Untitled Document


Exhibit 10.4

 SECURITY AGREEMENT 

      THIS SECURITY AGREEMENT
  (this “Agreement”)
  is made as of May 28, 2004, by and between Wits Basin Precious Minerals Inc., a Minnesota corporation ("Wits
  Basin"), and Pandora Select Partners L.P., a British Virgin Islands limited
  partnership ("Pandora”).
  

 RECITALS
  

      A. Wits Basin and Pandora have entered into a Purchase
  Agreement dated as of this date (the “Purchase Agreement”),
  pursuant to which Pandora is initially purchasing a $650,000 face amount promissory note (the “Initial
  Note”) from Wits Basin in consideration of a $650,000 loan (the “Initial
  Loan”) by Pandora to Wits Basin. Pandora is referred to herein as
  the “Secured Party.”
  

      B. Pursuant to the Purchase Agreement, and conditioned
  on Wits Basin’s timely satisfaction of particular milestones and conditions, Secured Party has agreed to purchase, and Wits Basin
  has agreed to sell, an additional secured convertible promissory note (the “Supplemental
  Note”) of at least $350,000 face amount (which, at Secured Party’s
  option, may be for up to $850,000 face amount inclusive of the foregoing $350,000) in consideration of a like supplemental loan (the
  “Supplemental Loan;”
  and together with the Initial Loan, the “Loans”);

      C. As a condition to making the Loans, Wits Basin
  has agreed to pledge to Secured Party all of Wits Basin’s assets (including the shares of capital stock and membership interests
  it owns in its subsidiaries), subject to no other security interest. 

      NOW, THEREFORE,
  in consideration of the agreements herein and in reliance upon the representations and warranties set forth herein and therein, the
  parties agree as follows: 

 ARTICLE 1.

  DEFINED TERMS 

      1.1     
  DEFINITIONS.
  Unless otherwise defined herein or unless the context otherwise requires, terms used in this Agreement, including its preamble and recitals,
  have the meanings provided in the Uniform Commercial Code in effect in the State of Minnesota (the “UCC”).
  In addition, the following terms when used in this Agreement, including its preamble and recitals, shall have the following meanings:
  

           “Loan
  Documents” means (a) this Agreement, (b) the Note and, if issued,
  (c) the Supplemental Note, (d) a Warrant of this date being issued, and (e) a Supplemental Warrant that may be issued in the future
  in connection with the Supplemental Note, each by Wits Basin to Secured Party to purchase particular shares of Wits Basin’s Common
  Stock, $0.01 par value, and (f) a Registration Rights Agreement and (g) a Call and Option Agreement, each of this date, between Wits
  Basin and Secured Party and the Purchase Agreement. 



           "Obligations”
  means the payment and other performance obligations under the Loan Documents. 

 ARTICLE 2.

  SECURITY INTEREST 

      2.1      GRANT
  OF SECURITY INTEREST. To secure the timely payment and performance in full
  of the Obligations, Wits Basin does hereby assign, grant and pledge to Secured Party, subject to no other secured rights, all of the
  estate, right, title and interest of Wits Basin in and to the Collateral as more fully described on Exhibit
  A hereto, whether now owned or later acquired or created, and including
  all proceeds of the Collateral, whether cash or non-cash (the “Collateral”).
  

      2.2      FINANCING
  STATEMENTS. 

           (a)
  Wits Basin hereby authorizes Secured Party to file all financing statements,
  continuation statements, assignments, certificates, and other documents and instruments with respect to the Collateral pursuant to the
  UCC and otherwise as may be necessary or reasonably requested by Secured Party to perfect or from time to time to publish notice of,
  or continue or renew the security interests granted hereby (including, such financing statements, continuation statements, certificates,
  and other documents as may be necessary or reasonably requested to perfect a security interest in any additional property rights hereafter
  acquired by Wits Basin or in any replacements, products or proceeds thereof), in each case in form and substance satisfactory to Secured
  Party. 

           (b)
  Secured Party will pay the cost of filing the same in all public offices where
  filing is necessary or reasonably requested by Secured Party and will pay any and all recording, transfer or filing taxes that may due
  in connection with any such filing. Wits Basin grants Secured Party the right, at any time and at Secured Party’s option, to file
  any or all such financing statements, continuation statements, and other documents pursuant to the UCC and otherwise as Secured Party
  reasonably may deem necessary or desirable. 

