Untitled Document


Exhibit
  10.1

 PURCHASE
  AGREEMENT 

      THIS
  PURCHASE AGREEMENT
  (the “Agreement”)
  is entered into as of the 28th day of May, 2004, by and among Wits
  Basin Precious Minerals Inc.,
  a Minnesota corporation (the “Company”),
  and Pandora Select
  Partners L.P.,
  a British Virgin Islands limited partnership
  (the “Purchaser”).
  

 R E
  C I T A L S :

      WHEREAS,
  in consideration of $650,000, the Company proposes to issue to the Purchaser,
  and the Purchaser desires to purchase, a $650,000 secured convertible promissory
  note in the form attached as Exhibit A (the “Note”)
  and a warrant in the form of Exhibit B (the “Warrant”)
  to purchase particular shares of the Company’s common stock, $0.01 par
  value (the “Common
  Stock”);
  and 

      WHEREAS,
  conditioned on the Company’s timely satisfaction of particular milestones
  and conditions as described in a separate letter agreement in the form attached
  as Exhibit C (the "Call
  and Option Agreement"),
  the Purchaser shall purchase, and the Company shall issue to the Purchaser,
  an additional secured convertible promissory note of at least $350,000 (which,
  at Purchaser’s option, may be for up to $850,000 inclusive of the foregoing
  $350,000) and an additional warrant to purchase Common Stock; 

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

 SECTION 1. AGREEMENT
  TO SELL AND PURCHASE
  

      1.1.
  Authorization of Transaction.
  On or prior to the closing of the transactions contemplated in this Agreement
  (the “Closing”),
  the Company shall have authorized the sale and issuance to the Purchaser of
  the Note, the Warrant and the shares of Common Stock issuable as payment under
  the Note, upon conversion of the Note and upon exercise of the Warrant (collectively,
  the “Shares”). 

      1.2.
  Sale and Purchase.
  Subject to the
  terms and conditions hereof, at the Closing, the Company hereby agrees to issue
  and sell to the Purchaser, and the Purchaser agrees to purchase from the Company,
  the Note and the Warrant for an aggregate purchase price of $650,000 (the “Purchase
  Price”). 

 SECTION 2. CLOSING, DELIVERY
  AND PAYMENT 

      2.1. Closing.
  The Closing shall take place at 10:00 a.m. on the date hereof at the offices of the Purchaser’s legal counsel, Messerli & Kramer
  P.A., in Minneapolis, Minnesota, or at such other time or place as the Company and the Purchaser may mutually agree (the “Closing
  Date”).
  At the Closing, subject to the terms and conditions hereof, the Company will issue, sell and deliver to the Purchaser the Note and the
  Warrant, against payment of the Purchase Price by certified check or wire transfer of immediately available funds. At that time, the
  Company shall also execute and deliver to the Purchaser the Registration Rights Agreement in the form attached as Exhibit D (the “Registration
  Rights Agreement”) and the Security Agreement in the form attached
  as Exhibit E (the “Security Agreement”).
  In addition, at the Closing, the Company shall cause Wayne W. Mills ("Mills")
  to execute and deliver to the Purchaser the Personal Guaranty in the form attached as Exhibit F (the "Mills
  Guaranty"). 



 SECTION 3. REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY
  

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

      3.1.
  Organization, Good Standing and Qualification.
  The Company is a corporation duly organized, validly existing and in good standing
  under the laws of the State of Minnesota. The Company’s only active subsidiaries
  are Active Hawk Minerals, LLC, a Minnesota limited liability company (“Active
  Hawk”),
  and Brazmin Ltda., a limited liability company organized under the laws of Brazil
  (“Brazmin,”
  and together with Active Hawk, the "Subsidiaries").
  Active Hawk is a limited liability company duly organized, validly existing
  and in good standing under the laws of the State of Minnesota. Brazmin is a
  limited liability company duly organized, validly existing and in good standing
  under the laws of Brazil. Each of the Company and the Subsidiaries has all requisite
  corporate or limited liability company power and authority to own and operate
  its respective properties and assets and to carry on its respective business
  as presented conducted and as presently proposed to be conducted. The Company
  has all requisite corporate power and authority to execute and deliver this
  Agreement, the Note, the Warrant, the Registration Rights Agreement and the
  Security Agreement (together, the “Transaction
  Documents”),
  to pledge the Company’s assets as described on the attached Exhibit G as
  security for the Note (the “Collateral”),
  to issue and sell the Shares as payment under the Note, upon conversion of the
  Note and upon exercise of the Warrant and to carry out the provisions of the
  Transaction Documents. Each of the Company and the Subsidiaries is duly qualified
  and is authorized to do business and is in good standing in each U.S. and foreign
  jurisdiction in which the nature of its respective activities and of its respective
  properties (both owned and leased) makes such qualification necessary, except
  for those jurisdictions in which failure to be so qualified would not have a
  materially adverse effect on the Company or its business, taken as a whole.
  

