Document:

Exhibit
      10.2

    

    THIS
      NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
      APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
      DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF
      AN
      OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY
      TO
      THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
      HEREOF MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
      FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES
      LAWS.

    

    WITS
      BASIN PRECIOUS MINERALS INC.

    

    10%
      Senior Secured Convertible Promissory Note

    due
      February 11, 2009

    

    
      	
              No.
                PP-1

            	
              $1,020,000

            
	
              Dated:
                February 11, 2008

            	 

    

    

    For
      value
      received, WITS
      BASIN PRECIOUS MINERALS INC.,
      a
      Minnesota corporation (the “Maker”),
      hereby promises to pay to the order of Platinum Long Term Growth V, LLC, a
      Delaware limited liability company with an address of 152 West 57th
      Street,
      54th
      Floor,
      New York, NY 10019 (together with its successors, representatives, and permitted
      assigns, the “Holder”),
      in
      accordance with the terms hereinafter provided, the principal amount of
ONE
      MILLION TWENTY THOUSAND DOLLARS
      ($1,020,000), together with interest thereon. 

     

    All
      payments under or pursuant to this Note shall be made in United States Dollars
      in immediately available funds to the Holder at
      the
      address of the Holder first set forth above or at such other place as the Holder
      may designate from time to time in writing to the Maker or by wire transfer
      of
      funds to the Holder’s account, instructions for which are attached hereto as
Exhibit
      A.
      Subject
      to Section 3.1(b) hereof, the
      outstanding principal balance of this Note shall be due and payable on February
      11, 2009 (the “Maturity
      Date”)
      or at
      such earlier time as provided herein. 

    

    ARTICLE
      I

    

    Section
      1.1 Purchase
      Agreement. This Note has been executed and delivered pursuant to the Note
      and Warrant Purchase Agreement, dated as of February 11, 2008 (the “Purchase
      Agreement”), by and between the Maker
      and the
      Holder. Capitalized terms used and not otherwise defined herein shall have
      the
      meanings set forth for such terms in the Purchase Agreement. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      1.2 Interest.
      Beginning on the issuance date of this Note (the “Issuance Date”), the
      outstanding principal balance of this Note shall bear interest, in arrears,
      at a
      rate per annum equal to ten percent (10%), payable quarterly in cash on March
      31, 2008 and the last day of each succeeding fiscal quarter after March 31,
      2008. Interest shall be computed on the basis of a 360-day year of twelve (12)
      30-day months, shall compound monthly and shall accrue commencing on the
      Issuance Date. Furthermore,
      upon the occurrence of an Event of Default (as defined in Section 2.1 hereof),
      the Maker will pay interest to the Holder, payable on demand, on the outstanding
      principal balance of and unpaid interest on the Note from the date of the Event
      of Default until such Event of Default is cured at the rate of the lesser of
      eighteen percent (18%) and the maximum applicable legal rate per
      annum. 

     

    Section
      1.3 Payment
      of Principal; Prepayment. The Principal Amount hereof shall be paid in full
      on the Maturity Date or, if earlier, upon acceleration of this Note in
      accordance with the terms hereof. Any amount of principal repaid hereunder
      may
      not be reborrowed. The Maker may prepay all or any portion of the principal
      amount of this Note upon seven (7) business days’ prior written notice to the
      Holder without premium or penalty (other than as set forth in Section 3.6);
      provided, that, it is understood that the Maker shall be obligated to honor
      all
      conversion requests during such seven (7) business day period.

     

    Section
      1.4 Security
      Agreement. The obligations of the Maker hereunder are secured by, among
      other things, a continuing security interest in certain assets of the Maker
      pursuant to the terms of a Security Agreement dated as of February 11, 2008
      by
      and among the Maker and certain of the Maker’s subsidiaries, on the one hand,
      and the Holder on the other hand. 

     

    Section
      1.5 Payment
      on Non-Business Days. Whenever any payment to be made shall be due on a
      Saturday, Sunday or a public holiday under the laws of the State of New York,
      such payment may be due on the next succeeding business day and such next
      succeeding day shall be included in the calculation of the amount of accrued
      interest payable on such date.

     

    Section
      1.6 Transfer.
      This Note may be transferred or sold, subject to the provisions of Section
      5.8
      of this Note, or pledged, hypothecated or otherwise granted as security by
      the
      Holder.

     

    Section
      1.7 Replacement.
      Upon receipt of a duly executed, notarized and unsecured written statement
      from
      the Holder with respect to the loss, theft or destruction of this Note (or
      any
      replacement hereof) and a standard indemnity, or, in the case of a mutilation
      of
      this Note, upon surrender and cancellation of such Note, the Maker shall issue
      a
      new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed
      or
      mutilated Note.

     

    Section
      1.8 Use
      of
      Proceeds. The Maker shall use the proceeds of this Note as set forth in the
      Purchase Agreement.

    

    ARTICLE
      II

    

    EVENTS
      OF DEFAULT; REMEDIES

    

    Section
      2.1 Events
      of Default. The occurrence of any of the following events shall be an
“Event of Default” under this Note:

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    (a) any
      default in the payment of (1) the principal amount hereunder when due, or (2)
      interest on, or liquidated damages in respect of, this Note, within three (3)
      business days after the same shall become due and payable (whether on the
      Maturity Date or by acceleration or otherwise); or

     

    (b) the
      Maker
      shall fail to observe or perform any other covenant or agreement contained
      in
      this Note, which failure is not cured, if possible to cure, within 3 business
      days after notice of such default sent by the Holder; or

     

    (c) the
      suspension from listing, without subsequent listing on any one of, or the
      failure of the Common Stock to be listed on at least one of the OTC Bulletin
      Board, the American Stock Exchange, the Nasdaq Capital Markets, the Nasdaq
      Global Market, the Nasdaq Global Select Market or The New York Stock Exchange,
      Inc. for a period of five (5) consecutive Trading Days; or

     

    (d) the
      Maker’s notice to the Holder, including by way of public announcement, at any
      time, of its inability to comply (including for any of the reasons described
      in
      Section 3.7(a) hereof) or its intention not to comply with proper requests
      for
      conversion of this Note into shares of Common Stock; provided, that, an
      inability to convert this Note pursuant to the terms of Section 3.4 shall not
      constitute an Event of Default hereunder or under the other Transaction
      Documents; or

     

    (e) the
      Maker
      shall fail to (i) timely deliver the shares of Common Stock upon conversion
      of
      the Note or any interest accrued and unpaid, (ii) make the payment of any fees
      and/or liquidated damages under this the Purchase Agreement or the other
      Transaction Documents, which failure, in the case of (ii) above, is not remedied
      within three (3) business days after the Maker’s receipt of notice thereof from
      Holder; or

     

    (f) [Reserved];
      or 

     

    (g) default
      shall be made in the performance or observance of any material covenant,
      condition or agreement contained in the Purchase Agreement or any other
      Transaction Document that is not covered by any other provisions of this Section
      2.1 and such default is not fully cured within three (3) business days after
      the
      Maker receives notice from the Holder of the occurrence thereof; or

     

    (h) any
      material representation or warranty made by the Maker herein or in the Purchase
      Agreement or any other Transaction Document shall prove to have been false
      or
      incorrect or breached in a material respect on the date as of which made;
      or

     

    (i) the
      Maker
      shall (A) default in any payment of any amount or amounts of principal of or
      interest on any Indebtedness (other than the Indebtedness hereunder) the
      aggregate principal amount of which Indebtedness is in excess of
      $200,000 or
      (B)
      default in the observance or performance of any other agreement or condition
      relating to any Indebtedness, that, in the aggregate, exceeds $200,000, or
      contained in any instrument or agreement evidencing, securing or relating
      thereto, or any other event shall occur or condition exist, the effect of which
      default or other event or condition is to cause, or to permit the holder or
      holders or beneficiary or beneficiaries of such Indebtedness to cause with
      the
      giving of notice if required, such Indebtedness to become due prior to its
      stated maturity; or

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    (j) the
      Maker
      shall (i) apply for or consent to the appointment of, or the taking of
      possession by, a receiver, custodian, trustee or liquidator of itself or of
      all
      or a substantial part of its property or assets, (ii) make a general assignment
      for the benefit of its creditors, (iii) commence a voluntary case under the
      United States Bankruptcy Code (as now or hereafter in effect) or under the
      comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition
      seeking to take advantage of any bankruptcy, insolvency, moratorium,
      reorganization or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition filed against it
      in
      an involuntary case under United States Bankruptcy Code (as now or hereafter
      in
      effect) or under the comparable laws of any jurisdiction (foreign or domestic),
      (vi) issue a notice of bankruptcy or winding down of its operations or issue
      a
      press release regarding same, or (vii) take any action under the laws of any
      jurisdiction (foreign or domestic) analogous to any of the foregoing; or

     

    (k) a
      proceeding or case shall be commenced in respect of the Maker, without its
      application or consent, in any court of competent jurisdiction, seeking (i)
      the
      liquidation, reorganization, moratorium, dissolution, winding up, or composition
      or readjustment of its debts, (ii) the appointment of a trustee, receiver,
      custodian, liquidator or the like of it or of all or any substantial part of
      its
      assets in connection with the liquidation or dissolution of the Maker or (iii)
      similar relief in respect of it under any law providing for the relief of
      debtors, and such proceeding or case described in clause (i), (ii) or (iii)
      shall continue undismissed, or unstayed and in effect, for a period of thirty
      (30) days or any order for relief shall be entered in an involuntary case under
      United States Bankruptcy Code (as now or hereafter in effect) or under the
      comparable laws of any jurisdiction (foreign or domestic) against the Maker
      or
      action under the laws of any jurisdiction (foreign or domestic) analogous to
      any
      of the foregoing shall be taken with respect to the Maker and shall continue
      undismissed, or unstayed and in effect for a period of thirty (30) days;
      or

     

    (l) the
      failure of the Maker to instruct its transfer agent to remove any legends from
      shares of Common Stock eligible to be sold under Rule 144 of the Securities
      Act
      and issue such unlegended certificates to the Holder within three (3) business
      days of the Holder’s request so long as the Holder has provided reasonable
      assurances to the Maker that such shares of Common Stock can be sold pursuant
      to
      Rule 144.

    
      
        
        

      

      
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    Section
      2.2 Remedies
      Upon An Event of Default. If an Event of Default shall have occurred and
      shall be continuing, the Holder of this Note may at any time at its option,
      upon
      delivery of written notice to the Maker, declare the entire unpaid principal
      balance of this Note, together with all interest accrued hereon, due and
      payable, and thereupon, the same shall be accelerated and so due and payable,
      without presentment, demand, protest, or notice, all of which are hereby
      expressly unconditionally and irrevocably waived by the Maker; provided,
however, that upon the occurrence of an Event of Default described
      (i) in
      Sections 2.1 (j) or (k) above, the outstanding principal balance and accrued
      interest hereunder shall be immediately due and payable without notice or demand
      of any kind, (ii) in Sections 2.1(b)-(i) and (l) above, the Holder, in its
      sole
      and absolute discretion, may (a) demand the prepayment of this Note pursuant
      to
      Section 3.6(a) hereof (to the extent permitted by Section 3.6(a) hereof), (b)
      demand that all or a portion of the principal amount of this Note then
      outstanding be converted in accordance with Article III hereof into shares
      of
      Common Stock at a Conversion Price equal to the lesser of (A) the Conversion
      Price on the date of such demand or (B) 85% of the lowest VWAP for the 10
      Trading Days preceding the date of such demand, with all accrued and unpaid
      interest on such principal amount to be paid to the Holder in cash, or (c)
      exercise or otherwise enforce any one or more of the Holder’s rights, powers,
      privileges, remedies and interests under this Note, the Purchase Agreement
      or
      applicable law and (iii) in the case of any Event of Default arising pursuant
      to
      Section 2.1(a) above, no acceleration shall be effective unless the Maker shall
      have been given at least two (2) business days’ prior written notice of such
      acceleration and opportunity to cure such Event of Default during such two
      (2)
      business day period. No course of delay on the part of the Holder shall operate
      as a waiver thereof or otherwise prejudice the right of the Holder. No remedy
      conferred hereby shall be exclusive of any other remedy referred to herein
      or
      now or hereafter available at law, in equity, by statute or
      otherwise.

