Document:

EXHIBIT
      10.2

     

    NEITHER
      THIS CONVERTIBLE NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
      HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
      SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION (TOGETHER, THE “SECURITIES
      LAWS”) AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR
      ENCUMBERED IN THE ABSENCE OF COMPLIANCE WITH SUCH SECURITIES LAWS AND UNTIL
      THE
      ISSUER THEREOF SHALL HAVE RECEIVED AN OPINION FROM COUNSEL ACCEPTABLE TO IT
      THAT
      THE PROPOSED DISPOSITION WILL NOT VIOLATE ANY APPLICABLE SECURITIES LAWS.
      TRANSFER OF THIS CONVERTIBLE NOTE IS ALSO RESTRICTED BY THE CONVERTIBLE NOTES
      PURCHASE AGREEMENT REFERRED TO HEREIN. 

     

    THE
      PAYMENT AND PERFORMANCE OF THIS CONVERTIBLE NOTE IS SUBJECT TO THE TERMS AND
      CONDITIONS OF THAT CERTAIN CONVERTIBLE NOTES PURCHASE AGREEMENT ENTERED INTO
      AS
      OF APRIL 10, 2007, AS AMENDED BY THAT CERTAIN AMENDMENT TO CONVERTIBLE NOTES
      PURCHASE AGREEMENT DATED JUNE 19, 2007, BY THE HOLDER AND
      ISSUER.

     

    CERTIFICATE
      NO: 3

     

    CONVERTIBLE
      PROMISSORY NOTE

     

    
      	
              $4,000,000.00

            	
              June
                19, 2007

            

    

     

    FOR
      VALUE RECEIVED,
      Wits
      Basin Precious Minerals Inc., a corporation organized and existing under the
      laws of the State of Minnesota (“Issuer”),
      hereby unconditionally promises to pay to the order of China Gold LLC, a Kansas
      limited liability company, or its successors and assigns (the “Holder”)
      on or
      before September 17, 2007, subject to extension as set forth below (the
“Maturity
      Date”),
      the
      principal sum of up to Four Million Dollars and 00/100 Cents ($4,000,000.00)
      (the “Principal”),
      together with accrued and unpaid interest thereon, as provided herein, from
      the
      date set forth in Section
      3
      below
      until fully paid (the “Indebtedness”),
      all
      without relief from valuation or appraisement laws. This Convertible Promissory
      Note (the “Note”)
      is
      issued pursuant to that certain Convertible Notes Purchase Agreement dated
      as of
      April 10, 2007, as amended by that certain Amendment to Convertible Notes
      Purchase Agreement dated June 19, 2007, by and between Issuer and Holder (as
      amended, modified, or replace from time to time, the “Convertible
      Notes Purchase Agreement”).
      The
      Maturity Date may be extended for additional periods of thirty (30) days, but
      in
      no event later than December 31, 2007, upon the written request of Issuer,
      provided that at the time of the original Maturity Date defined above and the
      last day of any extension period that certain Agreement and Plan of Merger
      dated
      April 20, 2007 by and among Issuer, Easyknit Enterprises Holdings Limited and
      Race Merger, Inc. (as the same may be amended from time to time, the
“Merger
      Agreement”)
      has
      not been terminated by the parties thereto. In the event the Merger Agreement
      is
      terminated after the original Maturity Date defined above, the Indebtedness
      shall become due and payable upon the expiration of fifteen (15) days following
      Issuer’s receipt of written notice of Holder calling such Indebtedness due and
      payable due to the termination of the Merger Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1. Payment
      of Principal and Interest.
      Subject
      to acceleration, earlier required payment, in cash or by conversion, as provided
      for elsewhere in this Note, the Convertible Notes Purchase Agreement or any
      of
      the other agreements, documents, and instruments relating to any of the
      Indebtedness or any security therefor that are required by the Convertible
      Notes
      Purchase Agreement to be executed and delivered to or for the benefit of Holder
      (collectively, together with this Note and the Convertible Notes Purchase
      Agreement, the “Investment
      Documents”),
      the
      principal balance of this Note, and any accrued and unpaid interest thereon,
      shall be due and payable at the earlier of (i) the Maturity Date or (ii) such
      time Issuer and/or Issuer’s majority-owned subsidiaries receive cumulative
      financing from one or more third parties in the aggregate amount of at least
      $50,000,000 from and after the date of this Note (a “Substantial
      Financing”).
      

     

    Issuer
      shall make all payments payable in cash under this Note in lawful money of
      the
      United States. All payments paid by Issuer to Holder under this Note and under
      the other Investment Documents shall be applied in the following order of
      priority: (a) to amounts, other than principal and interest, due to Holder
      pursuant to this Note for all costs of collection of any kind, including
      reasonable attorneys’ fees and expenses; (b) to accrued but unpaid interest on
      this Note; and (c) to the unpaid principal balance of this Note. If Issuer
      makes
      any payment of principal, interest or other amounts upon the Indebtedness by
      check, draft, or other remittance, Holder shall not be deemed to have received
      such payment until Holder actually receives the payment instrument.

     

    2. Additional
      Conditional Consideration.
      In the
      event this Note is paid in full by Issuer in cash or other immediately available
      funds, whether pursuant to a Substantial Financing, Prepayment of the entire
      outstanding balance of this Note, or at the Maturity Date (but not upon the
      conversion or other satisfaction of this Note), Holder shall, subject to the
      limitations of Section 7.6, have the right to purchase, from the date of such
      payment in full until the earlier of (i) immediately prior to the Merger (as
      defined in Section 7.3) or (ii) five (5) years from the date such payment,
      up to
      4,000,000 shares of Issuer’s common stock at a price per share of $1.00 (the
“Purchase
      Right”).
       In
      the
      event the issuance of a Purchase Right is required pursuant to the terms of
      this
      Section 2, Issuer shall deliver to Holder an option agreement, with standard
      terms and conditions as agreed upon by Issuer and Holder, evidencing Holder’s
      purchase rights as set forth herein. Issuer shall provide, as reasonably
      practicable, Holder notice of the proposed time of effectiveness of a
      Substantial Financing or Merger within a reasonable time prior to such proposed
      effectiveness. The provisions of Section 8 shall apply as practicable to any
      such purchase rights arising from this Section to avoid any inequity to Issuer
      and Holder. 

     

    3. Calculation
      of Interest.
      Interest shall accrue on the outstanding principal balance at the end of each
      day on which any amount is outstanding under this Note at the rate of 8.25%
      (the
“Interest
      Rate”)
      per
      annum. Interest shall be calculated on a basis of the actual number of days
      elapsed over a year of 365 days, commencing as of the date hereof.

     

    4. Prepayment.
      This
      Note may be prepaid in cash or other immediately available funds, in whole
      or in
      part, by Issuer at any time and from time to time, without premium or penalty
      (a
“Prepayment”).
      