           (c)
  Wits Basin hereby authorizes the filing of any financing statements or continuation
  statements, and amendments to financing statements, or any similar document in any jurisdictions and with any filing offices as Secured
  Party may reasonably determine are necessary or advisable to perfect the security interests granted to Secured Party. Such financing
  statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral
  that describes such property in any other manner as Secured Party may reasonably determine is necessary, advisable or prudent to ensure
  the perfection of the security interest in the Collateral granted to Secured Party herein. 

      2.3      DEBTOR
  REMAINS LIABLE. 

           (a)
  Anything herein contained to the contrary notwithstanding, Wits Basin shall
  remain liable under its articles of incorporation, bylaws or other constituent documents (together, the "Constituent
  Documents”), to perform all of the obligations undertaken by it thereunder,
  all in accordance with and pursuant to the terms and provisions thereof, and Secured Party shall have no obligations or liabilities
  under the Constituent Documents by reason of or arising out of this Agreement, nor shall Secured Party be required or obligated in any
  manner to perform or fulfill any obligations of Wits Basin thereunder or to make any payment, or to make any inquiry as to the nature
  or sufficiency of any payment received by their or present or file any claim, or take any action to collect or enforce the payment of
  any amounts which may have been assigned to them or to which they may be entitled at any time or times. 

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      (b) If
  any default by Wits Basin under any of the Constituent Documents shall occur, Secured Party shall, at its option, be permitted (but
  shall not be obligated) to remedy any such default by giving written notice of such intent to Wits Basin and to the parties to such
  agreement. Any cure by Secured Party of Wits Basin’s default under a Constituent Document shall not be construed as an assumption
  by Secured Party of any obligations, covenants or agreements of Wits Basin under the Constituent Documents, and Secured Party shall
  not incur any liability to Wits Basin or any other person as a result of any actions undertaken by Secured Party in curing or attempting
  to cure any such default. This Agreement shall not be deemed to release or to affect in any way the obligations of Wits Basin under
  any of the Constituent Documents. 

 ARTICLE 3.

  REPRESENTATIONS AND WARRANTIES OF DEBTOR 

      Wits Basin makes the following representations and
  warranties to and in favor of Secured Party as of the date hereof. All of these representations and warranties shall survive the execution
  and delivery of this Agreement: 

      3.1
       ORGANIZATION.
  Wits Basin: 

           (a)
  is a corporation duly incorporated and validly existing and in good standing under the laws of the State of Minnesota; 

           (b)
  is duly qualified, authorized to do business as a foreign corporation in each U.S. and foreign jurisdiction where the character of its
  properties or the nature of its activities makes such qualification necessary; and 

           (c)
  has the corporate power (A) to enter into the Loan Documents and to perform its obligations thereunder and to consummate the transactions
  contemplated thereby, (B) to carry on its business as now being conducted and as proposed to be conducted by it, (C) to execute, deliver
  and perform this Agreement, (D) to take all action as may be necessary to consummate the transactions contemplated hereunder, and (E)
  to grant the liens and security interests provided for in this Agreement. 

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      3.2      OFFICES,
  LOCATION OF COLLATERAL. The chief executive office or chief place of business
  of Wits Basin is located at 520 Marquette Avenue, Suite 900, Minneapolis, Minnesota 55402. 

      3.3      TITLE
  AND LIENS. Wits Basin has good, valid, and marketable title to the Collateral,
  free from all liens and encumbrances of any kind. As a result of this Agreement, Secured Party will have a security interest in the
  Collateral, subordinate to no other security interest. 

      3.4     
  AUTHORIZATION; NO CONFLICT.
  Wits Basin has duly authorized, executed and delivered this Agreement, and Wits Basin’s execution and delivery hereof and its consummation
  of the transactions contemplated hereby and the compliance with the terms thereof: 

           (a)
  does not or will not contravene any legal requirements applicable to or binding
  on Wits Basin which could reasonably be expected to have a material adverse effect upon the Collateral or Secured Party’s rights
  therein;

           (b)
  does not or will not contravene or result in any breach of or constitute any
  default, or result in or require the creation of any lien upon any of Wits Basin’s property, under any agreement or instrument
  to which Wits Basin is a party or by which it or any of its properties may be bound or affected; and 

           (c)
  does not or will not require the consent or approval of any third party which
  has not already been obtained. 