     

    Section
      2.3 Put;
      Special Conversion. If, at any time after August 11, 2008, the seven
      trailing Trading Day VWAP of the Common Stock shall be less than $0.30 (as
      appropriately adjusted for splits, combinations and the like occurring after
      the
      Issuance Date), the Holder, at any time and from time to time thereafter and
      in
      its sole discretion, may (i) cause the Maker to prepay in cash all or any
      portion of this Note at a price equal to one hundred and fifteen percent (115%)
      of the aggregate principal amount of this Note being prepaid plus all accrued
      and unpaid interest applicable at the time of such request (such payment to
      be
      made within ten (10) business days of the request therefor), or (ii) demand
      that
      all or a portion of the principal amount of this Note then outstanding be
      converted in accordance with Article III hereof into shares of Common Stock
      at a
      Conversion Price equal to the lesser of (A) the Conversion Price on the date
      of
      such demand or (B) 85% of the lowest VWAP for the 10 Trading Days preceding
      the
      date of such demand, with all accrued and unpaid interest on such principal
      amount to be paid to the Holder in cash (such payment of interest to be made
      within five (5) business days of the request therefor).

     

    ARTICLE
      III

     

    CONVERSION;
      ANTIDILUTION; PREPAYMENT

     

    Section
      3.1 Conversion
      Option. 

     

    (a) At
      any
      time and from time to time on or after the Issuance Date, this Note shall be
      convertible (in whole or in part), at the option of the Holder (the
“Conversion
      Option”),
      into
      such number of fully paid and non-assessable shares of Common Stock (the
“Conversion
      Rate”)
      as is
      determined by dividing (x) that portion of the outstanding principal balance
      plus any accrued but unpaid interest under this Note as of such date that the
      Holder elects to convert by (y) the Conversion Price (as defined in Section
      3.2
      hereof) then in effect on the date on which the Holder faxes a notice of
      conversion (the “Conversion
      Notice”),
      duly
      executed, to the Maker (facsimile number: (612) 395-5276, Attn.: Mark D. Dacko)
      (the “Voluntary
      Conversion Date”),
      provided, however, that the Conversion Price shall be subject to adjustment
      as
      described in Section 3.5 below. The Holder shall deliver this Note to the Maker
      at the address designated in the Purchase Agreement at such time that this
      Note
      is fully converted. With respect to partial conversions of this Note, the Maker
      shall keep written records of the amount of this Note converted as of each
      Conversion Date.

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    (b) If,
      at
      any time after August 11, 2008 and prior to February 11, 2009, the VWAP of
      the
      Common Stock exceeds $0.50 (as adjusted for splits, combinations and the like
      occurring after the Issuance Date) for a period of twenty (20) consecutive
      Trading Days, the Maker may cause the principal amount of this Note to convert
      into a number of fully paid and non-assessable shares of Common Stock equal
      to
      the quotient of (i) the principal amount of this Note then outstanding divided
      by (ii) the Conversion Price then in effect (as adjusted for splits,
      combinations and the like occurring after the Issuance Date) (the date of such
      conversion, the “Mandatory
      Conversion Date”
and,
      together with any Voluntary Conversion Date (including pursuant to a conversion
      request delivered pursuant to Section 2.2 or Section 2.3 hereof), a
“Conversion
      Date”).
      As a
      condition to any conversion pursuant to this Section 3.1(b), the Maker shall
      pay
      to the Holder all accrued and unpaid dividends in cash. No conversion pursuant
      to this Section 3.1(b) shall be effected unless (i) the Equity Conditions are
      satisfied on the Mandatory Conversion Date and during such twenty Trading Day
      period and such conversion would not cause the Holder to exceed the 9.99%
      beneficial ownership limitations set forth in Section 3.4(b) hereof and (ii)
      no
      Event of Default has occurred and is continuing for any part of such twenty
      Trading Day period or on the Mandatory Conversion Date.

    

    Section
      3.2 Conversion
      Price. The term “Conversion Price” shall mean $0.18, subject to adjustment
      under Section 3.5 hereof. 

     

    
      
        Section
          3.3 Mechanics
          of Conversion.

      

    

     

    (a) Not
      later
      than three (3) Trading Days after any Conversion Date, the Maker or its
      designated transfer agent, as applicable, shall issue and deliver to the
      Depository Trust Company (“DTC”)
      account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
      System (“DWAC”)
      as
      specified in the Conversion Notice, registered in the name of the Holder or
      its
      designee, for the number of shares of Common Stock to which the Holder shall
      be
      entitled. In the alternative, not later than three (3) Trading Days after any
      Conversion Date, the Maker shall deliver to the applicable Holder by express
      courier a certificate or certificates which shall be free of restrictive legends
      and trading restrictions (other than those required by Section 5.1 of the
      Purchase Agreement) representing the number of shares of Common Stock being
      acquired upon the conversion of this Note (the “Delivery
      Date”).
      Notwithstanding the foregoing to the contrary, the Maker or its transfer agent
      shall only be obligated to issue and deliver the shares to the DTC on the
      Holder’s behalf via DWAC (or certificates free of restrictive legends) if such
      conversion is in connection with a sale and the Holder has complied with the
      applicable prospectus delivery requirements (as evidenced by documentation
      furnished to and reasonably satisfactory to the Maker) or such shares may be
      sold pursuant to Rule 144 (without restriction as to volume). If in the case
      of
      any Conversion Notice such certificate or certificates are not delivered to
      or
      as directed by the applicable Holder by the Delivery Date, the Holder shall
      be
      entitled by written notice to the Maker at any time on or before its receipt
      of
      such certificate or certificates thereafter, to rescind such conversion, in
      which event the Maker shall immediately return this Note tendered for
      conversion, whereupon the Maker and the Holder shall each be restored to their
      respective positions immediately prior to the delivery of such notice of
      revocation, except that any amounts described in Sections 3.3(b) and (c) shall
      be payable through the date notice of rescission is given to the
      Maker.

    
      
        
        

      

      
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    (b) The
      Maker
      understands that a delay in the delivery of the shares of Common Stock upon
      conversion of this Note beyond the Delivery Date could result in economic loss
      to the Holder. If the Maker fails to deliver to the Holder such shares via
      DWAC
      (or, if applicable, certificates) by the Delivery Date, the Maker shall pay
      to
      such Holder, in cash, an amount per Trading Day for each Trading Day until
      such
      shares are delivered via DWAC or certificates are delivered (if applicable),
      together with interest on such amount at a rate of 10% per annum, accruing
      until
      such amount and any accrued interest thereon is paid in full, equal to the
      greater of (A) (i) 1% of the aggregate principal amount of the Notes requested
      to be converted for the first five (5) Trading Days after the Delivery Date
      and
      (ii) 2% of the aggregate principal amount of the Notes requested to be converted
      for each Trading Day thereafter and (B) $2,000 per day (which amount shall
      be
      paid as liquidated damages and not as a penalty). Nothing herein shall limit
      a
      Holder’s right to pursue actual damages for the Maker’s failure to deliver
      certificates representing shares of Common Stock upon conversion within the
      period specified herein and such Holder shall have the right to pursue all
      remedies available to it at law or in equity (including, without limitation,
      a
      decree of specific performance and/or injunctive relief). Notwithstanding
      anything to the contrary contained herein, the Holder shall be entitled to
      withdraw a Conversion Notice, and upon such withdrawal the Maker shall only
      be
      obligated to pay the liquidated damages accrued in accordance with this Section
      3.3(b) through the date the Conversion Notice is withdrawn.

     

    (c) In
      addition to any other rights available to the Holder, if the Maker fails to
      cause its transfer agent to transmit via DWAC or transmit to the Holder a
      certificate or certificates representing the shares of Common Stock issuable
      upon conversion of this Note on or before the Delivery Date, and if after such
      date the Holder is required by its broker to purchase (in an open market
      transaction or otherwise) shares of Common Stock to deliver in satisfaction
      of a
      sale by the Holder of the shares of Common Stock issuable upon conversion of
      this Note which the Holder anticipated receiving upon such conversion (a
“Buy-In”),
      then
      the Maker shall (1) pay in cash to the Holder the amount by which (x) the
      Holder’s total purchase price (including brokerage commissions, if any) for the
      shares of Common Stock so purchased exceeds (y) the amount obtained by
      multiplying (A) the number of shares of Common Stock issuable upon conversion
      of
      this Note that the Maker was required to deliver to the Holder in connection
      with the conversion at issue times (B) the price at which the sell order giving
      rise to such purchase obligation was executed, and (2) at the option of the
      Holder, either reinstate the portion of the Note and equivalent number of shares
      of Common Stock for which such conversion was not honored or deliver to the
      Holder the number of shares of Common Stock that would have been issued had
      the
      Maker timely complied with its conversion and delivery obligations hereunder.
      For example, if the Holder purchases Common Stock having a total purchase price
      of $11,000 to cover a Buy-In with respect to an attempted conversion of shares
      of Common Stock with an aggregate sale price giving rise to such purchase
      obligation of $10,000, under clause (1) of the immediately preceding sentence
      the Maker shall be required to pay the Holder $1,000. The Holder shall provide
      the Maker written notice indicating the amounts payable to the Holder in respect
      of the Buy-In, together with applicable confirmations and other evidence
      reasonably requested by the Maker. Nothing herein shall limit a Holder’s right
      to pursue any other remedies available to it hereunder, at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief with respect to the Maker’s failure to timely deliver
      certificates representing shares of Common Stock upon conversion of this Note
      as
      required pursuant to the terms hereof.

    
      
        
        

      

      
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        Section
          3.4 Ownership
          Cap and Certain Conversion Restrictions.

      

    

     

    (a) Notwithstanding
      anything to the contrary set forth in Section 3 of this Note, at no time may
      all
      or a portion of this Note be converted if the number of shares of Common Stock
      to be issued pursuant to such conversion would exceed, when aggregated with
      all
      other shares of Common Stock owned by the Holder at such time, the number of
      shares of Common Stock which would result in the Holder beneficially owning
      (as
      determined in accordance with Section 13(d) of the Exchange Act and the rules
      thereunder) more than 4.99% of all of the Common Stock outstanding at such
      time;
provided,
      however,
      that
      upon the Holder providing the Maker with sixty-one (61) days notice (pursuant
      to
      Section 4.1 hereof) (the “Waiver
      Notice”)
      that
      the Holder would like to waive this Section 3.4(a) with regard to any or all
      shares of Common Stock issuable upon conversion of this Note, this Section
      3.4(a) will be of no force or effect with regard to all or a portion of the
      Note
      referenced in the Waiver Notice. 

     

    (b) Notwithstanding
      anything to the contrary set forth in Section 3 of this Note, at no time may
      the
      Holder convert all or a portion of this Note if the number of shares of Common
      Stock to be issued pursuant to such conversion, when aggregated with all other
      shares of Common Stock owned by the Holder at such time, would result in the
      Holder beneficially owning (as determined in accordance with Section 13(d)
      of
      the Exchange Act and the rules thereunder) in excess of 9.99% of the then issued
      and outstanding shares of Common Stock outstanding at such time; provided,
      however,
      that
      upon the Holder providing the Maker with a Waiver Notice that the Holder would
      like to waive Section 3.4(b) of this Note with regard to any or all shares
      of
      Common Stock issuable upon conversion of this Note, this Section 3.4(b) shall
      be
      of no force or effect with regard to all or a portion of the Note referenced
      in
      the Waiver Notice.

     

    Section
      3.5 Adjustment
      of Conversion Price.

     

    (a) Until
      the
      Note has been paid in full or converted in full, the Conversion Price shall
      be
      subject to adjustment from time to time as follows:

     

    (i) Adjustments
      for Stock Splits and Combinations.
      If the
      Maker shall at any time or from time to time after the Issuance Date, effect
      a
      stock split of the outstanding Common Stock, the applicable Conversion Price
      in
      effect immediately prior to the stock split shall be proportionately decreased.
      If the Maker shall at any time or from time to time after the Issuance Date,
      combine the outstanding shares of Common Stock, the applicable Conversion Price
      in effect immediately prior to the combination shall be proportionately
      increased. Any adjustments under this Section 3.5(a)(i) shall be effective
      at
      the close of business on the date the stock split or combination
      occurs.