     

    5. Waiver.
      Payment
      of principal and interest due under this Note shall be made without presentment
      or demand. The Issuer and all others at any time liable directly or indirectly
      (including, without limitation, the Issuer, any co-makers, endorsers, sureties
      and guarantors, all of which are referred to herein as “Parties”),
      severally waive presentment, demand and protest, notice of protest, demand,
      and
      dishonor, and nonpayment of this Note, and all diligence in collection and
      agree
      to pay all costs of collection when incurred, including reasonable attorneys’
fees, and to perform and comply with each of the covenants, conditions,
      provisions, and agreements of the Issuer contained in every instrument now
      evidencing the Indebtedness. No release by Holder of any security for payment
      of
      the Indebtedness or any modification or restructuring in respect of any lien
      or
      security interest held or at any time obtained or acquired by Holder for payment
      of such Indebtedness shall operate to release, discharge, impair or alter the
      liability of any Party liable at any time directly or indirectly for payment
      of
      such Indebtedness.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6. Renewal
      and Modification.
      Issuer
      further agrees that the Indebtedness may be from time to time, extended,
      renewed, modified, rearranged, or evidenced by one or more other notes or
      obligations in substitution for this Note and upon and for such term or terms
      agreed to by Issuer and Holder in writing, and with or without notice to other
      Parties. Issuer agrees that upon and after such extension, renewal,
      modification, rearrangement, substitution, or other change in form of the
      Indebtedness, each of the other Parties shall remain liable in respect of the
      Indebtedness so renewed, extended, modified, rearranged, or otherwise evidenced
      in the same capacity and to the same extent as prior thereto. No release or
      discharge (in whole or in part) of any Party hereto by Holder shall in any
      manner impair, release, discharge, or alter the liability of any other
      Party.

     

    7. Conversion.

     

    7.1 Optional
      Conversion.
      Subject
      to the limitations set forth in Section 7.6 hereof, from and after the
      expiration of one hundred twenty (120) days from the date hereof, at any time
      while any portion of the Principal or accrued and unpaid interest under this
      Note is outstanding, the Holder shall have the right, at the Holder’s option, to
      convert (an “Optional
      Conversion”)
      all or
      any portion of the unpaid Principal and accrued interest under this Note (the
      “Conversion
      Amount”)
      into
      the number of shares of Issuer’s common stock (the “Common
      Stock”)
      computed by dividing the Conversion Amount by a conversion price of $1.00 per
      share (the “Conversion
      Price”).
      The
      Conversion Price shall be subject to adjustment from time to time pursuant
      to
      Section 8 hereof.

     

    7.2 Effect
      and Procedure of Optional Conversion.
      An
      Optional Conversion shall occur pursuant to the terms of this Note by Holder’s
      delivery to Issuer at its principal office a notice of Optional Conversion
      identifying the amount of the Optional Conversion (a “Notice
      of Optional Conversion”)
      (by
      facsimile or other reasonable means of communication) prior to 5:00 p.m. local
      time in Minneapolis, Minnesota on the Conversion Date. Holder shall not be
      required to physically surrender this Note to Issuer unless the entire unpaid
      Principal amount of this Note, together with accrued and unpaid interest, is
      so
      converted or otherwise paid in full. The Holder and Issuer shall maintain
      records showing the Principal and accrued and unpaid interest under the Note
      so
      converted and the dates of such conversions or shall use such other method,
      reasonably satisfactory to the Holder and Issuer, so as not to require physical
      surrender of this Note upon each such Optional Conversion. In the event of
      any
      dispute or discrepancy, such records of Issuer shall be controlling and
      determinative in the absence of manifest error. Notwithstanding the foregoing,
      if any portion of this Note is converted as aforesaid, the Holder may not
      transfer this Note unless the Holder first physically surrenders this Note
      to
      Issuer, whereupon Issuer will forthwith issue and deliver upon the order of
      the
      Holder a new note of like tenor, registered as the Holder (upon payment by
      the
      Holder of any applicable transfer taxes) may request, representing in the
      aggregate the remaining unpaid Principal and any unpaid and accrued interest
      of
      this Note. The Holder and any assignee, by acceptance of this Note, acknowledge
      and agree that, by reason of the provisions of this paragraph, following
      conversion of a portion of this Note, the unpaid and unconverted Principal
      amount of this Note may be less than the amount stated on the face hereof.
      

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Upon
      receipt of any Notice of Optional Conversion, Issuer shall, within five (5)
      Business Days, issue and deliver to such Holder at the address designated by
      such Holder a certificate or certificates for the number of shares of Common
      Stock the Holder shall be entitled to upon such Optional Conversion (bearing
      such legends as are required by applicable state and federal securities laws
      in
      the opinion of counsel to Issuer). The person or persons entitled to receive
      the
      shares of Common Stock issuable upon such Optional Conversion shall be treated
      for all purposes as the record holder or holders of such shares of Common Stock
      as of the Conversion Date. Upon Optional Conversion of all or a portion of
      this
      Note, Issuer will be forever released from all of its obligations and
      liabilities under this Note with regard to that portion of the Principal and
      accrued interest being converted, including without limitation the obligation
      to
      pay such portion of the Principal and accrued interest.

     

    7.3
      Automatic
      Conversion.
      All
      unpaid Principal and accrued and unpaid interest on this Note shall be
      automatically converted (an “Automatic
      Conversion”),
      effective immediately prior to the effective date of Issuer’s proposed merger
      transaction with Easyknit Enterprises Holdings Limited (the “Merger”),
      into
      the number of shares of Common Stock computed by dividing such outstanding
      amount by the then current Conversion Price.

     

    7.4
      Effect
      and Procedure of Automatic Conversion.
      Upon
      Automatic Conversion, Issuer will be forever released from all of its
      obligations and liabilities to Holder under this Note, including without
      limitation the obligation to pay the principal amount and accrued interest
      under
      the Note. Upon Holder’s surrender of this Note to Issuer at its principal
      office, Issuer shall, at its expense and as soon as practicable thereafter,
      issue and deliver to Holder one or more certificates representing that number
      of
      shares of Common Stock to which Holder is entitled, or, as applicable capital
      stock of the surviving company to the Merger pursuant to Section
      7.3
      hereof
      (in any case, bearing such legends as are required by applicable state and
      federal securities laws in the opinion of counsel to Issuer). The Automatic
      Conversion of this Note shall be deemed to have been made immediately prior
      to
      the effective time of the Merger, and the person or persons entitled to receive
      Common Stock upon such conversion shall be treated for all purposes as the
      record holder(s) of such Common Stock as of such date. 