       3.5     
  ENFORCEABILITY. This Agreement is a legal, valid and binding obligation
  of Secured Party, enforceable against Wits Basin in accordance with its terms, except to the extent that enforceability may be limited
  by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors’
  rights or by the effect of general equitable principles. 

       3.6     UCC
  ARTICLE 8. All membership interests or shares in each Wits Basin subsidiary,
  including Active Hawk Minerals, LLC, a Minnesota limited liability company, and Brazmin Ltda., a Brazilian limited liability company,
  that are part of the Collateral are securities governed by Article 8 of the UCC. 

 ARTICLE 4.

  COVENANTS OF DEBTOR 

      Wits
  Basin covenants to and in favor of Secured Party as follows: 

      4.1      COMPLIANCE
  WITH OBLIGATIONS. Wits Basin shall perform and comply in all material respects
  with all obligations and conditions on its part to be performed with respect to the Collateral. 

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      4.2      INFORMATION
  CONCERNING COLLATERAL. Wits Basin shall, promptly upon request, provide
  to Secured Party all information and evidence they it reasonably request concerning the Collateral to enable Secured Party to enforce
  the provisions of this Agreement. 

      4.3      DEFENSE
  OF COLLATERAL. Wits Basin shall defend its title to the Collateral and
  the interests of Secured Party in the Collateral pledged hereunder against the claims and demands of all third parties whomsoever. 

      4.4      MAINTENANCE
  OF COLLATERAL. Wits Basin shall not (i) fail to deliver to Secured Party
  a copy of each demand or notice received or given by it relating to any Constituent Document of Wits Basin or to any other Collateral
  which could reasonably be expected to have a material adverse effect upon the Collateral or Secured Party’s rights therein, or
  (ii) sell, contract to sell, assign, transfer or dispose of any of the Collateral, except in the ordinary course of business, or with
  the consent of Secured Party, which consent will not be unreasonably withheld.

      4.5      EVENTS
  OF DEFAULT. Wits Basin shall give to Secured Party prompt notice of any
  material default with respect to the Collateral of which Wits Basin has knowledge or has received notice. 

      4.6      PRESERVATION
  OF VALUE; LIMITATION OF LIENS. Wits Basin shall not take any action in
  connection with the Collateral which would impair in any material respect the interests or rights of Secured Party therein or with respect
  thereto, except as expressly permitted hereby; provided, however, that
  nothing in this Agreement shall prevent Wits Basin, prior to the exercise by Secured Party of any rights pursuant to the terms hereof,
  from undertaking Wits Basin’s operations in the ordinary course of business. Wits Basin shall not directly or indirectly create,
  incur, assume or suffer to exist any liens on or with respect to all or any part of the Collateral (other than the lien created by this
  Agreement). Wits Basin shall at its own cost and expense promptly take such action as may be necessary to discharge any such liens.
  

      4.7     
  NO OTHER FILINGS.
  Wits Basin shall not file or authorize to be filed in any jurisdiction any financing statements under the UCC or any like statement
  relating to the Collateral. 

      4.8      MAINTENANCE
  OF RECORDS. Wits Basin shall, at all times, keep accurate and complete
  records of the Collateral. Wits Basin shall permit representatives of Secured Party, upon reasonable prior notice, at any time during
  normal business hours of Wits Basin to inspect and make abstracts from Wits Basin’s books and records pertaining to the Collateral.
  Upon the occurrence and during the continuation of any Event of Default, at Secured Party’s request, Wits Basin shall promptly
  deliver copies of any and all such records to Secured Party. 

      4.9     
  PAYMENT OF TAXES.
  Wits Basin shall pay or cause to be paid, before any fine, penalty, interest or cost attaches thereto, all taxes, assessments and other
  governmental or non-governmental charges or levies (other than those taxes that it is contesting in good faith and by appropriate proceedings,
  and in respect of which it has established adequate reserves for such taxes) now or hereafter assessed or levied against the Collateral
  pledged by them hereunder and shall retain copies of, and, upon request, permit Secured Party to examine receipts showing payment of
  any of the foregoing. 

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      4.10     NAME;
  JURISDICTION OF ORGANIZATION. Wits Basin shall give Secured Party at least
  30 days prior written notice before Wits Basin changes its name, jurisdiction of organization or entity type and shall at the expense
  of Wits Basin execute and deliver such instruments and documents as may be required by Secured Party or applicable legal requirements
  to maintain a first perfected security interest in the Collateral. 