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    (ii) Adjustments
      for Certain Dividends and Distributions.
      Other
      than with respect to a Subsidiary Dividend (as defined in the Purchase
      Agreement), if the Maker shall at any time or from time to time after the
      Issuance Date, make or issue or set a record date for the determination of
      holders of Common Stock entitled to receive a dividend or other distribution
      payable in shares of Common Stock, then, and in each event, the applicable
      Conversion Price in effect immediately prior to such event shall be decreased
      as
      of the time of such issuance or, in the event such record date shall have been
      fixed, as of the close of business on such record date, by multiplying, the
      applicable Conversion Price then in effect by a fraction:

     

    (1) the
      numerator of which shall be the total number of shares of Common Stock issued
      and outstanding immediately prior to the time of such issuance or the close
      of
      business on such record date; and

     

    (2) the
      denominator of which shall be the total number of shares of Common Stock issued
      and outstanding immediately prior to the time of such issuance or the close
      of
      business on such record date plus the number of shares of Common Stock issuable
      in payment of such dividend or distribution.

     

    (iii) Adjustment
      for Other Dividends and Distributions.
      With
      the exception of the Subsidiary Dividend, if the Maker shall at any time or
      from
      time to time after the Issuance Date, make or issue or set a record date for
      the
      determination of holders of Common Stock entitled to receive a dividend or
      other
      distribution payable in other than shares of Common Stock, then, and in each
      event, an appropriate revision to the applicable Conversion Price shall be
      made
      and provision shall be made (by adjustments of the Conversion Price or
      otherwise) so that the holders of this Note shall receive upon conversions
      thereof, in addition to the number of shares of Common Stock receivable thereon,
      the number of securities of the Maker or other issuer (as applicable) which
      they
      would have received had this Note been converted into Common Stock on the date
      of such event and had thereafter, during the period from the date of such event
      to and including the Conversion Date, retained such securities (together with
      any distributions payable thereon during such period), giving application to
      all
      adjustments called for during such period under this Section 3.5(a)(iii) with
      respect to the rights of the holders of this Note; provided,
      however,
      that if
      such record date shall have been fixed and such dividend is not fully paid
      or if
      such distribution is not fully made on the date fixed therefor, the Conversion
      Price shall be adjusted pursuant to this paragraph as of the time of actual
      payment of such dividends or distributions.

     

    (iv) Adjustments
      for Reclassification, Exchange or Substitution.
      If the
      Common Stock issuable upon conversion of this Note at any time or from time
      to
      time after the Issuance Date shall be changed to the same or different number
      of
      shares of any class or classes of stock, whether by reclassification, exchange,
      substitution or otherwise (other than by way of a stock split or combination
      of
      shares or stock dividends provided for in Sections 3.5(a)(i), (ii) and (iii),
      or
      a reorganization, merger, consolidation, or sale of assets provided for in
      Section 3.5(a)(v)), then, and in each event, an appropriate revision to the
      Conversion Price shall be made and provisions shall be made (by adjustments
      of
      the Conversion Price or otherwise) so that the Holder shall have the right
      thereafter to convert this Note into the kind and amount of shares of stock
      and
      other securities receivable upon reclassification, exchange, substitution or
      other change, by holders of the number of shares of Common Stock into which
      such
      Note might have been converted immediately prior to such reclassification,
      exchange, substitution or other change, all subject to further adjustment as
      provided herein.

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    (v) Adjustments
      for Reorganization, Merger, Consolidation or Sales of Assets.
      If at
      any time or from time to time after the Issuance Date there shall be a capital
      reorganization of the Maker (other than by way of a stock split or combination
      of shares or stock dividends or distributions provided for in Section 3.5(a)(i),
      (ii) and (iii), or a reclassification, exchange or substitution of shares
      provided for in Section 3.5(a)(iv)), or a merger or consolidation of the Maker
      with or into another Person where the holders of outstanding voting securities
      prior to such merger or consolidation do not own over fifty percent (50%) of
      the
      outstanding voting securities of the merged or consolidated entity, immediately
      after such merger or consolidation, or the sale of all or substantially all
      of
      the Maker’s properties or assets to any other Person (an “Organic
      Change”),
      then
      as a part of such Organic Change, (A) if the surviving entity in any such
      Organic Change is a public company that is
      registered pursuant to the Securities Exchange Act of 1934, as amended, and
      its
      common stock is listed or quoted on a national exchange or the OTC Bulletin
      Board, an
      appropriate revision to the Conversion Price shall be made and provision shall
      be made (by adjustments of the Conversion Price or otherwise) so that the Holder
      shall have the right thereafter to convert such Note into the kind and amount
      of
      shares of stock and other securities or property of the Maker or any successor
      corporation resulting from Organic Change, and (B) if the surviving entity
      in
      any such Organic Change is not a public company that is
      registered pursuant to the Securities Exchange Act of 1934, as amended, or
      its
      common stock is not listed or quoted on a national exchange or the OTC Bulletin
      Board,
      the
      Holder shall have the right to demand prepayment pursuant to Section 3.6(b)
      hereof. In any such case, appropriate adjustment shall be made in the
      application of the provisions of this Section 3.5(a)(v) with respect to the
      rights of the Holder after the Organic Change to the end that the provisions
      of
      this Section 3.5(a)(v) (including any adjustment in the applicable Conversion
      Price then in effect and the number of shares of stock or other securities
      deliverable upon conversion of this Note) shall be applied after that event
      in
      as nearly an equivalent manner as may be practicable.

     

    (vi) Adjustments
      for Issuance of Additional Shares of Common Stock.
      In the
      event the Maker, shall, at any time, from time to time, issue or sell any
      additional shares of common stock (otherwise than as provided in the foregoing
      subsections (i) through (v) of this Section 3.5(a) or pursuant to Common Stock
      Equivalents (hereafter defined) granted or issued prior to the Issuance Date)
      (“Additional
      Shares of Common Stock”),
      at a
      price per share less than the Conversion Price then in effect or without
      consideration, then the Conversion Price upon each such issuance shall be
      reduced to a price determined by multiplying the Conversion Price then in effect
      by a fraction (A) the numerator of which is the total number of shares
      of
      Common Stock then outstanding plus
      the
      number of shares of Common Stock which the aggregate consideration received
      or
      to be received by the Company for the shares so issued (or deemed issued) would
      purchase at such Conversion Price, and (B) the denominator of which is the
      total
      number of shares of Common Stock then outstanding plus the number of shares
      of
      Common Stock so issued (or deemed issued). 

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    (vii) Issuance
      of Common Stock Equivalents.
      The
      provisions of this Section 3.5(a)(vii) shall apply if (a) the Maker, at any
      time
      after the Issuance Date, shall issue any securities convertible into or
      exchangeable for, directly or indirectly, Common Stock (“Convertible
      Securities”),
      other
      than the Note, or (b) any rights or warrants or options to purchase any such
      Common Stock or Convertible Securities (collectively, the “Common
      Stock Equivalents”),
      other
      than the Warrant issued pursuant to the Purchase Agreement, shall be issued
      or
      sold. If the price per share for which Additional Shares of Common Stock may
      be
      issuable pursuant to any such Common Stock Equivalent shall be less than the
      applicable Conversion Price then in effect, or if, after any such issuance
      of
      Common Stock Equivalents, the price per share for which Additional Shares of
      Common Stock may be issuable thereafter is amended or adjusted, and such price
      as so amended shall be less than the applicable Conversion Price in effect
      at
      the time of such amendment or adjustment, then the applicable Conversion Price
      upon each such issuance, amendment or adjustment shall be adjusted as provided
      in subsection (vi) of this Section 3.5(a), with the maximum number of shares
      of
      Common Stock issuable upon conversion or exercise of such Common Stock
      Equivalents being deemed to have be issued or sold by the Maker at the time
      of
      issuance or sale of such Common Stock Equivalents. For purposes of this Section
      3.5(a)(vii), the “price per share for which Additional Shares of Common Stock
      may be issuable” shall be determined by dividing (X) the total amount received
      or receivable by the Maker as consideration for the issue or sale of such Common
      Stock Equivalents, plus the minimum aggregate amount of additional
      consideration, if any, payable to the Maker upon the conversion or exercise
      thereof, by (B) the total maximum number of shares of Common Stock issuable
      upon
      the conversion or exercise of all such Common Stock Equivalents. No further
      adjustment of the Conversion Price shall be made when Common Stock is actually
      issued upon the conversion or exchange of such Common Stock Equivalents, and
      if
      any such issue or sale of Convertible Securities is made upon exercise of any
      Rights for which adjustment of the Conversion Price had been made pursuant
      to
      other provisions of Section 3.5(a), no further adjustment of the Conversion
      Price shall be made by reason of such issue or sale.

     

    (viii) Consideration
      for Stock.
      In case
      any shares of Common Stock or any Common Stock Equivalents shall be issued
      or
      sold:

     

    (1) in
      connection with any merger or consolidation in which the Maker is the surviving
      corporation (other than any consolidation or merger in which the previously
      outstanding shares of Common Stock of the Maker shall be changed to or exchanged
      for the stock or other securities of another corporation), the amount of
      consideration therefor shall be, deemed to be the fair value, as determined
      reasonably and in good faith by the Board of Directors of the Maker, of such
      portion of the assets and business of the nonsurviving corporation as such
      Board
      may determine to be attributable to such shares of Common Stock, Convertible
      Securities, rights or warrants or options, as the case may be; or

     

    (2) in
      the
      event of any consolidation or merger of the Maker in which the Maker is not
      the
      surviving corporation or in which the previously outstanding shares of Common
      Stock of the Maker shall be changed into or exchanged for the stock or other
      securities of another corporation, or in the event of any sale of all or
      substantially all of the assets of the Maker for stock or other securities
      of
      any corporation, the Maker shall be deemed to have issued a number of shares
      of
      its Common Stock for stock or securities or other property of the other
      corporation computed on the basis of the actual exchange ratio on which the
      transaction was predicated, and for a consideration equal to the fair market
      value on the date of such transaction of all such stock or securities or other
      property of the other corporation. If any such calculation results in adjustment
      of the applicable Conversion Price, or the number of shares of Common Stock
      issuable upon conversion of the Notes, the determination of the applicable
      Conversion Price or the number of shares of Common Stock issuable upon
      conversion of the Notes immediately prior to such merger, consolidation or
      sale,
      shall be made after giving effect to such adjustment of the number of shares
      of
      Common Stock issuable upon conversion of the Notes. In the event Common Stock
      is
      issued with other shares or securities or other assets of the Maker for
      consideration which covers both, the consideration computed as provided in
      this
      Section 3.5(a)(viii) shall be allocated among such securities and assets as
      determined in good faith by the Board of Directors of the
      Maker.

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    (ix) Superseding
      Adjustment.
      If, at
      any time after any adjustment of the Conversion Price then in effect shall
      have
      been made pursuant to Section 3.5(a)(vii) as the result of any issuance of
      any
      Convertible Securities or Common Stock Equivalents, and (i) such Convertible
      Securities or Common Stock Equivalents, or the right of conversion or exchange
      in such other Common Stock Equivalents, shall expire, and all or a portion
      of
      such Convertible Securities or Common Stock Equivalents, or the right of
      conversion or exchange with respect to all or a portion of such other Common
      Stock Equivalents, as the case may be shall not have been exercised, or (ii)
      the
      consideration per share for which shares of Common Stock are issuable pursuant
      to such Convertible Securities or Common Stock Equivalents, shall be increased
      solely by virtue of provisions therein contained for an automatic increase
      in
      such consideration per share upon the occurrence of a specified date or event,
      then any such previous adjustment to the Conversion Price of the Note shall
      be
      rescinded and annulled. Upon the occurrence of an event set forth in this
      Section 3.5(a)(ix), there shall be a recomputation made of the effect of
      such Convertible Securities or Common Stock Equivalents on the basis of:
      (i) treating the number of Additional Shares of Common Stock or other
      property, if any, theretofore actually issued or issuable pursuant to the
      previous exercise of any such Convertible Securities or Common Stock Equivalents
      or any such right of conversion or exchange, as having been issued on the date
      or dates of any such exercise and for the consideration actually received and
      receivable therefor, and (ii) treating any such Convertible Securities or
      Common Stock Equivalents which then remain outstanding as having been granted
      or
      issued immediately after the time of such increase of the consideration per
      share for which shares of Common Stock or other property are issuable under
      such
      Convertible Securities or Common Stock Equivalents; whereupon a new adjustment
      of the Conversion Price then in effect shall be made, which new adjustment
      shall
      supersede the previous adjustment so rescinded and annulled.