     

    7.5
      No
      fractional shares.
      No
      fractional shares shall be issued upon any conversion of this Note. In lieu
      of
      any fractional share of Common Stock to which Holder would otherwise be
      entitled, an amount in cash equal to such fraction multiplied by the fair market
      value of a share of Common Stock, such fair market value to be determined as
      follows (as applicable): (a) if the Common Stock is traded on an exchange or
      is
      quoted on The NASDAQ National Market, NASDAQ SmallCap Market or the OTC Bulletin
      Board, then the average closing or last sale prices, respectively, reported
      for
      the date of conversion; (b) if the Common Stock is traded in the
      over-the-counter market, then the average of the closing bid and asked prices
      reported on the date of conversion; or (c) if the Common Stock is not publicly
      traded and there has been no Qualifying Sale, then fair market value of such
      stock will be determined by Issuer’s board of directors, acting in good faith
      utilizing customary business valuation criteria and methodologies (without
      discount for lack of marketability or minority interest).

     

    7.6
      Limitation
      of Conversion of Note or Exercise of Purchase Right.
      Except
      with respect to a conversion pursuant to Section
      7.3
      hereof,
      Holder may not convert any or all of the outstanding balance of this Note or
      exercise any Purchase Right set forth in Section 2 during the time period and
      to
      the extent that the shares of Common Stock that Purchaser could acquire upon
      such conversion or exercise would cause the Beneficial Ownership (as defined
      below) of Common Stock held by Holder and its Affiliates (as defined in the
      Convertible Notes Purchase Agreement) to exceed 4.99%. The parties shall compute
      “Beneficial Ownership" of Common Stock in accordance with Rule 13d-3 under the
      Securities Exchange Act of 1934, as amended. Holder will, at the request of
      Issuer, from time to time, notify Issuer of Holder’s computation of Holder’s
      Beneficial Ownership. By written notice to Issuer, Holder may waive the
      provisions of this Section 7.6, but any such waiver will not be effective until
      the 61st day after delivery thereof. Nothing herein shall preclude Holder or
      its
      Affiliates from disposing of a sufficient number of other shares of Common
      Stock
      beneficially owned by Holder or its Affiliates so as to thereafter permit the
      conversion of this Note or exercise of the Purchase Right.

     

    8. Conversion
      Price Adjustments.

     

    8.1 Adjustment
      for Stock Splits or Combinations.
      In the
      event of: (a) the payment of dividends on any of Issuer’s capital stock payable
      in Common Stock or securities convertible into or exercisable for Common Stock;
      (b) the subdivision of Issuer’s outstanding shares of Common Stock into a
      greater number of shares; or (c) the combination of Issuer’s outstanding shares
      of Common Stock, by reclassification or otherwise; then the Conversion Price
      shall be adjusted proportionately to reflect the reduction or increase in the
      value of each share of Common Stock.

     

    8.2 Notice
      of Adjustment.
      Upon
      any adjustment of the Conversion Price, Issuer shall give written notice thereof
      within thirty (30) days, by first-class mail, postage prepaid, addressed to
      Holder as shown on Issuer’s books, which notice shall state the adjusted
      Conversion Price and set forth in reasonable detail the method of calculation
      and the facts upon which such calculation is based.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    8.3 Effect
      of Reorganization, Reclassification, Merger, Etc.
      If at
      any time Issuer: (a) reorganizes its capital stock (other than by the issuance
      of shares of Common Stock in subdivision of outstanding shares of Common Stock,
      and other than by a share combination, as provided for in Section
      8.1);
      (b)
      consolidates or merges with another corporation, or sells, conveys, leases
      or
      otherwise transfers all or substantially all of its property to any other
      corporation or entity, which transaction is effected in a manner such that
      the
      holders of Common Stock shall be entitled to receive cash, stock, securities,
      ownership interest, or assets with respect to or in exchange for Common Stock;
      or (c) pays a dividend or makes any other distribution upon any class of its
      capital stock, which dividend or distribution is payable in Issuer securities
      or
      other Issuer property (other than cash); then, as a part of such transaction,
      lawful provision shall be made so that Holder shall have the right thereafter
      to
      receive, upon conversion of this Note, the number of shares of stock, ownership
      interests, or other securities or property of the Issuer or of the successor
      corporation or entity resulting from such transaction, or of the corporation
      or
      entity to which the Issuer property has been sold, conveyed, leased or otherwise
      transferred, as the case may be, which Holder would have been entitled to
      receive upon transaction if this Note had been converted immediately prior
      thereto. In any such case, appropriate adjustments (as determined by the
      Issuer’s board of directors) shall be made in the application of the provisions
      set forth in this Note (including an adjustment to the Conversion Price) so
      that
      the provisions set forth herein shall thereafter be applicable, as near as
      reasonably may be, in relation to any shares, ownership interests, or other
      property thereafter deliverable upon the conversion of this Note as if the
      Note
      had been converted immediately prior to such transaction and Holder had carried
      out the terms of the exchange as provided for by such transaction. The Issuer
      shall not effect any such capital reorganization, consolidation, merger or
      transfer unless, upon or prior to the consummation thereof, the successor
      corporation(s) or entity(ies) to which Issuer property has been sold, conveyed,
      leased or otherwise transferred shall assume by written instrument the
      obligation to deliver to Holder such shares of stock, ownership interests,
      securities, cash, or property which Holder is entitled to receive under the
      foregoing provisions of this Section
      8.3.

     

    8.4 Subsequent
      Issuance or Sale of Common Stock.

     

    (a) In
      the
      event Issuer shall issue, after the date hereof and while this Note remains
      outstanding (a “Dilutive
      Issuance”),
      (i)
      any additional shares of Common Stock or other class of the Issuer’s common
      stock (“Additional
      Shares”)
      or
      (ii) options, warrants or other securities that can, by their terms, be
      converted into Common Stock or other classes of Issuer’s common stock
      (“Additional
      Option Shares”)
      for
      consideration per share less than the Conversion Price, the Conversion Price
      shall automatically be adjusted to a price (calculated to the nearest cent)
      determined by dividing:

     

    (i)
      an
      amount equal to the sum of (x) the number of shares of Common Stock outstanding
      immediately prior to such issue or sale multiplied by the Conversion Price,
      (y)
      the number of shares of Common Stock issuable upon conversion or exchange of
      any
      obligations or of any shares of stock of Issuer outstanding immediately prior
      to
      such issue or sale multiplied by the Conversion Price, and (z) an amount equal
      to the aggregate “consideration actually received” by Issuer pursuant to such
      Dilutive Issuance, by

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (ii)
      the
      sum of the number of shares of Common Stock outstanding immediately after such
      issue or sale and the number of shares of Common Stock issuable upon conversion
      or exchange of any obligations or of any shares of stock of Issuer outstanding
      immediately after such issue or sale.

     

    Issuer
      shall immediately notify the holder of such adjusted Conversion
      Price.