      4.11      PROCEEDS
  OF COLLATERAL. Wits Basin shall, at all times, keep pledged to Secured
  Party pursuant hereto all Collateral and all dividends, distributions, interest, principal and other proceeds received by Wits Basin
  with respect thereto, and all other Collateral and other securities, instruments, proceeds and rights from time to time received by
  or distributable to Wits Basin in respect of any Collateral, and shall not permit any issuer of such Collateral to issue any shares
  of stock or other equity interests which shall not have been immediately duly pledged to Secured Party hereunder. 

 ARTICLE 5.

  RIGHTS AND REMEDIES 

      5.1      EVENT
  OF DEFAULT DEFINED. Any event of default under the Note or, if issued,
  under the Supplemental Note (including events of non-compliance with this Agreement, as described in the Note or, if issued, the Supplemental
  Note) shall constitute an "Event of Default"
  hereunder. 

      5.2     
  REMEDIES UPON EVENT OF DEFAULT.
  

           (a) During any period
  during which an Event of Default shall have occurred and be continuing, Secured Party may (but shall be under no obligation to), directly
  or by using agent or broker:

                (i)
  proceed to protect and enforce the rights vested in it by this Agreement and
  under the UCC; 

                (ii)
  cause all moneys and other property pledged as security to be paid and/or delivered
  directly to it, and demand, sue for, collect and receive any such moneys and property; 

                (iii)
  cause any action at law or suit in equity or other proceeding to be instituted
  and prosecuted to collect or enforce any Obligations of Wits Basin or rights included in the Collateral, or for specific enforcement
  of any covenant or agreement contained herein, or in aid of the exercise of any power therein or herein granted, or for any foreclosure
  hereunder and sale under a judgment or decree in any judicial proceeding, or to enforce any other legal or equitable right vested in
  it by this Agreement or by law; 

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                (iv)
  foreclose or enforce any other agreement or other instrument by or under or
  pursuant to which the Obligations of Wits Basin are issued or secured; 

                (v)
  subject to Section
  5.2(b), sell, lease or otherwise dispose of any or all of the Collateral,
  in one or more transactions, at such prices as Secured Party may deem best, and for cash or on credit or for future delivery, without
  assumption of any credit risk, at any broker’s board or at public or private sale, without demand of performance or notice of intention
  to sell, lease or otherwise dispose of, or of time or place of disposition (except such notice as is required by applicable statute
  and cannot be waived), it being agreed that Secured Party may be purchasers or lessees on their own behalf at any such sale and that
  Secured Party or anyone else who may be the purchaser, lessee or recipient for value of any or all of the Collateral so disposed of
  shall, upon such disposition, acquire all of Wits Basin’s rights therein. Secured Party may adjourn any public or private sale
  or cause the same to be adjourned from time to time by announcement at the time and place fixed for the same, and such sale may, without
  further notice or publication, be made at any time or place to which the same may be so adjourned. If Secured Party sell any of the
  Collateral upon credit, after reasonable inquiry as to the credit worthiness of the purchaser, Wits Basin will be credited only with
  payments actually made by the purchaser, received by Secured Party and applied to the indebtedness of the purchaser. In the event the
  purchaser fails to pay for the Collateral, Secured Party may resell the Collateral and Wits Basin shall be credited with the proceeds
  of the sale; 

                (vi)
  incur expenses, including reasonable attorneys’ fees, consultants’
  fees, and other costs appropriate to the exercise of any right or power under this Agreement; 

                (vii)
  perform any obligation of Wits Basin hereunder and make payments, purchase,
  contest or compromise any encumbrance, charge, or lien, and pay taxes and expenses; 

                (viii)
  make any reasonable compromise or settlement deemed desirable with respect
  to any or all of the Collateral and extend the time of payment, arrange for payment installments, or otherwise modify the terms of,
  any or all of the Collateral; 

                (ix)
  secure the appointment of a receiver of any or all of the Collateral; 

                (x)
  exercise any other or additional rights or remedies granted to Secured Party
  under any other provision of this Agreement or exercisable by a secured party under the UCC, whether or not the UCC applies to the affected
  Collateral, or under any other applicable law and take any other action which Secured Party deem necessary or desirable to protect or
  realize upon their security interests in the Collateral or any part thereof; and/or

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                (xi)
  appoint a third party (who may be an employee, officer or other representative
  of Secured Party) to do any of the foregoing, or take any other action permitted hereunder, on behalf of Secured Party. 