    

    (b) Record
      Date.
      In case
      the Maker shall take record of the holders of its Common Stock for the purpose
      of entitling them to subscribe for or purchase Common Stock or Convertible
      Securities, then the date of the issue or sale of the shares of Common Stock
      shall be deemed to be such record date.

     

    (c) Certain
      Issues Excepted.
      Anything herein to the contrary notwithstanding, the Maker shall not be required
      to make any adjustment to the Conversion Price in connection with the following:
      (a) issuances of shares of Common Stock or options to employees, officers or
      directors of the Maker pursuant to any stock or option plan existing on the
      date
      hereof if such grants are duly approved by a majority of the non-employee
      members of the Board of Directors of the Maker or a majority of the members
      of a
      committee of non-employee directors established for such purpose; (b) issuances
      of securities upon the exercise or exchange of or conversion of any securities
      issued hereunder and/or securities exercisable or exchangeable for or
      convertible into shares of Common Stock issued and outstanding on the Issuance
      Date, provided that such securities have not been amended since the Issuance
      Date to increase the number of such securities or to decrease the exercise,
      exchange or conversion price of any such securities, (c) securities issued
      pursuant to acquisitions or strategic transactions, provided any such issuance
      shall only be to a person which is, itself or through its subsidiaries, an
      operating company in a business synergistic with the business of the Maker
      as
      determined in good faith by the Board of Directors of the Maker and in which
      the
      Maker receives benefits in addition to the investment of funds, but shall not
      include a transaction in which the Maker is issuing securities primarily for
      the
      purpose of raising capital or to an entity whose primary business is investing
      in securities, (d) shares of Common Stock (other than as set forth in (a)
      through (c) above and (e) below) in an aggregate amount not to exceed 5% of
      the
      number of shares of Common Stock outstanding on the Issuance Date and (e) the
      issuances set forth on Schedule 3.21 of the Purchase Agreement.

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    (d) No
      Impairment.
      The
Maker
      shall
      not, by amendment of its Articles of Incorporation or through any
      reorganization, transfer of assets, consolidation, merger, dissolution, issue
      or
      sale of securities or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms to be observed or performed
      hereunder by the Maker,
      but
      will at all times in good faith, assist in the carrying out of all the
      provisions of this Section 3.5 and in the taking of all such action as may
      be
      necessary or appropriate in order to protect the Conversion Rights of the Holder
      against impairment. In the event a Holder shall elect to convert any Notes
      as
      provided herein, the Maker cannot refuse conversion based on any claim that
      such
      Holder or any one associated or affiliated with such Holder has been engaged
      in
      any violation of law, violation of an agreement to which such Holder is a party
      or for any reason whatsoever, unless, an injunction from a court, or notice,
      restraining and or adjoining conversion of all or of said Notes shall have
      issued and the Maker posts a surety bond for the benefit of such Holder in
      an
      amount equal to one hundred thirty percent (130%) of the amount of the Notes
      the
      Holder has elected to convert, which bond shall remain in effect until the
      completion of arbitration/litigation of the dispute and the proceeds of which
      shall be payable to such Holder (as liquidated damages) in the event it obtains
      judgment.

    

    (e) Certificates
      as to Adjustments.
      Upon
      occurrence of each adjustment or readjustment of the Conversion Price or number
      of shares of Common Stock issuable upon conversion of this Note pursuant to
      this
      Section 3.5, the Maker
      at its
      expense shall promptly compute such adjustment or readjustment in accordance
      with the terms hereof and furnish to the Holder a certificate setting forth
      such
      adjustment and readjustment, showing in detail the facts upon which such
      adjustment or readjustment is based. The Maker
      shall,
      upon written request of the Holder, at any time, furnish or cause to be
      furnished to the Holder a like certificate setting forth such adjustments and
      readjustments, the applicable Conversion Price in effect at the time, and the
      number of shares of Common Stock and the amount, if any, of other securities
      or
      property which at the time would be received upon the conversion of this Note.
      Notwithstanding the foregoing, the Maker shall not be obligated to deliver
      a
      certificate unless such certificate would reflect an increase or decrease of
      at
      least one percent (1%) of such adjusted amount.

     

    (f) Issue
      Taxes.
      The
      Maker shall pay any and all issue and other taxes, excluding federal, state
      or
      local income taxes, that may be payable in respect of any issue or delivery
      of
      shares of Common Stock on conversion of this Note pursuant thereto; provided,
      however,
      that
      the Maker shall not be obligated to pay any transfer taxes resulting from any
      transfer requested by the Holder in connection with any such
      conversion.

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    (g) Fractional
      Shares.
      No
      fractional shares of Common Stock shall be issued upon conversion of this Note.
      In lieu of any fractional shares to which the Holder would otherwise be
      entitled, the Maker shall pay cash equal to the product of such fraction
      multiplied by the average of the Closing Bid Prices of the Common Stock for
      the
      five (5) consecutive Trading Days immediately preceding the Conversion Date.
      

     

    (h) Reservation
      of Common Stock.
      The
      Maker shall at all times when this Note shall be outstanding, reserve and keep
      available out of its authorized but unissued Common Stock, such number of shares
      of Common Stock as shall from time to time be sufficient to effect the
      conversion of this Note and all interest accrued thereon; provided
      that the
      number of shares of Common Stock so reserved shall on the date hereof be no
      less
      than one hundred twenty percent (120%) of the number of shares of Common Stock
      for which this Note and all interest accrued thereon are at any time
      convertible, and within thirty (30) days of the date hereof, the Maker shall
      have taken all necessary action to increase the number of shares of Common
      Stock
      so reserved so that such number shall at no time be less than one hundred fifty
      percent (150%) of the number of shares of Common Stock for which this Note
      and
      all interest accrued thereon are at any time convertible. The Maker shall,
      if
      necessary, use its best efforts from time to time and in accordance with
      Minnesota law, to increase the authorized number of shares of Common Stock
      if at
      any time the unissued number of authorized shares shall not be sufficient to
      satisfy the Maker’s obligations under this Section 3.5(h).

     

    (i) Regulatory
      Compliance.
      If any
      shares of Common Stock to be reserved for the purpose of conversion of this
      Note
      or any interest accrued thereon require registration or listing with or approval
      of any governmental authority, stock exchange or other regulatory body under
      any
      federal or state law or regulation or otherwise before such shares may be
      validly issued or delivered upon conversion, the Maker shall, at its sole cost
      and expense, in good faith and as expeditiously as possible, endeavor to secure
      such registration, listing or approval, as the case may be.

    

    Section
      3.6 Prepayment.

    

    (a) Prepayment
      Upon an Event of Default.
      Notwithstanding anything to the contrary contained herein, upon the occurrence
      of an Event of Default described in Sections 2.1(b)-(i) or (l) hereof, the
      Holder shall have the right, at such Holder’s option, to require the Maker to
      prepay in cash all or a portion of this Note at a price equal to one hundred
      and
      fifteen percent (115%) of the aggregate principal amount of this Note plus
      all
      accrued and unpaid interest applicable at the time of such request. Nothing
      in
      this Section 3.6(a) shall limit the Holder’s rights under Section 2.2
      hereof.

    

    (b) Prepayment
      Option Upon Major Transaction. In addition to all other rights of the Holder
      contained herein, simultaneous with the occurrence of a Major Transaction (as
      defined below), the Holder shall have the right, at the Holder’s option, to
      require the Maker to prepay all or a portion of the Holder’s Notes in cash at a
      price equal to the sum of (i) the greater of (A) one hundred percent (100%)
      of
      the aggregate principal amount of this Note plus all accrued and unpaid interest
      and (B) in the event at such time the Holder is unable to obtain the benefit
      of
      its conversion rights through the conversion of this Note and resale of the
      shares of Common Stock issuable upon conversion hereof in accordance with the
      terms of this Note and the other Transaction Documents or the Equity Conditions
      are not satisfied with respect to all such shares of Common Stock, the aggregate
      principal amount of this Note plus all accrued but unpaid interest hereon,
      divided by the Conversion Price on the date the Prepayment Price (as defined
      below) is demanded or otherwise due, multiplied by the VWAP on the date the
      Major Transaction Prepayment Price is demanded or otherwise due, and (ii) all
      other amounts, costs, expenses and liquidated damages due in respect of this
      Note and the other Transaction Documents (the “Major Transaction Prepayment
      Price”).

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    (c) Prepayment
      Option Upon Triggering Event.
      In
      addition to all other rights of the Holder contained herein, after a Triggering
      Event (as defined below), the Holder shall have the right, at the Holder’s
      option, to require the Maker to prepay all or a portion of this Note in cash
      at
      a price equal to the sum of (i) the greater of (A) one hundred percent (100%)
      of
      the aggregate principal amount of this Note plus all accrued and unpaid interest
      and (B) the aggregate principal amount of this Note plus all accrued but unpaid
      interest hereon, divided by the Conversion Price on the date the Prepayment
      Price (as defined below) is demanded or otherwise due, multiplied by the VWAP
      on
      the date the Prepayment Price is demanded or otherwise due, and (ii) all other
      amounts, costs, expenses and liquidated damages due in respect of this Note
      and
      the other Transaction Documents (the “Triggering
      Event Prepayment Price,”
and,
      collectively with the Major Transaction Prepayment Price, the “Prepayment
      Price”).
      

     

    (d) “Major
      Transaction.” A “Major Transaction” shall be deemed to have occurred
      at such time as any of the following events:

     

    (i) the
      consolidation, merger or other business combination of the Maker with or into
      another Person (other than (A) pursuant to a migratory merger effected solely
      for the purpose of changing the jurisdiction of incorporation of the Maker
      or
      (B) a consolidation, merger or other business combination in which holders
      of
      the Maker’s voting power immediately prior to the transaction continue after the
      transaction to hold, directly or indirectly, the voting power of the surviving
      entity or entities necessary to elect a majority of the members of the board
      of
      directors (or their equivalent if other than a corporation) of such entity
      or
      entities).

     

    (ii) the
      sale
      or transfer of more than fifty percent (50%) of the Maker’s assets (based on the
      fair market value as determined in good faith by the Maker’s Board of Directors)
      other than inventory in the ordinary course of business in one or a related
      series of transactions; or

     

    (iii) closing
      of a purchase, tender or exchange offer made to the holders of more than fifty
      percent (50%) of the outstanding shares of Common Stock in which more than
      fifty
      percent (50%) of the outstanding shares of Common Stock were tendered and
      accepted.

     

    (f) “Triggering
      Event.” A “Triggering Event” shall be deemed to have occurred at such
      time as any of the following events: 

     

    (i) the
      suspension from listing, without subsequent listing on any one of, or the
      failure of the Common Stock to be listed on at least one of the OTC Bulletin
      Board, the American Stock Exchange, the Nasdaq National Market, the Nasdaq
      SmallCap Market or The New York Stock Exchange, Inc., for a period of five
      (5)
      consecutive Trading Days;

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    (ii) the
      Maker’s notice to the Holder, including by way of public announcement, at any
      time, of its inability to comply (including for any of the reasons described
      in
      Section 3.7) or its intention not to comply with proper requests for conversion
      of this Note into shares of Common Stock; provided that such inability to
      convert due to the terms of Section 3.4 hereof shall not constitute a Triggering
      Event; or

     

    (iii) the
      Maker’s failure to comply with a Conversion Notice tendered in accordance with
      the provisions of this Note within ten (10) business days after the receipt
      by
      the Maker of the Conversion Notice; provided that such inability to convert
      due
      to the terms of Section 3.4 hereof shall not constitute a Triggering Event;
      or

     

    (iv) the
      Maker
      deregisters its shares of Common Stock and as a result such shares of Common
      Stock are no longer publicly traded; or

     

    (v) the
      Maker
      consummates a “going private” transaction and as a result the Common Stock is no
      longer registered under Sections 12(b) or 12(g) of the Exchange
      Act.