     

    (b) If
      Issuer
      shall sell and issue shares of Common Stock or other class of Issuer’s common
      stock, or rights, options, warrants, or convertible securities containing the
      right to subscribe for or purchase shares of Common Stock or other class of
      Issuer’s common stock, for consideration consisting, in whole or in part, of
      property other than cash or its equivalent, then in determining the total
      consideration per share paid to Issuer for the purposes of this Section
      8.4,
      the
      board of directors of Issuer shall determine, in its discretion, the fair value
      of said property and such determination, if made in good faith, shall be binding
      upon the Holder.

     

    For
      purposes of this Section
      8.4,
      the
      following provisions will be applicable:

     

    (A) In
      the
      case of an issue or sale for cash of shares of Common Stock, the “consideration
      actually received’” by Issuer relating to a Dilutive Issuance therefore shall be
      deemed to be the amount of cash received in such Dilutive Issuance, before
      deducting therefrom any commissions or expenses paid by Issuer.

     

    (B) In
      case
      of a Dilutive Issuance (otherwise than upon conversion or exchange of
      obligations or shares of stock of Issuer) of additional shares of Common Stock
      for a consideration other than cash or a consideration partly other than cash,
      the amount of the consideration other than cash received by Issuer for such
      shares, then the board of directors shall determine, in its discretion, the
      fair
      the value of such consideration, which, if made in good faith, shall be binding
      upon the Holder.

     

    (C) In
      case
      of a Dilutive Issuance by Issuer in any manner of any rights to subscribe for
      or
      to purchase shares of Common Stock, or any option for the purchase of shares
      of
      Common Stock or stock convertible into Common Stock, all shares of Common Stock
      or stock convertible into Common Stock to which the holders of such rights
      or
      options shall be entitled to subscribe for or purchase pursuant to such rights
      or options shall be deemed “outstanding” as of the date of the offering of such
      rights or the granting of such options, as the case may be, and the minimum
      aggregate consideration named in such rights or options for the shares of Common
      Stock or stock convertible into Common Stock covered thereby, plus the
      consideration, if any, received by Issuer for such rights or options, shall
      be
      deemed to be the “consideration actually received” by Issuer (as of the date of
      the offering of such rights or the granting of such options, as the case may
      be)
      for the issuance of such shares.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (D) In
      case
      of a Dilutive Issuance by Issuer in any manner of any obligations or of any
      shares of stock of Issuer that shall be convertible into or exchangeable for
      Common Stock, all shares of Common Stock issuable upon the conversion or
      exchange of such obligations or shares shall be deemed issued as of the date
      such obligations or shares are issued, and the amount of the “consideration
      actually received” by Issuer for such additional shares of Common Stock shall be
      deemed to be the total of (X) the amount of consideration received by Issuer
      upon the issuance of such obligations or shares, as the case may be, plus (Y)
      the minimum aggregate consideration, if any, other than such obligations or
      shares, receivable by Issuer upon such conversion or exchange, except in
      adjustment of dividends.

     

    (E) The
      amount of the “consideration actually received” by Issuer upon the issuance of
      any rights or options referred to in subparagraph (C) above or upon the issuance
      of any obligations or shares which are convertible or exchangeable as described
      in subparagraph (D) above, and the amount of the consideration, if any, other
      than such obligations or shares so convertible or exchangeable, receivable
      by
      Issuer upon the exercise, conversion or exchange thereof shall be determined
      in
      the same manner provided in subparagraphs (A) and (B) above with respect to
      the
      consideration received by Issuer in case of the issuance of additional shares
      of
      Common Stock; provided,
      however,
      that if
      such obligations or shares of stock so convertible or exchangeable are issued
      in
      payment or satisfaction of any dividend upon any stock of Issuer other than
      Common Stock, the amount of the “consideration actually received” by Issuer upon
      the original issuance of such obligations or shares or stock so convertible
      or
      exchangeable shall be deemed to be the value of such obligations or shares
      of
      stock, as of the date of the adoption of the resolution declaring such dividend,
      as determined by the board of directors of Issuer at or as of that date. On
      the
      expiration of any rights or options referred to in subparagraph (C), or the
      termination of any right of conversion or exchange referred to in subparagraph
      (D), or any change in the number of shares of Common Stock deliverable upon
      exercise of such options or rights or upon conversion of or exchange of such
      convertible or exchangeable securities, the Conversion Price shall forthwith
      be
      readjusted to such Conversion Prices as would have obtained had the adjustments
      made upon the issuance of such options, rights or convertible or exchangeable
      securities been made upon the basis of the delivery of only the number of shares
      of Common Stock actually delivered or to be delivered upon the exercise of
      such
      rights or options or upon the conversion or exchange of such
      securities.

     

    9. Events
      of Default.
      Any one
      or more of the following events shall constitute an event of default (each,
      an
“Event
      of Default”)
      under
      this Note: (a) Issuer fails to timely pay as and when due any monetary
      obligation under this Note in accordance with the terms hereof; (b) Issuer’s
      assignment for the benefit of creditors, or filing of a petition in bankruptcy
      or for reorganization or to effect a plan or arrangement with creditors; (c)
      Issuer’s application for, or voluntary permission of, the appointment of a
      receiver of trustee for any or all Company property; (d) any action or
      proceeding described in the foregoing paragraphs (b) or (c) is commenced against
      Issuer and such action or proceeding is not vacated within sixty (60) days
      of
      its commencement; (e) Issuer’s dissolution or liquidation; and (f) an event of
      default under any other Investment Document shall have occurred.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    10. Rights
      and Remedies.
      Upon
      the occurrence, and during the continuation, of an Event of Default (a) all
      Indebtedness and all other amounts due and owing under this Note shall (at
      the
      option of Holder) immediately become due and payable without demand and without
      notice to Issuer, (b) Holder shall have all rights, powers and remedies set
      forth in the Investment Documents, as well as any and all rights and remedies
      available to it under any applicable law or as otherwise provided at law or
      in
      equity; (c) Issuer shall pay to Holder, in addition to the sums stated above,
      the costs of collection, regardless of whether litigation is commenced,
      including reasonable attorneys’ fees; and (d) notwithstanding any other
      provision of this Note, during the period of existence of such Event of Default,
      upon written notice from Holder, interest on the Indebtedness shall accrue
      and
      be paid, not at the Interest Rate, but at a default interest rate that is equal
      to 11.25% per annum.

    

    Holder
      may employ an attorney to enforce its rights and remedies hereunder and Issuer
      hereby agrees to pay Holder’s reasonable attorneys’ fees and other reasonable
      expenses, including reasonable expenses relating to any assistance provided
      by
      Holder to Issuer in resolving such defaults and amounts incurred by Holder
      in
      exercising any of Holder’s rights and remedies upon an Event of Default.
      Holder’s rights and remedies under this Note and the other Investment Documents
      shall be cumulative. Holder shall have all other rights and remedies not
      inconsistent herewith as provided under the Uniform Commercial Code as in effect
      in the State of Kansas, or otherwise by law, or in equity. No exercise by Holder
      of one right or remedy shall be deemed an election, and no waiver by Holder
      of
      any Event of Default shall be deemed a continuing waiver. No delay by Holder
      shall constitute a waiver, election, or acquiescence by it.