           (b)
  If, pursuant to any law, prior notice of any action described in Section
  5.2(a) is required to be given to Wits Basin, Wits Basin hereby acknowledges
  that the minimum time required by such law, or if no minimum is specified, ten days, shall be deemed a reasonable notice period. 

           (c)
  Any action or proceeding to enforce this Agreement may be taken by Secured
  Party either in Wits Basin’s name or in Secured Party’s name, as Secured Party may deem necessary. 

           (d)
  All rights of marshalling of assets of Wits Basin, including any such right
  with respect to the Collateral, are hereby waived by Wits Basin. 

           (e)
  Secured Party shall incur no liability as a result of the sale of any or all
  of the Collateral at any private sale pursuant to Section 5.2(a)
  conducted in a commercially reasonable manner. Wits Basin hereby waives any claims against Secured Party arising by reason of the fact
  that the price at which any or all of the Collateral may have been sold at such a private sale was less than the price that might have
  obtained at a public sale or was less than the aggregate amount of the Obligations, even if Secured Party accept the first offer received
  and does not offer the Collateral to more than one offeree. 

      5.3     
  ATTORNEY-IN-FACT.
  Upon the occurrence and during the continuation of an Event of Default, Wits Basin hereby irrevocably constitutes and appoints Secured
  Party as its true and lawful attorney-in-fact to enforce all rights of Wits Basin with respect to the Collateral, including the right
  to give appropriate receipts, releases and satisfactions for and on behalf of and in the name of Wits Basin or, at the option of Secured
  Party, in the name of Secured Party, with the same force and effect as Wits Basin could do if this Agreement had not been made. If Secured
  Party shall so elect after the occurrence and during the continuation of an Event of Default hereunder, Secured Party shall have the
  right at all times to settle, compromise, adjust, or liquidate all claims or disputes directly with Wits Basin or any obligor of Wits
  Basin upon such terms and conditions as Secured Party may determine in its sole discretion, and to charge all costs and expenses thereof
  (including reasonable attorneys’ fees and charges) to Wits Basin’s account and to add them to the Obligations whereupon such
  costs and expenses shall be and become part of the Obligations. This power of attorney is a power coupled with an interest and shall
  be irrevocable. 

      5.4     
  EXPENSES; INTEREST.
  All costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Secured Party in connection with exercising
  any actions taken under Article 5, together with interest thereon (to the extent permitted by law) computed at a rate of 10% per annum
  (or if less, the maximum rate permitted by law) from the date on which such costs or expenses are invoiced to and become payable by
  Wits Basin, to the date of payment thereof, shall constitute part of the Obligations secured by this Agreement and shall be paid by
  Wits Basin to Secured Party within 10 days after written demand. 

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      5.5     
  NO IMPAIRMENT OF REMEDIES.
  If under applicable law, Secured Party proceed by either judicial foreclosure or by non-judicial sale or enforcement, Secured Party
  may, at its sole option, determine which of its remedies or rights to pursue without affecting any of their rights and remedies under
  this Agreement. If, by exercising any right and remedy, Secured Party forfeits any of its other rights or remedies, including any right
  to enter a deficiency judgment against Wits Basin or any third party (whether because of any applicable law pertaining to “election
  of remedies” or the like), Wits Basin nevertheless hereby consents to such action by Secured Party. To the extent permitted by
  applicable law, Wits Basin also waives any claim based upon such action, even if such action by Secured Party results in a full or partial
  loss of any rights of subrogation, indemnification or reimbursement which Wits Basin might otherwise have had but for such action by
  Secured Party or the terms herein. Any election of remedies which results in the denial or impairment of the right of Secured Party
  to seek a deficiency judgment against any third party shall not, to the extent permitted by applicable law, impair Wits Basin’s
  obligations hereunder. If Secured Party bids at any foreclosure or trustee’s sale or at any private sale permitted by law or this
  Agreement, Secured Party may bid all or less than the amount of the Obligations. To the extent permitted by applicable law, the amount
  of the successful bid at any such sale, whether Secured Party or any other party is the successful bidder, shall be conclusively deemed
  to be the fair market value of the Collateral and the difference between such bid amount and the remaining balance of the Obligations
  shall be conclusively deemed to be the amount of the Obligations. 