     

    (h) Mechanics
      of Prepayment at Option of Holder Upon Major Transaction. No sooner than
      twenty (20) days nor later than ten (10) days prior to the consummation of
      a
      Major Transaction, but not prior to the public announcement of such Major
      Transaction, the Maker shall deliver written notice thereof via facsimile and
      overnight courier (“Notice of Major Transaction”) to the Holder of this
      Note. At any time after receipt of a Notice of Major Transaction (or, in the
      event a Notice of Major Transaction is not delivered at least ten (10) days
      prior to a Major Transaction, at any time within ten (10) days prior to a Major
      Transaction), any holder of the Notes then outstanding may require the Maker
      to
      prepay, effective immediately prior to the consummation of such Major
      Transaction, all of the holder’s Notes then outstanding by delivering written
      notice thereof via facsimile and overnight courier (“Notice of Prepayment at
      Option of Holder Upon Major Transaction”) to the Maker, which Notice of
      Prepayment at Option of Holder Upon Major Transaction shall indicate (i) the
      principal amount of the Notes that such holder is electing to have prepaid
      and
      (ii) the applicable Major Transaction Prepayment Price, as calculated pursuant
      to Section 3.6(b) above.

     

    (i) Mechanics
      of Prepayment at Option of Holder Upon Triggering Event. Within three (3)
      business days after the occurrence of a Triggering Event, the Maker shall
      deliver written notice thereof via facsimile and overnight courier (“Notice
      of Triggering Event”) to the Holder. At any time after the earlier of a
      holder’s receipt of a Notice of Triggering Event and such holder becoming aware
      of a Triggering Event, the Holder may require the Maker to prepay this Note
      by
      delivering written notice thereof via facsimile and overnight courier
      (“Notice of Prepayment at Option of Holder Upon Triggering Event”) to the
      Maker, which Notice of Prepayment at Option of Holder Upon Triggering Event
      shall indicate (i) the amount of the Note that the Holder is electing to have
      prepaid and (ii) the applicable Triggering Event Prepayment Price, as calculated
      pursuant to Section 3.6(c) above. The Holder shall only be permitted to require
      the Maker to prepay the Note pursuant to Section 3.6 hereof for the greater
      of a
      period of ten (10) days after receipt by such holder of a Notice of Triggering
      Event or for so long as such Triggering Event is continuing.

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    (j) Payment
      of Prepayment Price.
      Upon
      the Maker’s receipt of a Notice of Prepayment at Option of Holder Upon
      Triggering Event or a Notice(s) of Prepayment at Option of Holder Upon Major
      Transaction from the Holder, the Maker shall deliver the applicable Triggering
      Event Prepayment Price, in the case of a prepayment pursuant to Section 3.6(i),
      to the Holder within five (5) business days after the Maker’s receipt of a
      Notice of Prepayment at Option of Holder Upon Triggering Event and, in the
      case
      of a prepayment pursuant to Section 3.6(h), the Maker shall deliver the
      applicable Major Transaction Prepayment Price immediately prior to the
      consummation of the Major Transaction; provided that the Holder’s original Note
      shall have been so delivered to the Maker. If the Maker shall fail to prepay
      the
      Note (other than pursuant to a dispute as to the arithmetic calculation of
      the
      Prepayment Price), in addition to any remedy the Holder may have under this
      Note
      and the Purchase Agreement, the applicable Prepayment Price payable in respect
      of the Note (or portion thereof) not prepaid shall bear interest at the rate
      of
      two percent (2%) per month (prorated for partial months) until paid in full.
      Until the Maker pays such unpaid applicable Prepayment Price in full to the
      Holder, the Holder shall have the option (the “Void
      Optional Prepayment Option”)
      to, in
      lieu of prepayment, require the Maker to promptly return to the Holder all
      or
      that portion of the Note that was submitted for prepayment by such holder(s)
      under this Section 3.6 and for which the applicable Prepayment Price has not
      been paid, by sending written notice thereof to the Maker via facsimile (the
      “Void
      Optional Prepayment Notice”).
      Upon
      the Maker’s receipt of such Void Optional Prepayment Notice and prior to payment
      of the full applicable Prepayment Price to the Holder, (i) the Notice of
      Prepayment at Option of Holder Upon Triggering Event or the Notice of Prepayment
      at Option of Holder Upon Major Transaction, as the case may be, shall be null
      and void with respect to the Note submitted for prepayment and for which the
      applicable Prepayment Price has not been paid, (ii) the Maker shall immediately
      return the Note submitted to the Maker by the Holder for prepayment under this
      Section 3.6(j) and for which the applicable Prepayment Price has not been paid
      and (iii) the Conversion Price of the Note shall be adjusted to the lesser
      of
      (A) the Conversion Price as in effect on the date on which the Void Optional
      Prepayment Notice is delivered to the Maker and (B) the lowest Closing Bid
      Price
      during the period beginning on the date on which the Notice of Prepayment of
      Option of Holder Upon Major Transaction or the Notice of Prepayment at Option
      of
      Holder Upon Triggering Event, as the case may be, is delivered to the Maker
      and
      ending on the date on which the Void Optional Prepayment Notice is delivered
      to
      the Maker; provided that no adjustment shall be made if such adjustment would
      result in an increase of the Conversion Price then in effect. The Holder’s
      delivery of a Void Optional Prepayment Notice and exercise of its rights
      following such notice shall not affect the Maker’s obligations to make any
      payments which have accrued prior to the date of such notice. Payments provided
      for in this Section 3.6 shall have priority to payments to other stockholders
      in
      connection with a Major Transaction. 

     

    Section
      3.7 Inability
      to Fully Convert.

     

    (a) Holder’s
      Option if Maker Cannot Fully Convert.
      If,
      upon the Maker’s receipt of a Conversion Notice, the Maker cannot issue shares
      of Common Stock for any reason (other than pursuant to the terms of Section
      3.4
      hereof), including, without limitation, because the Maker (x) does not have
      a
      sufficient number of shares of Common Stock authorized and available, or (y)
      is
      otherwise prohibited by applicable law or by the rules or regulations of any
      stock exchange, interdealer quotation system or other self-regulatory
      organization with jurisdiction over the Maker or any of its securities from
      issuing all of the Common Stock which is to be issued to the Holder pursuant
      to
      a Conversion Notice, then the Maker shall issue as many shares of Common Stock
      as it is able to issue in accordance with the Holder’s Conversion Notice and,
      with respect to the unconverted portion of this Note, the Holder, solely at
      Holder’s option, can elect to:

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    (i) If
      the
      Maker’s inability to fully convert is pursuant to Section 3.7(a)(x) above,
      require the Maker to prepay that portion of this Note for which the Maker is
      unable to issue Common Stock in accordance with the Holder’s Conversion Notice
      (the “Mandatory
      Prepayment”)
      at a
      price per share equal to the Triggering Event Prepayment Price as of such
      Conversion Date (the “Mandatory
      Prepayment Price”);

     

    (ii) if
      the
      Maker’s inability to fully convert is pursuant to Section 3.7(a)(y) above,
      require the Maker to issue restricted shares of Common Stock in accordance
      with
      such holder’s Conversion Notice;

     

    (iii) void
      its
      Conversion Notice and retain or have returned, as the case may be, this Note
      that was to be converted pursuant to the Conversion Notice (provided that the
      Holder’s voiding its Conversion Notice shall not effect the Maker’s obligations
      to make any payments which have accrued prior to the date of such
      notice);

     

    (iv) exercise
      its Buy-In rights pursuant to and in accordance with the terms and provisions
      of
      Section 3.3(c) of this Note; provided that such inability to convert is not
      due
      to the terms of Section 3.4 hereof.

     

    In
      the
      event the Holder shall elect to convert any portion of the Note as provided
      herein, the Maker cannot refuse conversion based on any claim that such Holder
      or any one associated or affiliated with such Holder has been engaged in any
      violation of law, violation of an agreement to which such Holder is a party
      or
      for any reason whatsoever, unless, an injunction from a court, on notice,
      restraining and or adjoining conversion of the Note shall have been issued
      and
      the Maker posts a surety bond for the benefit of such Holder in an amount equal
      to 130% of the principal amount of the Note the Holder has elected to convert,
      which bond shall remain in effect until the completion of arbitration/litigation
      of the dispute and the proceeds of which shall be payable to such Holder in
      the
      event it obtains judgment. 

    

    (b) Mechanics
      of Fulfilling Holder’s Election.
      The
      Maker shall immediately send via facsimile to the Holder, upon receipt of a
      facsimile copy of a Conversion Notice from the Holder which cannot be fully
      satisfied as described in Section 3.7(a) above, a notice of the Maker’s
      inability to fully satisfy the Conversion Notice (the “Inability
      to Fully Convert Notice”).
      Such
      Inability to Fully Convert Notice shall indicate (i) the reason why the Maker
      is
      unable to fully satisfy such holder’s Conversion Notice, (ii) the amount of this
      Note which cannot be converted and (iii) the applicable Mandatory Prepayment
      Price. The Holder shall notify the Maker of its election pursuant to Section
      3.7(a) above by delivering written notice via facsimile to the Maker
      (“Notice
      in Response to Inability to Convert”).

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    (c) Payment
      of Prepayment Price.
      If the
      Holder shall elect to have the Note prepaid pursuant to Section 3.7(a)(i) above,
      the Maker shall pay the Mandatory Prepayment Price to the Holder within thirty
      (30) days of the Maker’s receipt of the Holder’s Notice in Response to Inability
      to Convert, provided
      that
      prior to the Maker’s receipt of the Holder’s Notice in Response to Inability to
      Convert the Maker has not delivered a notice to the Holder stating, to the
      satisfaction of the Holder, that the event or condition resulting in the
      Mandatory Prepayment has been cured and all Conversion Shares issuable to the
      Holder can and will be delivered to the Holder in accordance with the terms
      of
      this Note. If the Maker shall fail to pay the applicable Mandatory Prepayment
      Price to the Holder on the date that is one (1) business day following the
      30-day period following the Maker’s receipt of the Holder’s Notice in Response
      to Inability to Convert (other than pursuant to a dispute as to the
      determination of the arithmetic calculation of the Prepayment Price), in
      addition to any remedy the Holder may have under this Note and the Purchase
      Agreement, such unpaid amount shall bear interest at the rate of two percent
      (2%) per month (prorated for partial months) until paid in full. Until the
      full
      Mandatory Prepayment Price is paid in full to the Holder, the Holder may (i)
      void the Mandatory Prepayment with respect to that portion of the Note for
      which
      the full Mandatory Prepayment Price has not been paid, (ii) receive back such
      Note, and (iii) require that the Conversion Price of such returned Note be
      adjusted to the lesser of (A) the Conversion Price as in effect on the date
      on
      which the Holder voided the Mandatory Prepayment and (B) the lowest Closing
      Bid
      Price during the period beginning on the Conversion Date and ending on the
      date
      the Holder voided the Mandatory Prepayment. 

     

    Section
      3.8 No
      Rights as Shareholder. Nothing contained in this Note shall be construed as
      conferring upon the Holder, prior to the conversion of this Note, the right
      to
      vote or to receive dividends or to consent or to receive notice as a shareholder
      in respect of any meeting of shareholders for the election of directors of
      the
      Maker or of any other matter, or any other rights as a shareholder of the
      Maker.

    

    ARTICLE
      IV

    COVENANTS

    

    For
      so
      long as this Note is outstanding, without the prior written consent of the
      Holder:

    

    Section
      4.1 No
      Liens. Other than Permitted Encumbrances, the Maker shall not, and shall not
      permit any Guarantor to, enter into, create, incur, assume or suffer to exist
      any liens, security interests, charges, claims or other encumbrances of any
      kind
      (collectively, “Liens”) on or with respect to any of its assets now owned or
      hereafter acquired or any interest therein or any income or profits
      therefrom.

     

    Section
      4.2 No
      Indebtedness. The Maker shall not, and shall not permit any Guarantor to,
      enter into, create, incur, assume or suffer to exist any Indebtedness, other
      than (i) Permitted Subordinated Indebtedness, (ii) Indebtedness existing on
      the
      date hereof and disclosed in the Commission Documents and (iii) purchase money
      security indebtedness for assets acquired by the Maker or the Guarantors in
      the
      ordinary course of their respective businesses, provided that such Indebtedness
      does not exceed the fair market value of the asset acquired by the Maker
      (“Permitted PMSI Debt”).

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    Section
      4.3 Compliance
      with Transaction Documents. The Maker shall, and shall cause the Guarantors
      to, comply with their respective obligations under this Note and the other
      Transaction Documents.

