
provided for convenience only and will not affect its construction or
interpretation. All references to “Section” or “Sections” refer to the
corresponding Section or Sections of this Note unless otherwise specified. All
words used in this Note will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the words “hereof”
and “hereunder” and similar references refer to this Note in its entirety and
not to any specific section or subsection hereof.
 
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IN WITNESS WHEREOF, the Company has executed and delivered this Note as of the
date first stated above.

       
WITS BASIN PRECIOUS MINERALS INC.
 
   
   
  By:   /s/ Stephen D King  

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Name: Stephen D King
 
Title: CEO

 

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