    

    11. Revival
      and Reinstatement of Note.
      To the
      extent that any payment to Holder or any payment or proceeds of any collateral
      received by Holder in reduction of the Indebtedness is subsequently invalidated,
      declared to be fraudulent or preferential, set aside or required to be repaid
      to
      a trustee, to Issuer (or Issuer’s successor) as a debtor-in-possession, or to a
      receiver or any other party under any bankruptcy law, state or federal law,
      common law or equitable cause, then the portion of the Indebtedness intended
      to
      have been satisfied by such payment or proceeds shall remain due and payable
      hereunder, be evidenced by this Note, and shall continue in full force and
      effect as if such payment or proceeds had never been received by Holder whether
      or not this Note has been marked “paid” or otherwise canceled or satisfied or
      has been delivered to Issuer, and in such event Issuer shall be immediately
      obligated to return the original Note to Holder and any marking of “paid” or
      other similar marking shall be of no force and effect.

     

    12. Authority.
      Issuer
      warrants and represents that the persons or officers who are executing this
      Note
      and the other Investment Documents on behalf of Issuer have full right, power
      and authority to do so, and that this Note and the other Investment Documents
      constitute valid and binding documents, enforceable against Issuer in accordance
      with their terms, and that no other person, entity, or party is required to
      sign, approve, or consent to, this Note.

     

    13. Governing
      Law; Consent to Forum.
      This
      Note shall be governed by the laws of the State of Kansas without giving effect
      to any choice of law rules thereof; provided,
      however,
      that if
      any of the collateral securing the Indebtedness shall be located in any
      jurisdiction other than Kansas, the laws of such jurisdiction shall govern
      the
      method, manner and procedure for foreclosure of Holder’s security interest, lien
      or mortgage upon such collateral and the enforcement of Holder’s other remedies
      in respect of such collateral to the extent that the laws of such jurisdiction
      are different from or inconsistent with the laws of Kansas. AS PART OF THE
      CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, ISSUER HEREBY CONSENTS TO THE
      JURISDICTION OF ANY STATE COURT LOCATED WITHIN JOHNSON COUNTY, KANSAS OR FEDERAL
      COURT IN THE DISTRICT OF KANSAS, AND WAIVES PERSONAL SERVICE OF ANY AND ALL
      PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
      CERTIFIED OR REGISTERED MAIL AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED
      UPON ACTUAL RECEIPT THEREOF. ISSUER WAIVES ANY OBJECTION TO JURISDICTION AND
      VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT
      TO
      ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. ISSUER FURTHER AGREES
      NOT TO ASSERT AGAINST HOLDER (EXCEPT BY WAY OF A DEFENSE OR COUNTERCLAIM IN
      A
      PROCEEDING INITIATED BY HOLDER) ANY CLAIM OR OTHER ASSERTION OF LIABILITY WITH
      RESPECT TO THIS NOTE, THE OTHER INVESTMENT DOCUMENTS, HOLDER’S CONDUCT OR
      OTHERWISE IN ANY JURISDICTION OTHER THAN THE FOREGOING
      JURISDICTIONS.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    14. WAIVER
      OF JURY TRIAL AND COUNTERCLAIMS.
      TO THE
      FULLEST EXTENT PERMITTED BY LAW, AND AS SEPARATELY BARGAINED-FOR CONSIDERATION
      TO HOLDER, ISSUER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY (WHICH HOLDER ALSO
      WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR IN ANY COUNTERCLAIM OF ANY KIND
      ARISING OUT OF OR OTHERWISE RELATING TO THIS NOTE, THE INDEBTEDNESS, THE
      COLLATERAL SECURING THE INDEBTEDNESS, OR THE HOLDER’S CONDUCT IN RESPECT OF ANY
      OF THE FOREGOING.

     

    15. Transfer
      of Note.
      Issuer
      shall not transfer any obligations hereunder without Holder’s prior written
      consent, which may be withheld in Holder’s sole and absolute discretion. With
      the prior written consent of Issuer, which shall not be unreasonably withheld,
      conditioned, or delayed, Holder may participate, sell, assign, transfer or
      otherwise dispose of all or any portion of its interest in this Note (including
      Holder’s rights, title, interests, remedies, powers and duties hereunder) to a
      purchaser, participant, any syndicate, or any other Person (each, a
“Note
      Purchaser”).
      In
      connection with any such disposition (and thereafter), Holder may, with adequate
      safeguards of confidentiality in a manner satisfactory to Issuer, disclose
      any
      financial information Holder may have concerning Issuer to any such Note
      Purchaser or potential Note Purchaser.

     

    16. Further
      Assurances.
      Issuer
      agrees to execute and deliver such further documents and to do such other acts
      as Holder may request in order to effect or carry out the terms of this Note
      and
      the other Investment Documents and the due performance of Issuer’s obligations
      hereunder and thereunder.

     

    17. Relationship
      to Security Agreement.
      This
      Note shall be entitled to the benefits of, shall be construed in accordance
      with
      any Security Agreement securing the Indebtedness.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    18. Miscellaneous.

     

    (a) Time
      is
      of the essence with respect to this Note.

     

    (b) Issuer
      hereby waives presentment, demand, protest, and notice of dishonor and protest.
      No waiver of any right or remedy of the Holder under this Note shall be valid
      unless in a writing executed by the Holder and any such waiver shall be
      effective only in the specific instance and for the specific purpose given.
      All
      rights and remedies of the Holder of this Note shall be cumulative and may
      be
      exercised singly, concurrently, or successively. 

     

    (c) Unless
      otherwise provided herein, any notice required or permitted to be given
      hereunder shall be given by Issuer to the Holder or the Holder to the Company
      in
      accordance with the Convertible Notes Purchase Agreement.

     

    (d) Any
      provision of this Note that is prohibited or unenforceable in any jurisdiction
      shall be ineffective to the extent of such prohibition or unenforceability
      without invalidating the remaining provisions hereof in that jurisdiction or
      affecting the validity or enforceability of such provision in any other
      jurisdiction.

     

    (e) This
      Note
      and the other Investment Documents collectively: (i) constitute the final
      expression of the agreement between Issuer and Holder concerning the
      Indebtedness; (ii) contain the entire agreement between Issuer and Holder
      respecting the matters set forth herein and in the other Investment Documents;
      and (iii) may not be contradicted by evidence of any prior or contemporaneous
      oral agreements or understandings between Issuer and Holder. Neither this Note
      nor any of the terms hereof may be terminated, amended, supplemented, waived
      or
      modified orally, but only by an instrument in writing executed by the party
      against which enforcement of the termination, amendment, supplement, waiver
      or
      modification is sought. 