 ARTICLE 6.

  CERTAIN WAIVERS 

      6.1      MODIFICATION
  OF OBLIGATIONS. Wits Basin’s liability hereunder shall not be reduced,
  limited, impaired, discharged or terminated if Secured Party at any time with Wits Basin’s consent (or, to the extent permissible
  by the terms of the Loan Documents and law, without notice to or demand of Wits Basin):

           (a)
  renews, extends, accelerates, increases the rate of interest on, or otherwise
  changes the time, place, manner or terms, or otherwise modifies any of the Obligations (including any payment terms);

           (b)
  extends or waives the time for Wits Basin’s performance of, or compliance
  with, any term, covenant or agreement on its part to be performed or observed under the Loan Documents, or waives such performance or
  compliance or consents to a failure of, or departure from, such performance or compliance; 

           (c)
  settles, compromises, releases or discharges, or accepts or refuses any offer
  of performance with respect to, or substitutions for, any of the Obligations or any agreement relating thereto and/or subordinates the
  payment of the same to the payment of any other obligations;

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           (d)
  requests and accepts other guaranties of any of the Obligations and takes and
  holds security for the payment hereof or any of the Obligations;

           (e)
  releases, surrenders, exchanges, substitutes, compromises, settles, rescinds,
  waives, alters, subordinates or modifies, with or without consideration, any security for payment of any of the Obligations, any other
  guaranties of any of the Obligations, or any other obligation of any third party with respect to any of the Obligations; 

           (f)
  to the extent permitted by law, enforces and applies any security, if any,
  now or hereafter held by or for the benefit of Secured Party in respect hereof or any of the Obligations and directs the order or manner
  of sale thereof, or exercises any other right or remedy that Secured Party may have against any such security, in each case as Secured
  Party in its discretion may determine, including foreclosure on any collateral pursuant to one or more judicial or nonjudicial sales,
  whether or not every aspect of any such sale is commercially reasonable; or 

           (g)
  exercises any other rights available to it under any of the Loan Documents,
  at law or in equity. 

      6.2      SECURITY
  INTERESTS ABSOLUTE. All rights of Secured Party and the security interests
  hereunder, and all obligations of Wits Basin hereunder, shall be absolute and unconditional irrespective of: 

           (a)
  any failure or omission to assert or enforce or agreement or election not to
  assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of,
  any claim or demand or any right, power or remedy (whether arising under any Loan Document, at law, in equity or otherwise) with respect
  to any of the Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of
  any of the Obligations;

           (b)
  any rescission, waiver, amendment or modification of, or any consent to departure
  from, any of the terms or provisions (including provisions relating to events of default) hereof, in any other Loan Document or any
  agreement or instrument executed pursuant thereto, or of any other guaranty or security for any of the Obligations, in each case, whether
  or not in accordance with the terms hereof or any other Loan Document or any agreement relating to such other guaranty or security;

           (c)
  the application of payments received from any source (other than payments received
  from the proceeds of any security for any of the Obligations, except to the extent such security also serves as collateral for indebtedness
  other than the Obligations) to the payment of indebtedness of Wits Basin to Secured Party other than the Obligations, even though Secured
  Party might have elected to apply such payment to any part or all of the Obligations;

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           (d)
  Secured Party’s consent to the change, reorganization or termination of
  the corporate structure or existence of Wits Basin and to any corresponding restructuring of any of the Obligations; 

           (e)
  any other act or thing or omission, or delay to do any other act or thing,
  which may or might in any manner or to any extent vary the risk of Wits Basin as an obligor in respect of any of the Obligations; 

           (f)
  any Obligations or any agreement relating thereto, at any time being found
  to be illegal, invalid or unenforceable in any respect 

           (g)
  any defenses, set-offs or counterclaims which Wits Basin may allege or assert
  against Secured Party in respect of the Obligations; and 

           (h)
  whether Secured Party makes, or does not or fails to make, any Supplemental
  Loan to Wits Basin subsequent to the date hereof. 

      6.3      CERTAIN
  WAIVERS. Except as provided in Section 7.16, Wits Basin hereby waives any
  and all defenses afforded to a surety, including promptness, diligence, notice of acceptance and any other notice with respect to any
  of the Obligations and this Agreement and any requirement that Secured Party protect, secure, perfect or insure any security interest
  or lien, or any property subject thereto, or exhaust any right or take any action against Wits Basin or any other third party or entity
  or any collateral securing any of the Obligations, as the case may be.