    

    ARTICLE
      V

     

    MISCELLANEOUS

     

    Section
      5.1 Notices.
      Any notice, demand, request, waiver or other communication required or permitted
      to be given hereunder shall be in writing and shall be effective (a) upon hand
      delivery, telecopy or facsimile at the address or number designated in the
      Purchase Agreement (if delivered on a business day during normal business hours
      where such notice is to be received), or the first business day following such
      delivery (if delivered other than on a business day during normal business
      hours
      where such notice is to be received) or (b) on the second business day following
      the date of mailing by express courier service, fully prepaid, addressed to
      such
      address, or upon actual receipt of such mailing, whichever shall first occur.
      The Maker will give written notice to the Holder at least ten (10) days prior
      to
      the date on which the Maker takes a record (x) with respect to any dividend
      or
      distribution upon the Common Stock, (y) with respect to any pro rata
      subscription offer to holders of Common Stock or (z) for determining rights
      to
      vote with respect to any Organic Change, dissolution, liquidation or winding-up
      and in no event shall such notice be provided to such holder prior to such
      information being made known to the public. The Maker will also give written
      notice to the Holder at least ten (10) days prior to the date on which any
      Organic Change, dissolution, liquidation or winding-up will take place and
      in no
      event shall such notice be provided to the Holder prior to such information
      being made known to the public. 

    

    Section
      5.2 Governing
      Law. This Note shall be governed by and construed in accordance with the
      internal laws of the State of New York, without giving effect to any of the
      conflicts of law principles which would result in the application of the
      substantive law of another jurisdiction. This Note shall not be interpreted
      or
      construed with any presumption against the party causing this Note to be
      drafted.

     

    Section
      5.3 Headings.
      Article and section headings in this Note are included herein for purposes
      of
      convenience of reference only and shall not constitute a part of this Note
      for
      any other purpose.

     

    Section
      5.4 Remedies,
      Characterizations, Other Obligations, Breaches and Injunctive Relief. The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under this Note, at law or in equity (including, without
      limitation, a decree of specific performance and/or other injunctive relief),
      no
      remedy contained herein shall be deemed a waiver of compliance with the
      provisions giving rise to such remedy and nothing herein shall limit a holder’s
      right to pursue actual damages for any failure by the Maker to comply with
      the
      terms of this Note. Amounts set forth or provided for herein with respect to
      payments, conversion and the like (and the computation thereof) shall be the
      amounts to be received by the holder thereof and shall not, except as expressly
      provided herein, be subject to any other obligation of the Maker (or the
      performance thereof). The Maker acknowledges that a breach by it of its
      obligations hereunder will cause irreparable and material harm to the Holder
      and
      that the remedy at law for any such breach may be inadequate. Therefore the
      Maker agrees that, in the event of any such breach or threatened breach, the
      Holder shall be entitled, in addition to all other available rights and
      remedies, at law or in equity, to seek and obtain such equitable relief,
      including but not limited to an injunction restraining any such breach or
      threatened breach, without the necessity of showing economic loss and without
      any bond or other security being required.

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    Section
      5.5 Enforcement
      Expenses. The Maker agrees to pay all costs and expenses of enforcement of
      this Note, including, without limitation, reasonable attorneys’ fees and
      expenses.

     

    Section
      5.6 Binding
      Effect. The obligations of the Maker and the Holder set forth herein shall
      be binding upon the successors and assigns of each such party, whether or not
      such successors or assigns are permitted by the terms hereof.

     

    Section
      5.7 Amendments.
      This Note may not be modified or amended in any manner except in writing
      executed by the Maker and the Holder. 

     

    Section
      5.8 Compliance
      with Securities Laws. The Holder of this Note acknowledges that this Note is
      being acquired solely for the Holder’s own account and not as a nominee for any
      other party, and for investment, and that the Holder shall not offer, sell
      or
      otherwise dispose of this Note. This Note and any Note issued in substitution
      or
      replacement therefor shall be stamped or imprinted with a legend in
      substantially the following form:

     

    “THIS
      NOTE
      AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
      APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
      ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL
      IN
      THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS
      NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE MAY
      BE
      SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
      FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.”

    

    Section
      5.9 Consent
      to Jurisdiction. Each of the Maker and the Holder (i) hereby irrevocably
      submits to the exclusive jurisdiction of the United States District Court
      sitting in the Southern District of New York and the courts of the State of
      New
      York located in New York county for the purposes of any suit, action or
      proceeding arising out of or relating to this Note and (ii) hereby waives,
      and
      agrees not to assert in any such suit, action or proceeding, any claim that
      it
      is not personally subject to the jurisdiction of such court, that the suit,
      action or proceeding is brought in an inconvenient forum or that the venue
      of
      the suit, action or proceeding is improper. Each of the Maker and the Holder
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address in effect for notices to
      it
      under the Purchase Agreement and agrees that such service shall constitute
      good
      and sufficient service of process and notice thereof. Nothing in this Section
      4.9 shall affect or limit any right to serve process in any other manner
      permitted by law. Each of the Maker and the Holder hereby agree that the
      prevailing party in any suit, action or proceeding arising out of or relating
      to
      this Note shall be entitled to reimbursement for reasonable legal fees from
      the
      non-prevailing party.

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    Section
      5.10 Parties
      in Interest. This Note shall be binding upon, inure to the benefit of and be
      enforceable by the Maker, the Holder and their respective successors and
      permitted assigns.

     

    Section
      5.11 Failure
      or Indulgence Not Waiver. No failure or delay on the part of the Holder in
      the exercise of any power, right or privilege hereunder shall operate as a
      waiver thereof, nor shall any single or partial exercise of any such power,
      right or privilege preclude other or further exercise thereof or of any other
      right, power or privilege.

     

    Section
      5.12 Maker
      Waivers; Dispute Resolution. Except as otherwise specifically provided
      herein, the Maker and all others that may become liable for all or any part
      of
      the obligations evidenced by this Note, hereby waive presentment, demand, notice
      of nonpayment, protest and all other demands’ and notices in connection with the
      delivery, acceptance, performance and enforcement of this Note, and do hereby
      consent to any number of renewals of extensions of the time or payment hereof
      and agree that any such renewals or extensions may be made without notice to
      any
      such persons and without affecting their liability herein and do further consent
      to the release of any person liable hereon, all without affecting the liability
      of the other persons, firms or Maker liable for the payment of this Note, AND
      DO
      HEREBY WAIVE TRIAL BY JURY.

     

    (a) No
      delay
      or omission on the part of the Holder in exercising its rights under this Note,
      or course of conduct relating hereto, shall operate as a waiver of such rights
      or any other right of the Holder, nor shall any waiver by the Holder of any
      such
      right or rights on any one occasion be deemed a waiver of the same right or
      rights on any future occasion.

     

    (b) THE
      MAKER
      ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL
      TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS
      RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE
      HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    (c) In
      the
      case of a reasonable dispute as to the determination of the Closing Bid Price
      or
      the VWAP or the arithmetic calculation of the Conversion Price, any adjustment
      to the Conversion Price, liquidated damages amount, interest or dividend
      calculation, or any redemption price, redemption amount, adjusted Conversion
      Price, or similar calculation, or as to whether a subsequent issuance of
      securities is prohibited hereunder or would lead to an adjustment to the
      Conversion Price, the Maker shall submit the disputed determinations or
      arithmetic calculations via facsimile within two (2) Business Days of receipt,
      or deemed receipt, of the Conversion Notice, any redemption notice, default
      notice or other event giving rise to such dispute, as the case may be, to the
      Holder. If, after a good faith effort by the parties, the Holder and the Maker
      are unable to agree upon such determination or calculation within two (2)
      Business Days of such disputed determination or arithmetic calculation being
      submitted to the Holder, then the Maker shall, within two (2) Business Days
      submit via facsimile (a) the disputed determination of the Closing Price or
      the
      VWAP to an independent, reputable investment bank selected by the Maker and
      approved by the Holder, which approval shall not be unreasonably withheld,
      (b)
      the disputed arithmetic calculation of the Conversion Price, adjusted Conversion
      Price or any redemption price, redemption amount or default amount to the
      Maker’s independent, outside accountant or (c) the disputed facts regarding
      whether a subsequent issuance of securities is prohibited hereunder or would
      lead to an adjustment to the Conversion Price (or any of the other above
      described facts not expressly designated to the investment bank or accountant),
      to an expert attorney from a nationally recognized outside law firm (having
      at
      least 100 attorneys and having with no prior relationship with the Maker)
      selected by the Maker and approved by the Lead Purchaser as defined in the
      Purchase Agreement). The Maker, at the Maker’s expense, shall cause the
      investment bank, the accountant, the law firm, or other expert, as the case
      may
      be, to perform the determinations or calculations and notify the Maker and
      the
      Holder of the results no later than five (5) Business Days from the time it
      receives the disputed determinations or calculations. Such investment bank’s,
      accountant’s or attorney’s determination or calculation, as the case may be,
      shall be binding upon all parties absent demonstrable error.

    

    Section
      5.13 Definitions.
      Terms used herein and not defined shall have the meanings set forth in the
      Purchase Agreement. For the purposes hereof, the following terms shall have
      the
      following meanings:

     

    “Closing
      Bid Price”
shall
      mean, on any particular date (i) the last trading price per share of the Common
      Stock on such date on the OTC
      Bulletin Board or
      another registered national stock exchange on which the Common Stock is then
      listed, or if there is no such price on such date, then the last trading price
      on such exchange or quotation system on the date nearest preceding such date,
      or
      (ii) if the Common Stock is not then listed or traded on a registered national
      securities exchange or quoted on the OTC Bulletin Board, then the average of
      the
“Pink Sheet” quotes for the relevant conversion period, as determined in good
      faith by the Holder, or (iii) if the Common Stock is not then publicly traded
      the fair market value of a share of Common Stock as determined by the Maker
      and
      reasonably acceptable to the Holder.  

    

    “Equity
      Conditions”
shall
      mean, during the period in question, (i) the Maker shall have duly honored
      all
      conversions and redemptions scheduled to occur or occurring by virtue of one
      or
      more Conversion Notices of the Holder, if any, (ii) all liquidated damages
      and
      other amounts owing to the Holder in respect of this Note and the other
      Transaction Documents shall have been paid; (iii) (A) there is an effective
      Registration Statement pursuant to which the Holder is permitted to utilize
      the
      prospectus thereunder to resell all of the shares issued or issuable pursuant
      to
      the Transaction Documents or (B) there exists, under Rule 144 of the Securities
      Act, “current public information” with respect to the Maker and the Holder is
      permitted to resell the shares of Common Stock issued or issuable pursuant
      to
      the Transaction Documents pursuant to Rule 144 of the Securities Act, without
      any restriction as to volume, (iv) the Common Stock is trading on the Trading
      Market and all of the shares issuable pursuant to the Transaction Documents
      are
      listed for trading on a Trading Market (and the Maker believes, in good faith,
      that trading of the Common Stock on a Trading Market will continue uninterrupted
      for the foreseeable future), (v) there is a sufficient number of authorized
      but
      unissued and otherwise unreserved shares of Common Stock for the issuance of
      all
      of the shares issuable pursuant to the Transaction Documents, (vi) there is
      then
      existing no Event of Default or event which, with the passage of time or the
      giving of notice, would constitute an Event of Default, and (vii) no public
      announcement of a pending or proposed Major Transaction or Triggering Event
      has
      occurred. 

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    “Indebtedness”
means
      (a) all obligations for borrowed money, (b) all obligations evidenced by bonds,
      debentures, notes, or other similar instruments and all reimbursement or other
      obligations in respect of letters of credit, bankers acceptances, current swap
      agreements, interest rate hedging agreements, interest rate swaps, or other
      financial products, (c) all capital lease obligations that exceed $10,000 in
      the
      aggregate in any fiscal year, (d) all obligations or liabilities secured by
      a
      lien or encumbrance on any asset of the Maker, irrespective of whether such
      obligation or liability is assumed, (e) all obligations for the deferred
      purchase price of assets, together with trade debt and other accounts payable
      that exceed $10,000 in the aggregate in any fiscal year, (f) all synthetic
      leases, and (g) any obligation guaranteeing or intended to guarantee (whether
      directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
      recourse) any of the foregoing obligations of any other person; provided,
      however, Indebtedness shall not include (a) usual and customary trade debt
      incurred in the ordinary course of business and (b) endorsements for collection
      or deposit in the ordinary course of business.