     

    (f) If
      there
      is a conflict between or among the terms, covenants, conditions or provisions
      of
      this Note and the other Investment Documents, then any term, covenant, condition
      and/or provision that Holder may elect to enforce from time to time so as to
      enlarge the interest of Holder in its security for the Indebtedness, afford
      Holder the maximum financial benefits or security for the Indebtedness, and/or
      provide Holder the maximum assurance of payment of the Indebtedness and the
      Indebtedness in full, shall control. ISSUER ACKNOWLEDGES AND AGREES THAT IT
      HAS
      BEEN PROVIDED WITH SUFFICIENT AND NECESSARY TIME AND OPPORTUNITY TO REVIEW
      THE
      TERMS OF THIS NOTE AND EACH OF THE INVESTMENT DOCUMENTS WITH ANY AND ALL COUNSEL
      IT DEEMS APPROPRIATE, AND THAT NO INFERENCE IN FAVOR OF, OR AGAINST, HOLDER
      OR
      ISSUER SHALL BE DRAWN FROM THE FACT THAT EITHER SUCH PARTY HAS DRAFTED ANY
      PORTION OF THIS NOTE OR ANY OF THE INVESTMENT DOCUMENTS.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (g) The
      terms
“include”, “including” and similar terms shall be construed as if followed by
      the phrase “without being limited to.” The term “or” has, except where otherwise
      indicated, the inclusive meaning represented by the phrase “and/or.” Words of
      masculine, feminine or neuter gender shall mean and include the correlative
      words of the other genders, and words importing the singular number shall mean
      and include the plural number, and vice versa. All article, section, schedule,
      and exhibit captions are used for convenient reference only and in no way
      define, limit or describe the scope or intent of, or in any way affect, any
      such
      article, section, schedule, or exhibit. Unless the context of this Note clearly
      requires otherwise, references to the plural include the singular, references
      to
      the singular include the plural. Any reference in this Note or in the Investment
      Documents to this Note or to any of the Investment Documents shall include
      all
      alterations, amendments, changes, extensions, modifications, renewals,
      replacements, substitutions, and supplements thereto and thereof, as applicable.
      An Event of Default shall “continue” or be “continuing” until such Event of
      Default has been waived in writing by Holder or completely cured in accordance
      with the terms of the applicable Investment Documents.

     

    [The
      remainder of this page is intentionally blank. Signature page
      follows.]

     

    

     

     

     

     

     

     

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      Issuer
      has executed and delivered this Note as of the date first stated
      above.

     

     

    
      	 	 	
              ISSUER:     

              

              WITS
                BASIN PRECIOUS MINERALS INC.

              

              By: 

              Name: 

              Title:EXHIBIT
      10.3

    

    SECURITY
      AGREEMENT

     

    THIS
      SECURITY AGREEMENT (this “Agreement”)
      is
      dated as of June 19, 2007, and is by and between Wits Basin Precious Minerals
      Inc.,
      a
      Minnesota corporation
      (“Issuer”),
      and
      China Gold, LLC a Kansas limited liability company, its successors and assigns
      (together with its successors and assigns, “Purchaser”).

     

    RECITALS

     

    The
      following recitals are a material part of this Agreement.

     

    A.  Issuer
      and Purchaser are parties to that certain Convertible Notes Purchase Agreement
      dated as of April 10, 2007, as amended by the Amendment to the Convertible
      Notes
      Purchase Agreement dated as of June 19, 2007 (as the same may hereafter be
      further modified, amended, restated or supplemented from time to time, the
      “Convertible
      Notes Purchase Agreement”),
      pursuant to which, among other things, Issuer has agreed to issue and sell,
      and
      Purchaser has agreed to purchase from Issuer 8.25% Secured Convertible Notes
      in
      an aggregate principal amount of at least $12,000,000 (the “Notes”)
      within
      12 month of the Initial Closing Date. All capitalized terms used in this
      Agreement without definition have the definitions given to them in the
      Convertible Notes Purchase Agreement.

     

    B.  Pursuant
      to the Purchase Agreement, on April 10, 2007, Issuer sold, and Purchaser
      purchased, the Initial Note in the amount of $3,000,000. On May 7, 2007, Issuer
      sold, and Purchaser purchased, an Additional Note in the amount of $2,000,000.
      

     

    C.  Issuer
      desires that Purchaser acquire an Additional Note in the principal amount of
      $4,000,000.

     

    D.  Under
      the
      terms of the Convertible Notes Purchase Agreement, Purchaser’s obligation to
      purchase the Additional Note is subject to Purchaser’s receipt of a Security
      Agreement, in form and substance satisfactory to Purchaser and Issuer, granting
      Purchaser a security interest in all of the assets acquired from the use of
      proceeds for the sale of all of the Additional Notes.

     

    E.  To
      cause
      Purchaser to purchase the Additional Notes as contemplated in the Convertible
      Notes Purchase Agreement, Issuer has agreed to grant to Purchaser a security
      interest in certain of its existing property to secure all of its existing
      and
      future obligations to Purchaser, including all of its Obligations.

     

    AGREEMENT

     

    NOW,
      THEREFORE, to cause Purchaser to purchase the Additional Notes, and in
      recognition that Purchaser would not be required to purchase the Additional
      Notes but for Issuer’s promises and agreements hereunder, and for other good and
      valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged by the parties, Issuer and Purchaser agree as follows:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.  Grant
      of Security Interest.
      Issuer
      grants to Purchaser a present and continuing security interest in all of
      Issuer’s right, title and interest in and to all the following property of
      Issuer (collectively, the “Collateral”):

     

    (a)  Promissory
      note of China Global Mining Resources Limited, a corporation organized and
      existing under the laws of the British Virgin Islands (“China Global”) in the
      amount of US$2,000,000 dated as of June 15, 2007 in favor of
      Issuer;

     

    (b)  All
      contract rights and privileges and instruments now or hereafter assigned or
      pledged as security or guaranty the payment of the promissory note referenced
      in
      subsection (a) above, including but not limited to: (i) Joint Venture Agreement
      dated April 14, 2007 and Supplemental Agreement dated June 6, 2007 with Shaanxi
      Hua Ze Nickle Smelting Co. in respect of acquisition of 80% equity interest
      in
      Sino-American Hua Ze Nickel & Cobalt Metal Co., Ltd; and (ii) commodity
      purchase agreement dated June 15, 2007 with Shaanxi Hua Ze Nickle Smelting
      Co.
      for purchase of 40 tons of electrolytic nickel with purity of not less than
      99%;

     

    (c)  Promissory
      note of China Global in the amount of US $5,000,000 dated as of June 15, 2007
      in
      favor of Issuer;

     