      6.4      POSTPONEMENT
  OF SUBROGATION. Wits Basin agrees that it will not exercise any rights
  which it may acquire by way of rights of subrogation under this Agreement, by any payment made hereunder or otherwise, while this Agreement
  is in effect, unless such action is required to stay or prevent the running of any applicable statute of limitations. Any amount paid
  to Wits Basin on account of any such subrogation rights prior to such time shall be held in trust for Secured Party and shall immediately
  be paid to Secured Party and credited and applied against the Obligations. Any time after this Agreement has terminated and if Wits
  Basin has made payment to Secured Party of all of the Obligations, or if an action is required to stay or prevent the running of any
  applicable statute of limitations, then, at Wits Basin’s request, Secured Party will execute and deliver to Wits Basin appropriate
  documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to Wits Basin
  of an interest in the Obligations resulting from such payment by Wits Basin. 

 ARTICLE 7.

  MISCELLANEOUS 

      7.1      NOTICES.
  Any communications, including notices and instructions, between the parties hereto or notices provided herein to be given may be given
  to the following addresses:

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	 	(a)	if to Wits Basin, 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 Secured Party, in care of:
	 	 	 
	 	 	Whitebox Advisors, LLC
	 	 	3033 Excelsior Boulevard, Suite 300
	 	 	Minneapolis, Minnesota 55416
	 	 	Attention: Jonathan Wood, Chief Financial Officer
	 	 	Facsimile: (612) 253-6151
	 	 	 
	 	 	with a copy to:
	 	 	 
	 	 	Messerli & Kramer P.A.
	 	 	150 South Fifth Street, Suite 1800
	 	 	Minneapolis, Minnesota 55402
	 	 	Attention: Jeffrey C. Robbins, Esq.
	 	 	Facsimile: (612) 672-3777.


      All notices or other communications required or permitted
  to be given hereunder shall be in writing and shall be considered as properly given (a) on the date received in person, (b) on the date
  received by overnight delivery service (including Federal Express, UPS, ETA, Emery, DHL, AirBorne and other similar overnight delivery
  services), (c) on the fourth business day following the date mailed by first class United States mail, postage prepaid, registered or
  certified with return receipt requested, (d) on the next business day after being transmitted by telecopy or by other electronic means
  (including electronic mail). Any party shall have the right to change its address for notice hereunder to any other location within
  the continental United States by giving of notice to the other parties in the manner set forth hereinabove. 

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      7.2
       DELAY
  AND WAIVER; REMEDIES CUMULATIVE. No failure or delay by Secured Party in
  exercising any right or power hereunder shall operate as a waiver thereof,  nor shall any single or partial exercise of any such
  right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise
  thereof or the exercise of any other right or power. Any waiver, permit, consent or approval of any kind or character on the part of
  Secured Party of any breach or default under the Agreement or any waiver on the part of Secured Party of any provision or condition
  of this Agreement must be in writing and shall be effective only to the extent in such writing specifically set forth. No right, power
  or remedy herein conferred upon or reserved to Secured Party hereunder is intended to be exclusive of any other right, power or remedy,
  and every such right, power and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right, power
  and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or
  remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Resort
  to any or all security now or hereafter held by Secured Party may be taken concurrently or successively and in one or several consolidated
  or independent judicial actions or lawfully taken nonjudicial proceedings, or both. 

      7.3      ENTIRE
  AGREEMENT. This Agreement and any agreement, document or instrument referred
  to herein integrate all the terms and conditions mentioned herein or incidental hereto and supersede all oral negotiations and prior
  writings in respect of the subject matter hereof.

      7.4      GOVERNING
  LAW. This Agreement shall be governed by and construed in accordance with
  the laws of the State of Minnesota, exclusive of its conflict of laws rules. 

      7.5      SEVERABILITY.
  In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the
  validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 

      7.6      HEADINGS.
  Paragraph headings have been inserted in this Agreement as a matter of convenience for reference only and it is agreed that such paragraph
  headings are not a part of this Agreement and shall not be used in the interpretation of any provision of this Agreement. 