     

    “Permitted
      Encumbrance”
means
      the individual and collective reference to the following: (a) Liens for taxes,
      assessments and other governmental charges or levies not yet due or Liens for
      taxes, assessments and other governmental charges or levies being contested
      in
      good faith and by appropriate proceedings for which adequate reserves (in the
      good faith judgment of the management of the Maker) have been established in
      accordance with GAAP; (b) Liens imposed by law which were incurred in the
      ordinary course of the Maker’s business, such as carriers’, warehousemen’s and
      mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
      the ordinary course of the Maker’s business, and which (x) do not individually
      or in the aggregate materially detract from the value of such property or assets
      or materially impair the use thereof in the operation of the business of the
      Maker and its consolidated subsidiaries or (y) are being contested in good
      faith
      by appropriate proceedings, which proceedings have the effect of preventing
      for
      the foreseeable future the forfeiture or sale of the property or asset subject
      to such Lien, (c) Liens securing Permitted Subordinated Indebtedness, (d) Liens
      securing Permitted PMSI Debt, provided that Indebtedness is secured solely
      by
      Liens on the assets acquired with the proceeds of such Permitted PMSI Debt;
      and
      (e) Liens in favor of China Gold, LLC and its affiliates granted by (i) China
      Global Mining Resources Ltd., a Hong Kong corporation, China Global Mining
      Resources Ltd., a British Virgin Islands corporation, or Wits-China Acquisition
      Corp. and any wholly owned subsidiary of such entities (each, a “China
      Subsidiary”), including as set forth in those certain Subsidiary Security
      Agreements dated as of February 7, 2008 by and between China Gold, LLC (“China
      Gold”) and any China Subsidiary, or (ii) the Company with respect to (A) its
      equity interests in the entities identified in (i) above and (B) the other
      assets identified in and defined as “Collateral” under the Security Agreement,
      dated as of June 19, 2007, between the Company and China Gold, LLC (“China
      Gold”) (without giving effect to any amendment to such Security Agreement) and
      the Amended and Restated Pledge Agreement dated as of February 7, 2008 by and
      between the Company and China Gold (without giving effect to any amendment
      to
      such Security Agreement).

    

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    “Permitted
      Subordinated Indebtedness”
means
      Indebtedness incurred after the date hereof that (i) shall be expressly
      subordinate in right of payment to this Note in form and substance satisfactory
      to the Holder in its reasonable discretion, (ii) shall not be secured by any
      asset, agreement or other collateral, other than liens expressly subordinate
      to
      the liens securing this Note, and (iii) in the event of any bankruptcy,
      liquidation or other similar proceeding, shall provide for the payment in full
      of this Note prior to the payment of any amounts in respect thereof.

    

    “Person”
means
      an individual or a corporation, partnership, trust, incorporated or
      unincorporated association, joint venture, limited liability company, joint
      stock company, government (or an agency or political subdivision thereof) or
      other entity of any kind.

     

    “Trading
      Day”
means
      (a) a day on which the Common Stock is traded on the OTC Bulletin Board or
      a
      registered national securities exchange, or (b) if the Common Stock is not
      traded on the OTC Bulletin Board or a registered national securities exchange,
      a
      day on which the Common Stock is quoted in the over-the-counter market as
      reported by the National Quotation Bureau Incorporated (or any similar
      organization or agency succeeding its functions of reporting prices);
provided,
      however,
      that in
      the event that the Common Stock is not listed or quoted as set forth in (a)
      or
      (b) hereof, then Trading Day shall mean any day except Saturday, Sunday and
      any
      day which shall be a legal holiday or a day on which banking institutions in
      the
      State of New York are authorized or required by law or other government action
      to close.

    

    “Trading
      Market”
means
      the Over the Counter Bulletin Board, the New York Stock Exchange, the Nasdaq
      Capital Markets, the Nasdaq Global Markets, the Nasdaq Global Select Market
      or
      the American Stock Exchange.

    

    “VWAP”
means,
      for any date, (i) the daily volume weighted average price of the Common Stock
      for such date on the OTC Bulletin Board or national securities exchange as
      reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m.
      Eastern Time to 4:02 p.m. Eastern Time); (ii) if the Common Stock is not
      then listed or quoted on the OTC Bulletin Board or a national securities
      exchange and if prices for the Common Stock are then reported in the “Pink
      Sheets” published by the Pink Sheets, LLC (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid price
      per
      share of the Common Stock so reported; or (iii) in all other cases, the
      fair market value of a share of Common Stock as determined by an independent
      appraiser selected in good faith by the Holder and reasonably acceptable to
      the
      Maker.

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Maker has caused this Note to be duly executed by its
      duly
      authorized officer as of the date first above indicated.

    

    
      	
              WITS
                BASIN PRECIOUS MINERALS INC.

            
	 	 
	
              By:

            	
              /s/
                Mark D. Dacko

            
	
               

            	
              
                
                  Name: Mark
                    D. Dacko

                

              

            
	
               

            	
              
                
                  Title:
                    Chief Financial Officer

                

              

            

    

     

     

    Signature
      Page

    to
      10% Senior Secured Convertible Promissory Note

    due
      February 11, 2009

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

    FORM
      OF

     

    NOTICE
      OF
      CONVERSION

     

    (To
      be
      Executed by the Registered Holder in order to Convert the Note)

     

    The
      undersigned hereby irrevocably elects to convert $ ________________ of the
      principal amount [and accrued interest thereon] of the above Note No. ___ into
      shares of Common Stock of Wits Basin Precious Minerals Inc. (the “Maker”)
      according to the conditions hereof, as of the date written below.

     

    Date
      of
      Conversion
      _________________________________________________________

     

    Applicable
      Conversion Price __________________________________________________

     

    Number
      of
      shares of Common Stock beneficially owned or deemed beneficially owned by the
      Holder on the Date of Conversion: _________________________

     

    Signature___________________________________________________________________

     

    [Name]

     

    Address:__________________________________________________________________

     

    _______________________________________________________________________

    
      
        
        

      

      
        -27-Exhibit
      10.3

     

    SECURITY
      AGREEMENT

    

    This
      SECURITY AGREEMENT, dated as of February 11, 2008 (this “Agreement”),
      is
      among
      Wits
      Basin Precious Minerals Inc., a Minnesota corporation (the
      “Company”),
      certain Subsidiaries of the Company
      (such
      subsidiaries,
      the
“Guarantors”
      and
      together with the Company,
      the
“Debtors”)
      and
      Platinum Long Term Growth V, LLC, a Delaware limited liability company (the
      “Secured
      Party”),
      the
      holder of the Company’s Senior Secured Note, issued on February 11, 2008 in the
      original principal amount of $1,020,000 (the “Note”),
      and
      its endorsees, transferees and assigns.

    

    W
      I T N E S S E T H:

    

    WHEREAS,
      pursuant to the Note, the Secured Party has agreed to extend the loans to the
      Company evidenced by the Note;

    

    WHEREAS,
      pursuant to a certain Guarantee, dated as of the date hereof (the “Guarantee”),
      the
      Guarantors
      have
      jointly and severally agreed to guarantee and act as surety for payment of
      such
      Note; and

    

    WHEREAS,
      in order to induce the Secured Party to extend the loans evidenced by the Note,
      each Debtor has agreed to execute and deliver to the Secured Party this
      Agreement and to grant the Secured Party a security interest in certain property
      of such Debtor to secure the prompt payment, performance and discharge in full
      of all of the Company’s obligations under the Note and the Guarantors’
obligations under the Guarantee.

    

    NOW,
      THEREFORE, in consideration of the agreements herein contained and for other
      good and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereto hereby agree as follows:

    

    1.
       Certain
      Definitions.
      As used
      in this Agreement, the following terms shall have the meanings set forth in
      this
      Section 1. Terms used but not otherwise defined in this Agreement that are
      defined in Article 9 of the UCC (including the terms “account”, “chattel paper”,
“commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”,
“general intangibles”, “goods”, “instruments”, “inventory”, “investment
      property”, “letter-of-credit rights”, “proceeds”, “securities” and “supporting
      obligations”) shall have the respective meanings given such terms in Article 9
      of the UCC.

    

    (a)
       “Collateral”
means
      the collateral in which the Secured Party is granted a security interest by
      this
      Agreement and which shall include the following personal property of the
      Debtors, whether presently owned or existing or hereafter acquired or coming
      into existence, wherever situated, and all additions and accessions thereto
      and
      all substitutions and replacements thereof, and all proceeds, products and
      accounts thereof, including, without limitation, all proceeds from the sale
      or
      transfer of the Collateral and of insurance covering the same and of any tort
      claims in connection therewith,
      and all
      dividends, interest, cash, notes, securities, equity interest or other property
      at any time and from time to time acquired, receivable or otherwise distributed
      in respect of, or in exchange for, any or all of the Pledged Securities (as
      defined below):

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (i)
      All
      goods, including, without limitation, (A) all machinery, equipment, computers,
      motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
      and
      general tools, fixtures, test and quality control devices and other equipment
      of
      every kind and nature and wherever situated, together with all documents of
      title and documents representing the same, all additions and accessions thereto,
      replacements therefor, all parts therefor, and all substitutes for any of the
      foregoing and all other items used and useful in connection with any Debtor’s
      businesses and all improvements thereto; and (B) all inventory, including all
      materials, work in process and finished goods;

    

    (ii)
       All
      contract rights and other general intangibles, including, without limitation,
      all partnership interests, membership interests, stock or other securities,
      rights
      under any of the Organizational Documents, agreements related to the Pledged
      Securities, licenses,
      distribution and other agreements, computer software (whether “off-the-shelf”,
      licensed from any third party or developed by any Debtor), computer software
      development rights, leases, franchises, customer lists, quality control
      procedures, grants and rights, goodwill, trademarks, service marks, trade
      styles, trade names, patents, patent applications, copyrights, and income tax
      refunds; 

     

    (iii)
       All
      accounts, together with all instruments, all documents of title representing
      any
      of the foregoing, all rights in any merchandising, goods, equipment, motor
      vehicles and trucks which any of the same may represent, and all right, title,
      security and guaranties with respect to each account, including any right of
      stoppage in transit; 

    

    (iv)
       All
      documents, letter-of-credit rights, instruments and chattel paper;

    

    (v) All
      commercial tort claims;

    

    (vi) All
      deposit accounts and all cash (whether or not deposited in such deposit
      accounts);

    

    (vii) All
      investment property;

    

    (viii) All
      supporting obligations; 

    

    (ix) All
      files, records, books of account, business papers, and computer programs;
      and

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (x) the
      products and proceeds of all of the foregoing Collateral set forth in clauses
      (i)-(ix) above.

    

    Without
      limiting the generality of the foregoing, the “Collateral”
shall
      include, subject to the exclusions below, all investment property and general
      intangibles respecting ownership and/or other equity interests of Debtors in
      each wholly-owned, majority-owned or minority owned subsidiary (including Kwagga
      Gold (Barbados) Limited), including, without limitation, the shares of capital
      stock and the other equity interests listed on Schedule
      H
      hereto
      (as the same may be modified from time to time pursuant to the terms hereof),
      and any other shares of capital stock and/or other equity interests of any
      other
      direct or indirect subsidiary of any Debtor obtained in the future, and, in
      each
      case, all certificates representing such shares and/or equity interests and,
      in
      each case, all rights, options, warrants, stock, other securities and/or equity
      interests that may hereafter be received, receivable or distributed in respect
      of, or exchanged for, any of the foregoing and all rights arising under or
      in
      connection with the Pledged Securities, including, but not limited to, all
      dividends, interest and cash.

     

    Notwithstanding
      the foregoing, nothing herein shall be deemed to constitute an assignment of
      any
      asset which, in the event of an assignment, becomes void by operation of
      applicable law or the assignment of which is otherwise prohibited by applicable
      law (in each case to the extent that such applicable law is not overridden
      by
      Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
      provided, however, that to the extent permitted by applicable law, this
      Agreement shall create a valid security interest in such asset and, to the
      extent permitted by applicable law, this Agreement shall create a valid security
      interest in the proceeds of such asset.