      3.2.
  Capitalization. The Company is authorized to issue 150,000,000 shares of
  Common Stock, par value $0.01 per share, of which 33,275,181 shares are issued and outstanding. Except as set forth on Schedule 3.2
  or in the Company’s current, quarterly, annual and other periodic filings (the “SEC
  Reports”) with the U.S. Securities and Exchange Commission (the
  “Commission”),
  the Company has no outstanding options, warrants or other rights to acquire any capital stock, or securities convertible or exchangeable
  for capital stock or for securities themselves convertible or exchangeable for capital stock (together, “Convertible
  Securities”). Except as set forth on Schedule 3.2 or in the SEC
  Reports, the Company has no agreement or commitment to sell or issue any shares of capital stock or Convertible Securities. All issued
  and outstanding shares of the Company’s capital stock (i) have been duly authorized and validly issued, (ii) are fully paid and
  nonassessable, (iii) are free from any preemptive and cumulative voting rights and (iv) were issued pursuant to an effective registration
  statement filed with the Commission and applicable state securities authorities or pursuant to valid exemptions under federal and state
  securities laws. Except as set forth on Schedule 3.2, there are no outstanding rights of first refusal or proxy or shareholder agreements
  of any kind relating to any of the Company’s securities to which the Company or any of its executive officers and directors is
  a party or as to which the Company otherwise has knowledge of. When issued in compliance with the provisions of the Note and the Warrant
  (and upon payment as provided by the Warrant), the Shares will be validly issued, fully paid and nonassessable, and will be free of
  any liens or encumbrances; provided, however,
  that the Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise
  required by such laws at the time a transfer is proposed.  

  -2- 



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

      3.4. Financial Statements. The
  Company’s audited consolidated balance sheets at, and the audited consolidated statements of operations, cash flows and shareholders’
  equity of the Company for the years ended, December 31, 2003 (as restated) and 2002 and the Company’s unaudited consolidated balance
  sheet at, and the unaudited consolidated statements of operations and cash flows of the Company for the three months ended March 31,
  2004 (all of the foregoing together, the “Financial Statements,”
  with March 31, 2004 being the “Latest Statement Date” and
  the consolidated financial statements at and for the three months ended March 31, 2004 being the “Latest
  Financial Statements”), as contained in the SEC Reports, fairly
  present in all material respects the consolidated financial position, results
  of operations, cash flows and shareholders’ equity of the Company as of the respective dates and for the respective periods covered
  thereby in accordance with generally accepted accounting principles consistently applied and the rules and regulations of the Commission.
  

  -3- 



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

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

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

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

 -4-



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

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

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

  -5- 



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

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

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

  -6- 



      3.15.
  Registration Rights. Except as to a registration statement on Form S-2,
  SEC File No. 333-110831, filed by the Company with the Commission (the "S-2
  Registration Statement"), or as disclosed on Schedule 3.15 or required
  pursuant to the Registration Rights Agreement, the Company is presently not under any obligation, and has not granted any rights, to
  register (as defined in the Registration Rights Agreement) any of the Company’s presently outstanding securities or any of its
  securities that may hereafter be issued. 

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

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

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

  -7- 



 

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

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

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

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

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

  -8- 



      “Hazardous
  Substances Law”
  means any of: 

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

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

      (iii) the Resource Conservation and Recovery Act (42
  U.S.C. Section 6901 et seq.)
   (“ RCRA”);
  

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

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

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

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

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

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

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

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

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

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

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

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

 -9-



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

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

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

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

      3.22.
  Security Interest in Collateral. The
  Company owns the Collateral free and clear of all claims, liens or encumbrances
  of any kind. Upon consummation of the transactions as contemplated hereby, the
  Purchaser will have a first priority security interest in the Collateral. 