      7.7      WAIVER
  OF JURY TRIAL. WITS BASIN HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY
  WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
  WITH, THIS AGREEMENT OR ANY COURSE OR CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF SECURED PARTY.
  THIS PROVISION IS A MATERIAL INDUCEMENT FOR SECURED PARTY TO MAKE THE LOANS. 

      7.8      CONSENT
  TO JURISDICTION. Each party hereto agrees that any legal action or proceeding
  with respect to or arising out of this Agreement may be brought in or removed to the federal or state courts located in Hennepin County,
  Minnesota, as Secured Party may elect. By execution and delivery of this Agreement, each party hereto accepts, for themselves and in
  respect of their property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each of the parties hereto irrevocably
  consents to the service of process out of any of the aforementioned courts in any manner permitted by law. Nothing herein shall affect
  the right of Secured Party to bring legal action or proceedings in any other competent jurisdiction. Each party hereto hereby waives
  any right to stay or dismiss any action or proceeding under or in connection with this Agreement brought before the foregoing courts
  on the basis of forum non-conveniens.
   

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      7.9      SUCCESSORS
  AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit
  of the parties hereto and their respective successors and permitted assigns.

      7.10      COUNTERPARTS.
  This Agreement may be executed in one or more duplicate counterparts and when signed by all of the parties listed below, shall constitute
  a single binding agreement. Delivery of an executed signature page of this Agreement by facsimile transmission shall be as effective
  as delivery of a manually executed counterpart thereof. 

      7.11      BENEFIT
  OF AGREEMENT. Nothing in this Agreement, express or implied, shall give
  or be construed to give, any person other than the parties hereto and their respective permitted successors, transferees and assigns
  any legal or equitable right, remedy or claim under this Agreement, or under any covenants and provisions of this Agreement, each such
  covenant and provision being for the sole benefit of the parties hereto and their respective permitted successors, transferees and assigns.
  

      7.12      AMENDMENTS
  AND WAIVERS. No amendment, modification, termination or waiver of any provision
  of this Agreement or consent to any departure therefrom shall be effective unless the same shall be in writing and signed by each of
  the parties hereto. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the
  specific purpose for which it was given. 

      7.13      SURVIVAL
  OF AGREEMENTS. The provisions regarding the payment of expenses and indemnification
  obligations shall survive and remain in full force and effect regardless of the termination of this Agreement pursuant to Section
  7.14. 

      7.14      RELEASE
  AND SATISFACTION. Upon the indefeasible payment (whether in cash and/or
  other consideration which is satisfactory to Secured Party in their sole discretion) and performance in full of the Obligations, (i)
  this Agreement and the security interests created hereby shall terminate and Secured Party will return the Collateral, including all
  documentation evidencing or affecting the Collateral, and (ii) upon written request of Wits Basin, Secured Party shall execute and deliver
  to Wits Basin, at Wits Basin’s expense and without representation or warranty by or recourse to Secured Party, releases and satisfactions
  of all financing statements, mortgages, notices of assignment and other registrations of security. 

      7.15      REINSTATEMENT.
  This Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time any payment pursuant
  to this Agreement is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, reorganization, liquidation
  of Wits Basin or upon the dissolution of, or appointment of any intervenor or conservator of, or trustee or similar official for, Wits
  Basin or any substantial part of Wits Basin’s assets, or otherwise, all as though such payments had not been made. 

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      7.16      LIMITATION
  ON DUTY OF SECURED PARTY WITH RESPECT TO THE COLLATERAL. The powers conferred
  on Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty on Secured Party or any
  of its designated agents to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting
  for monies actually received by it hereunder, Secured Party shall have no duty with respect to any Collateral and no implied duties
  or obligations shall be read into this Agreement against Secured Party. Secured Party shall be deemed to have exercised reasonable care
  in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment that is substantially equivalent
  to that which Secured Party accords its own property, it being expressly agreed, to the maximum extent permitted by applicable law,
  that Secured Party shall have no responsibility for (a) taking any necessary steps to preserve rights against any parties with respect
  to any Collateral or (b) taking any action to protect against any diminution in value of the Collateral, but, in each case, Secured
  Party may do so and all expenses reasonably incurred in connection therewith shall be part of the Obligations. 

  IN WITNESS WHEREOF,
  the undersigned have hereunto affixed their signatures. 

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

	 	


	 	Mark D. Dacko, Chief Financial Officer	 	 
	 	 	 	Its
	 	 	 	 



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