    (d)  All
      contract rights and privileges and instruments now or hereafter assigned or
      pledged to secure or guaranty payment of the promissory note referenced in
      subsection (c) above, including, but not limited to: (i) Equity Transfer Heads
      of Agreement dated May 4, 2007 with Lu Benzhao in respect of purchase of 95%
      of
      the equity in Yun County Changjiang Mining Company Limited; and (ii) Equity
      and
      Asset Transfer Heads of Agreement, dated May 4, 2007 with Lu Benzhao, Lu Nan,
      Maanshan Zhaoyuan Mining Co., Ltd.and Xiananshan Mining Co., Ltd. In respect
      of
      purchase of 100% equity in Nanjing Sudan Mining Co., Ltd. And assets from both
      of Mannshan Zhaoyuan Mining Co., Ltd. And Xiaonanshan Mining Co.,
      Ltd.;

     

    (e)  All
      financing statements and other writings which now or hereafter evidence a
      security interest for the benefit of Issuer in the items specified in subsection
      (a) through (d) above;

     

    (f)  All
      additions and accessions to, replacements and substitutions for, proceeds of,
      and the use or operation of the property described in subsections (a) through
      (e) above, whether tangible or intangible, and, to the extent not otherwise
      included, all payments under any insurance policy (whether or not Purchaser
      is
      the loss payee thereof) and under any indemnity, warranty or guaranty, payable
      by reason of loss or damage to or otherwise with respect to any of the foregoing
      Collateral.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    To
      the
      extent that the Uniform Commercial Code does not apply to any item of the
      Collateral, it is the intention of the parties and this Agreement that Purchaser
      have a common law pledge or collateral assignment of such item of
      Collateral.

    

    2.  Security
      for Obligations.
      This
      Agreement secures the payment and performance of all of the
      Obligations.

     

    3.  [Reserved.]

     

    4.  Further
      Assurances.

     

    (a)  Issuer
      agrees that it shall, from time to time and at its sole expense, promptly
      execute and deliver all further instruments and documents, and take all further
      action, that may be necessary or desirable, or that Purchaser may reasonably
      request, in order to perfect and protect any security interest granted or
      purported to be granted hereby or to enable Purchaser to exercise and enforce
      its rights and remedies under this Agreement with respect to any Collateral.
      Without limiting the generality of the foregoing, Issuer shall: (i) if any
      Collateral is or shall become evidenced by any promissory note or other
      instrument or any certificate or document of title or the like, deliver and
      pledge to Purchaser such note, instrument, certificate or document duly endorsed
      with recourse by Issuer, and accompanied by duly executed instruments of
      transfer or assignment, all in form and content satisfactory to Purchaser;
      and
      (ii) execute and file such financing or continuation statements, or amendments
      thereto, and such other instruments or notices, as may be necessary or
      desirable, or as Purchaser may request, in order to perfect and preserve the
      security interests granted or purported to be granted hereby.

     

    (b)  Issuer
      hereby authorizes Purchaser to file one or more financing or continuation
      statements, and amendments thereto, relating to all or any part of the
      Collateral, without the signature of Issuer to the extent permitted by law.
      A
      copy of this Agreement shall be sufficient as a financing statement to the
      extent permitted by law.

     

    (c)  Issuer
      will furnish to Purchaser from time to time statements and schedules further
      identifying and describing the Collateral and such other reports in connection
      with the Collateral as Purchaser may reasonably request from time to time,
      all
      in reasonable detail.

     

    5.  Purchaser’s
      Duties.
      The
      powers conferred on Purchaser under this Agreement are solely to protect its
      interest in the Collateral and shall not impose any duty upon it 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 under this Agreement,
      Purchaser shall have no duty as to any Collateral or as to the taking of any
      necessary steps to preserve rights against other parties or any other rights
      pertaining to any Collateral. Upon full and complete payment and performance
      of
      all of the Obligations under the Investment Documents, Purchaser shall release
      the Collateral of the Liens created and granted under this Agreement and, at
      Issuer’s expense, execute and deliver to Issuer such documents as Issuer shall
      reasonably request to evidence such release.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6.  Issuer
      Remains Liable.
      Notwithstanding anything in this Agreement to the contrary, (a) Issuer shall
      remain liable under the contracts and agreements included in the Collateral
      to
      the extent set forth therein to perform all of its duties and obligations
      thereunder to the same extent as if this Agreement had not been executed, (b)
      the exercise by Purchaser of any of its rights under this Agreement shall not
      release Issuer from any of its duties or obligations under the contracts and
      agreements included in the Collateral, and (c) Purchaser shall not have any
      obligation or liability under the contracts and agreements included in the
      Collateral by reason of this Agreement, nor shall Purchaser be obligated to
      perform any of the obligations or duties of Issuer thereunder or to take any
      action to collect or enforce any claim for payment assigned under this
      Agreement.

     

    7.  Remedies.
      If any
      Event of Default shall have occurred and be continuing:

     

    (a)  Purchaser
      shall have the right pursuant to the applicable Uniform Commercial Code (or
      pursuant to applicable law for any Collateral not subject to the Uniform
      Commercial Code) to take immediate possession of the Collateral, and (i) to
      require Issuer to assemble the Collateral, at Issuer’s expense, and make it
      available to Purchaser at a place designated by Purchaser which is reasonably
      convenient to both parties, and (ii) to enter any of the premises of Issuer
      or
      wherever any of the Collateral shall be located, and to keep and store the
      same
      on such premises until sold or otherwise realized upon (and if such premises
      are
      the property of Issuer, Issuer agrees not to charge Purchaser for storage
      thereof).

     

    (b)  Purchaser
      shall have the right to sell or otherwise dispose of all or any Collateral
      at
      public or private sale or sales, with such notice as may be required by law,
      all
      as Purchaser, in its sole discretion, may deem advisable. Issuer agrees that
      ten
      (10) days written notice to Issuer of any public or private sale or other
      disposition of such Collateral shall be reasonable notice thereof, and such
      sale
      shall be at such locations as Purchaser may designate in such notice. Purchaser
      shall have the right to conduct such sales on Issuer’s premises, without charge
      therefor. All public or private sales may be adjourned from time to time in
      accordance with applicable law. Purchaser shall have the right to sell, lease
      or
      otherwise dispose of such Collateral, or any part thereof, for cash, credit
      or
      any combination thereof, and Purchaser may purchase all or any part of such
      Collateral at public or, if permitted by law, private sale and, in lieu of
      actual payment of such purchase price, may set off the amount of such price
      against the Obligations.

     

    (c)  Purchaser
      may exercise with respect to the Collateral all of the rights and remedies
      (i)
      provided for in this Agreement, (ii) provided under the Convertible Notes
      Purchase Agreement or under the other Investment Documents, (iii) afforded
      to a
      secured party upon a default under the Uniform Commercial Code, or (iv)
      otherwise available at law or in equity.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    8.  Indemnity
      and Expenses.