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

      3.24. Reporting Status. The
  Company has filed in a timely manner all documents that the Company was required to file under the Exchange Act during the 12 months
  preceding the date of this Agreement. The SEC Reports complied in all material respects with the Commission’s requirements as of
  their respective filing dates, and the information contained therein as of
  the date thereof did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein
  or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. As of the date
  hereof, the Company satisfies the eligibility requirements for the use of Form S-2 under the Securities Act of 1933, as amended. 

 -10- 



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

      3.26. Foreign Corrupt
  Practices; Sarbanes-Oxley.

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

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

 SECTION 4. REPRESENTATIONS
  AND WARRANTIES OF THE PURCHASER
  

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

      4.1.
  Investment Representations. The
  Purchaser understands that neither the offer nor the sale of the Note, the Warrant
  or the Shares has been registered under the Securities Act. The Purchaser also
  understands that the Note and Warrant are being offered and sold pursuant to
  an exemption from registration contained in the Securities Act based in part
  upon the Purchaser’s representations contained in the Agreement. The Purchaser
  hereby represents and warrants as follows: 

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

 -11- 



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

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

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

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

      (f)
  Rule 144. The Purchaser
  acknowledges and agrees that the Note and Warrant, and, if issued, the Shares,
  must be held indefinitely unless they are subsequently registered under the
  Securities Act or an exemption from such registration is available. The Purchaser
  has been advised or is aware of the provisions of Rule 144 promulgated under
  the Securities Act, which permits limited resale of shares purchased in a private
  placement subject to the satisfaction of certain conditions, including, among
  other things: the availability of certain current public information about the
  Company, the resale occurring not less than one year after a party has purchased
  and paid for the security to be sold, the sale being through an unsolicited
  “broker’s transaction” or in transactions directly with a market
  maker (as such term is defined under the Securities Exchange Act of 1934, as
  amended) and the number of shares being sold during any three-month period not
  exceeding specified limitations. 

      4.2.
  Transfer Restrictions. 
  The Purchaser acknowledges and agrees that the Note and Warrant and, if issued,
  the Shares, are subject to restrictions on transfer and will bear restrictive
  legends. 

      4.3.
  Acquisition of Shares. Until the Note is paid in full, the Purchaser may
  not acquire “beneficial ownership” (as defined by Rule 13d-3 of the Securities Exchange Act of 1934,
  as amended) of Shares except for those which are or may be acquired as payment on the Note or upon exercise of the Warrant. The foregoing
  covenant shall lapse if the Company defaults in the timely payment of any amount due under the Note. 

 -12- 



 SECTION 5. CONDITIONS FOR CLOSING
  

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

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

      (b)
  The Company shall have executed and delivered to the Purchaser at Closing the
  Transaction Documents. 

      (c)
  The Company shall have paid Gary S. Kohler and Scot W. Malloy, together, a $40,000
  cash origination fee related to the transactions contemplated hereby and shall
  have issued warrants (in form substantially similar to that of the Warrant)
  to purchase 100,000 shares of the Company’s Common Stock to each of Messrs.
  Kohler and Malloy. Purchaser acknowledges that the Company has previously paid
  $20,000 of the cash origination fee to Whitebox Advisors, LLC pursuant to a
  letter agreement dated May 13, 2004 and that only the $20,000 balance is due
  to Messrs. Kohler and Malloy at Closing. 

      (d)
  Mills shall have executed and delivered the Mills Guaranty to the Purchaser.
  

      (e)
  Maslon Edelman Borman & Brand, LLP, legal counsel to the Company, shall
  have delivered an opinion to the Purchaser with respect to the following matters:
  

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

 -13- 



           (ii) The Company is authorized to issue 150,000,000
  shares of Common Stock, par value $0.01 per share, of which, to the firm’s knowledge, 33,275,181 shares are issued and outstanding.
  To the firm’s knowledge, the Company has no outstanding Convertible Securities or any agreement or commitment to sell or issue
  any shares of capital stock or Convertible Securities, except as described herein. All issued and outstanding shares of the Company’s
  capital stock (a) have been duly authorized and validly issued, (b) are fully paid and nonassessable, (c) are free from any preemptive
  and cumulative voting rights and (d) were issued pursuant to an effective registration statement filed with the Commission and applicable
  state securities authorities or pursuant to valid exemptions under federal and state securities laws. To the firm’s knowledge,
  there are no outstanding rights of first refusal or proxy or shareholder agreements of any kind relating to any of the Company’s
  securities to which the Company or any of its executive officers and directors is a party. When issued in compliance with the provisions
  of the Note and the Warrant (and upon payment as provided by the Warrant), the Shares will be validly issued, fully paid and nonassessable,
  and will be free of any liens or encumbrances; provided, however,
  that the Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise
  required by such laws at the time a transfer is proposed. 