     

    (a)  Issuer
      agrees to indemnify Purchaser from and against any and all claims, losses and
      liabilities arising out of or relating to this Agreement or any of the
      Obligations (including enforcement of this Agreement and Purchaser’s exercise of
      its rights and remedies under this Agreement), unless such claims, losses and
      liabilities are caused solely by Purchaser’s gross negligence or willful
      misconduct.

     

    (b)  Issuer
      shall upon demand pay to Purchaser the amount of any and all charges, costs,
      fees and expenses, including the reasonable fees and disbursements of its
      counsel and of any experts and agents, that Purchaser may incur following
      Issuer’s default in connection with (i) the custody, preservation, use of, or
      the sale of, collection from, or other realization upon, any of the Collateral,
      (ii) the exercise or enforcement of any of the rights of Purchaser under this
      Agreement, or (iii) the failure by Issuer to perform or observe any of the
      provisions of this Agreement. All such fees, expenses and disbursements shall
      be
      deemed Obligations secured by this Agreement.

     

    9.  Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Kansas without regard to any choice of law rule thereof giving effect
      to the laws of any other jurisdiction; provided,
      however,
      that if
      any of the Collateral is located in any jurisdiction other than Kansas, then
      the
      laws of such jurisdiction shall govern the method, manner and procedure for
      foreclosure of Purchaser’s security interest in such Collateral and the
      enforcement of Purchaser’s other remedies in respect of such Collateral to the
      extent that the laws of such jurisdiction are different from or inconsistent
      with the laws of Missouri.

     

    10.  Organizational
      Representations; UCC Filing Offices.
      Issuer
      represents and warrants to Purchaser that (a) Issuer is a corporation
      incorporated under the laws of Minnesota and (b) Issuer’s chief executive office
      is located at 80 South Eighth Street, Suite 900, Minneapolis, Minnesota
      55402-8773. If Issuer changes the address of its chief executive office, or
      if
      Issuer changes its name, identity, corporate structure or state of incorporation
      (without implying any right of Issuer to make any such change without the prior
      consent of Purchaser), then, in each case, Issuer shall give Purchaser not
      less
      than ten (10) Business Days prior written notice thereof.

     

    11.  Miscellaneous.
      

     

    (a)  No
      amendment or waiver of any provision of this Agreement nor consent to any
      departure by Issuer from the terms or provisions of this Agreement, shall in
      any
      event be effective unless it shall be in writing and signed by the party against
      whom enforcement of such amendment, waiver or consent is sought, and then such
      waiver or consent shall be effective only in the specific instance and for
      the
      specific purpose for which given. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (b)  The
      paragraph and section headings in this Agreement are solely for convenience
      and
      shall not be deemed to limit or otherwise affect the meaning or construction
      of
      any part of this Agreement. This document shall be construed without regard
      to
      any presumption or rule requiring construction against the party causing such
      document or any portion thereof to be drafted. The section and other headings
      in
      this Agreement are for convenience of reference only and shall not limit or
      otherwise affect any of the terms of this Agreement. Any pronoun used in this
      Agreement shall be deemed to cover all genders. The terms “include”, “including”
and similar terms shall be construed as if followed by the phrase “without being
      limited to.” The term “or” has, except where otherwise indicated, the inclusive
      meaning represented by the phrase “and/or.” The words “hereof,” “herein,”
“hereby,” “hereunder,” and similar terms in this Agreement refer to this
      Agreement as a whole and not to any particular provision or section of this
      Agreement. An Event of Default shall “continue” or be “continuing” until such
      Event of Default has been waived in writing by Purchaser.

     

    

    (c)  If
      any
      provision or provisions of this Agreement shall be unlawful, then such provision
      or provisions shall be null and void, but the remainder of the Agreement shall
      remain in full force and effect and be binding on the parties.

     

    

    (d)  This
      Agreement may be validly executed and delivered by fax or other electronic
      transmission and in one or more counterpart signature pages by different
      signatories thereto.

     

    

    (e)  Any
      notice or demand that Purchaser may wish to give to Issuer shall be served
      upon
      it in the fashion prescribed for notices in the Convertible Notes Purchase
      Agreement at the address and facsimile number for Issuer set forth in the
      Convertible Notes Purchase Agreement, and any notice or demand so sent shall
      be
      deemed to be served as set forth in the Convertible Notes Purchase
      Agreement.

     

    

    12.  Waiver
      of Jury Trial.
      TO THE
      FULLEST EXTENT PERMITTED BY LAW, AND AS SEPARATELY BARGAINED-FOR CONSIDERATION
      TO PURCHASER, ISSUER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY (WHICH PURCHASER
      ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING
      OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT OR ANY OF THE OTHER INVESTMENT
      DOCUMENTS, THE OBLIGATIONS, THE COLLATERAL, PURCHASER’S CONDUCT IN RESPECT OF
      ANY OF THE FOREGOING, ANY OTHER INVESTMENT DOCUMENT OR THE TRANSACTIONS
      CONTEMPLATED HEREBY OR THEREBY, REGARDLIESS OF WHICH PARTY INITATES SUCH ACTION,
      SUIT, PROCEEDING OR COUNTERCLAIM. TO EFFECTUATE THE FOREGOING, PURCHASER IS
      HEREBY GRANTED AN IRREVOCABLE POWER OF ATTORNEY TO FILE, AS ATTORNEY-IN-FACT
      FOR
      ISSUER, A COPY OF THIS AGREEMENT IN ANY COURT,
      AND THE COPY OF THIS AGREEMENT SO FILED SHALL CONCLUSIVELY BE DEEMED TO
      CONSTITUTE ISSUER’S WAIVER OF TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR
      OTHERWISE RELATING TO THIS AGREEMENT OR ANY OF THE OTHER INVESTOR DOCUMENTS,
      THE
      OBLIGATIONS, THE COLLATERAL OR PURCHASER’S CONDUCT IN RESPECT OF ANY OF THE
      FOREGOING.

     

    [Remainder
      of page intentionally left blank; signature page follows.]

     

     

     

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have executed this Agreement on the date first written
      above.

     

    

      
        	
                ISSUER:

              	Wits
                Basin Precious Minerals Inc.
	
                 

              	a
                Minnesota corporation
	 	 	 
	
                 

              	
                By:

              	 
	 	 	
                

              
	 	 	 
	
                PURCHASER:

              	China
                Gold, LLC
	 	a
                Kansas limited liability company
	 	 	 
	
                 

              	
                By:

              	
                China
                  Gold, LLC

              
	
                 

              	
                Its:

              	
                General
                  Partner

              
	 	 	 
	 	 	 
	
                 

              	
                By:

              	 
	 	 	
                

              

      

    

    
 

    

    [SIGNATURE
      PAGE TO SECURITY AGREEMENT]

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