           (iii)
  All corporate action on the part of the Company, its officers, directors and
  shareholders necessary for the authorization of the Transaction Documents, the
  performance of all obligations of the Company under the Transaction Documents
  at the Closing, including the pledge of the Collateral as security for the Note,
  and the authorization, sale, issuance and delivery of the Shares as payment
  under the Note, upon conversion of the Note or upon exercise of the Warrant
  has been taken. The Transaction Documents, when executed and delivered, will
  be valid and binding obligations of the Company enforceable in accordance with
  their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization,
  moratorium or other laws of general application affecting enforcement of creditors’
  rights, (b) according to general principles of equity that restrict the availability
  of equitable remedies; and (c) to the extent that the enforceability of the
  indemnification provisions of the Registration Rights Agreement may be limited
  by applicable laws. Although it is not representing Mr. Mills in connection
  with the transactions contemplated by this Agreement and the Transactions Documents,
  nothing has come to such firm’s attention in connection with its regular
  representation of the Company that would cause it to believe that the Mills
  Guaranty, when executed and delivered, will not be a valid and binding obligation
  of Mills enforceable in accordance with its terms, except (a) as limited by
  applicable bankruptcy, insolvency, reorganization, moratorium or other laws
  of general application affecting enforcement of creditors’ rights and (b)
  according to general principles of equity that restrict the availability of
  equitable remedies. The sale of the Shares upon exercise of the Warrant or upon
  payment under the Note is not and will not be subject to any preemptive rights
  or rights of first refusal. 

 -14-



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

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

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

 SECTION 6. MISCELLANEOUS
  

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

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

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

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

 -15- 



 

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

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

      6.7.
  Notices. All notices, requests, consents, and other communications hereunder
  shall be in writing and shall be deemed effectively given and received when delivered in person or by national overnight courier service
  or by certified or registered mail, return receipt requested, or by telecopier, addressed as follows: 

	 	(a)	if to the Company, at
	 	 	 
	 	 	Wits Basin Precious Minerals Inc.
	 	 	520 Marquette Avenue, Suite 900
	 	 	Minneapolis, Minnesota 55402
	 	 	Attention: H. Vance White, Chief Executive Officer
	 	 	Facsimile: (612) 371-2077
	 	 	 
	 	 	with a copy to:
	 	 	 
	 	 	Maslon Edelman Borman & Brand, LLP
	 	 	90 South Seventh Street, Suite 3300
	 	 	Minneapolis, Minnesota 55402
	 	 	Attention: William M. Mower, Esq.
	 	 	Facsimile: (612) 642-8358
	 	 	 
	 	(b)	if to the Purchaser, in care of:
	 	 	 
	 	 	Whitebox Advisors, LLC
	 	 	3033 Excelsior Boulevard, Suite 300
	 	 	Minneapolis, Minnesota 55416
	 	 	Attention: Jonathan Wood, Chief Financial Officer
	 	 	Facsimile: (612) 253-6151


-16-




  
     with a copy to: 

     Messerli & Kramer P.A.

      150 South Fifth Street, Suite 1800

      Minneapolis, Minnesota 55402

      Attention: Jeffrey C. Robbins, Esq.

      Facsimile: (612) 672-3777. 

  



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

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

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

      6.11.
  Counterparts. This
  Agreement may be delivered via facsimile or other means of electronic communication,
  and may be executed in counterparts, each of which shall be an original, but
  all of which together shall constitute one instrument. 

      IN WITNESS WHEREOF,
  the parties hereto have hereunto affixed their signatures. 

	Wits Basin Precious Minerals Inc.	Pandora Select Partners L.P.
	 	 	 	 
	 	 	 	 
	By	/s/ Mark D. Dacko	By	 
	 	
      
	 	


	 	Mark D. Dacko, Chief Financial Officer	 	 
	 	 	Its	 
	 	 	 	
      



 -17-