    

    Notwithstanding
      the foregoing, the “Collateral”
shall
      not be deemed to include (i) any equity interest of the Debtors in China Global
      Mining Resources Ltd., a Hong Kong corporation, China Global Mining Resources
      Ltd., a British Virgin Islands corporation, Wits-China Acquisition Corp., or
      any
      other entity created by the Company or such entities after the date hereof
      (each, a “China
      Subsidiary”)
      to the
      extent all or substantially all of such entity’s assets are located in, or
      relate to, China and such assets are subject to a lien in favor of China Gold
      LLC (“China
      Gold”)
      pursuant to that certain Security Agreement dated June 19, 2007 by and between
      the Company and China Gold, the Amended and Restated Pledge Agreement dated
      as
      of February 7, 2008, or those certain Subsidiary Security Agreements by and
      between China Gold and any China Subsidiary, or any of the respective assets
      of
      such entities or the proceeds thereof, (ii) the portion of any equity interest
      of the Debtors in any Dividend Subsidiary (as defined in that certain Note
      and
      Warrant Purchase Agreement dated of even date herewith by and between the
      Company and Secured Party (the “Purchase
      Agreement”))
      to
      the extent such portion is distributed to the holders of the Company’s Common
      Stock pursuant to a Subsidiary Dividend (as defined in the Purchase Agreement)
      and (iii) the other assets identified in and defined as “Collateral” under the
      Security Agreement, dated as of June 19, 2007, between the Company and China
      Gold (without giving effect to any amendment to such Security Agreement), the
      Amended and Restated Pledge Agreement dated February 7, 2008 by and between
      the
      Company and China Gold, or those certain Subsidiary Security Agreements by
      and
      between China Gold and any China Subsidiary. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (b)
       “Intellectual
      Property”
means
      the collective reference to all rights, priorities and privileges relating
      to
      intellectual property, whether arising under United States, multinational or
      foreign laws or otherwise, including, without limitation, (i) all copyrights
      arising under the laws of the United States, any other country or any political
      subdivision thereof, whether registered or unregistered and whether published
      or
      unpublished, all registrations and recordings thereof, and all applications
      in
      connection therewith, including, without limitation, all registrations,
      recordings and applications in the United States Copyright Office, (ii) all
      letters patent of the United States, any other country or any political
      subdivision thereof, all reissues and extensions thereof, and all applications
      for letters patent of the United States or any other country and all divisions,
      continuations and continuations-in-part thereof, (iii) all trademarks, trade
      names, corporate names, company names, business names, fictitious business
      names, trade dress, service marks, logos, domain names and other source or
      business identifiers, and all goodwill associated therewith, now existing or
      hereafter adopted or acquired, all registrations and recordings thereof, and
      all
      applications in connection therewith, whether in the United States Patent and
      Trademark Office or in any similar office or agency of the United States, any
      State thereof or any other country or any political subdivision thereof, or
      otherwise, and all common law rights related thereto, (iv) all trade secrets
      arising under the laws of the United States, any other country or any political
      subdivision thereof, (v) all rights to obtain any reissues, renewals or
      extensions of the foregoing, (vi) all licenses for any of the foregoing, and
      (vii) all causes of action for infringement of the foregoing.

    

    (c) “Necessary
      Endorsement”
means
      undated stock powers endorsed in blank or other proper instruments of assignment
      duly executed and such other instruments or documents as the Secured Party
      may
      reasonably request.

    

    (d)
       “Obligations”
means
      all of the liabilities
      and obligations (primary, secondary, direct, contingent, sole, joint or several)
      due or to become due, or that are now or may be hereafter contracted or
      acquired, or owing to, of any Debtor to the Secured Party, including, without
      limitation, all
      obligations under this Agreement, the Purchase Agreement, the Note, the
      Guarantee, the Warrant issued by the Company to the Secured Party on the date
      hereof (the “Warrant”)
      and
      any other instruments, agreements or other documents executed and/or delivered
      in connection herewith or therewith, in each case, whether now or hereafter
      existing, voluntary or involuntary, direct or indirect, absolute or contingent,
      liquidated or unliquidated, whether or not jointly owed with others, and whether
      or not from time to time decreased or extinguished and later increased, created
      or incurred, and all or any portion of such obligations or liabilities that
      are
      paid, to the extent all or any part of such payment is avoided or recovered
      directly or indirectly from any of the Secured Party as a preference, fraudulent
      transfer or otherwise as such obligations may be amended, supplemented,
      converted, extended or modified from time to time. Without limiting the
      generality of the foregoing, the term “Obligations” shall include, without
      limitation: (i) principal of, and interest on the Note and the loans extended
      pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations
      and liabilities of the Debtors from time to time under or in connection with
      this Agreement, the Note, the Purchase Agreement, the Guarantee, the Warrant
      and
      any other instruments, agreements or other documents executed and/or delivered
      in connection herewith or therewith; and (iii) all amounts (including but not
      limited to post-petition interest) in respect of the foregoing that would be
      payable but for the fact that the obligations to pay such amounts are
      unenforceable or not allowable due to the existence of a bankruptcy,
      reorganization or similar proceeding involving any Debtor.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (e)
       “Organizational
      Documents”
means
      with respect to any Debtor, the documents by which such Debtor was organized
      (such as a certificate of incorporation, certificate of limited partnership
      or
      articles of organization, and including, without limitation, any certificates
      of
      designation for preferred stock or other forms of preferred equity) and which
      relate to the internal governance of such Debtor (such as bylaws, a partnership
      agreement or an operating, limited liability or members agreement).

    

    (f)
       “Pledged
      Securities”
shall
      have the meaning ascribed to such term in Section 4(i).

    

    (g) “UCC”
means
      the Uniform Commercial Code of the State of New York and or any other applicable
      law of any state or states which has jurisdiction with respect to all, or any
      portion of, the Collateral or this Agreement, from time to time. It is the
      intent of the parties that defined terms in the UCC should be construed in
      their
      broadest sense so that the term “Collateral” will be construed in its broadest
      sense. Accordingly if there are, from time to time, changes to defined terms
      in
      the UCC that broaden the definitions, they are incorporated herein and if
      existing definitions in the UCC are broader than the amended definitions, the
      existing ones shall be controlling. 

    

    2.
       Grant
      of Security Interest in Collateral.
      As an
      inducement for the Secured Party to extend the loans as evidenced by the Note
      and to secure the complete and timely payment, performance and discharge in
      full, as the case may be, of all of the Obligations, each Debtor hereby
      unconditionally and irrevocably pledges, grants and hypothecates to the Secured
      Party a security interest in and to, a lien upon and a right of set-off against
      all of their respective right, title and interest of whatsoever kind and nature
      in and to, the Collateral (a “Security
      Interest”
and
      collectively, the “Security
      Interests”).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    3. Delivery
      of Certain Collateral.
      Within
      ten (10) days of the execution of this Agreement, each Debtor shall deliver
      or
      cause to be delivered to the Secured Party (a) any and all certificates and
      other instruments representing or evidencing the Pledged Securities, and (b)
      any
      and all certificates and other instruments or documents representing any of
      the
      other Collateral, in each case, together with all Necessary Endorsements. The
      Debtors are, contemporaneously with the execution hereof, delivering to the
      Secured Party, or have previously delivered to the Secured Party, a true and
      correct copy of each Organizational Document governing any of the Pledged
      Securities.

    

     4.  Representations,
      Warranties, Covenants and Agreements of the Debtors.
      Except
      as set forth under the corresponding section of the disclosure schedules
      delivered to the Secured Party concurrently herewith (the “Disclosure
      Schedules”),
      which
      Disclosure Schedules shall be deemed a part hereof, each Debtor represents
      and
      warrants to, and covenants and agrees with, the Secured Party as
      follows:

    

    (a)
      Each
      Debtor has the requisite corporate, partnership, limited liability company
      or
      other power and authority to enter into this Agreement and otherwise to carry
      out its obligations hereunder. The execution, delivery and performance by each
      Debtor of this Agreement and the filings contemplated therein have been duly
      authorized by all necessary action on the part of such Debtor and no further
      action is required by such Debtor. This Agreement has been duly executed by
      each
      Debtor. This Agreement constitutes the legal, valid and binding obligation
      of
      each Debtor, enforceable against each Debtor in accordance with its terms except
      as such enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization and similar laws of general application relating to or affecting
      the rights and remedies of creditors and by general principles of
      equity.

    

    (b)
       The
      Debtors have no place of business or offices where their respective books of
      account and records are kept (other than temporarily at the offices of its
      attorneys or accountants) or places where Collateral is stored or located,
      except as set forth on Schedule
      A
      attached
      hereto. Except as specifically set forth on Schedule
      A,
      each
      Debtor is the record owner of the real property where such Collateral is
      located, and there exist no mortgages or other liens on any such real property
      except for Permitted Encumbrances (as defined in the Note). Except as disclosed
      on Schedule
      A,
      none of
      such Collateral is in the possession of any consignee, bailee, warehouseman,
      agent or processor.

    

    (c)
       Except
      for Permitted Encumbrances (as defined in the Note) and except as set forth
      on
Schedule
      B
      attached
      hereto, the Debtors are the sole owner of the Collateral, free and clear of
      any
      liens, security interests, encumbrances, rights or claims, and are fully
      authorized to grant the Security Interests. Except as set forth on Schedule
      B
      attached
      hereto, there is not on file in any governmental or regulatory authority, agency
      or recording office an effective financing statement, security agreement,
      license or transfer or any notice of any of the foregoing (other than those
      that
      will be filed in favor of the Secured Party pursuant to this Agreement) covering
      or affecting any of the Collateral. Except as set forth on Schedule B attached
      hereto and except pursuant to this Agreement, as long as this Agreement shall
      be
      in effect, the Debtors shall not execute and shall not knowingly permit to
      be on
      file in any such office or agency any other financing statement or other
      document or instrument (except to the extent filed or recorded in favor of
      the
      Secured Party pursuant to the terms of this Agreement).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (d)
       No
      written claim has been received that any Collateral or Debtor's use of any
      Collateral violates the rights of any third party. There has been no adverse
      decision to any Debtor's claim of ownership rights in or exclusive rights to
      use
      the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
      such Collateral in full force and effect, and there is no proceeding involving
      said rights pending or, to the best knowledge of any Debtor, threatened before
      any court, judicial body, administrative or regulatory agency, arbitrator or
      other governmental authority.

    

    (e)
       Each
      Debtor shall at all times maintain its books of account and records relating
      to
      the Collateral at its principal place of business and its Collateral at the
      locations set forth on Schedule
      A
      attached
      hereto and may not relocate such books of account and records or tangible
      Collateral unless it delivers to the Secured Party at least 30 days prior to
      such relocation (i) written notice of such relocation and the new location
      thereof (which must be within the United States) and (ii) evidence that
      appropriate financing statements under the UCC and other necessary documents
      have been filed and recorded and other steps have been taken to perfect the
      Security Interests to create in favor of the Secured Party a valid, perfected
      and continuing perfected first priority lien in the Collateral.

    

    (f)
       This
      Agreement creates in favor of the Secured Party a valid, security interest
      in
      the Collateral, subject only to Permitted Encumbrances (as defined in the Note)
      securing the payment and performance of the Obligations. Upon Secured Party
      making the filings described in the immediately following paragraph, all
      security interests created hereunder in any Collateral which may be perfected
      by
      filing Uniform Commercial Code financing statements shall have been duly
      perfected. Except for the filing of the Uniform Commercial Code financing
      statements referred to in the immediately following paragraph, and
      the
      delivery of the certificates and other instruments provided in Section
      3,
      no
      action is necessary to create, perfect or protect the security interests created
      hereunder. Without limiting the generality of the foregoing, except for the
      filing of said financing statements, no consent of any third parties and no
      authorization, approval or other action by, and no notice to or filing with,
      any
      governmental authority or regulatory body is required for (i) the execution,
      delivery and performance of this Agreement, (ii) the creation or perfection
      of
      the Security Interests created hereunder in the Collateral or (iii) the
      enforcement of the rights of the Secured Party hereunder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (g)
       Each
      Debtor hereby authorizes the Secured Party to file one or more financing
      statements under the UCC, with respect to the Security Interests with the proper
      filing and recording agencies in any jurisdiction deemed proper by it, which
      UCC
      financing statement may describe the collateral as “All assets”. 

    

     (h)
       The
      execution, delivery and performance of this Agreement by the Debtors does not
      (i) violate any of the provisions of any Organizational Documents of any Debtor
      or any judgment, decree, order or award of any court, governmental body or
      arbitrator or any applicable law, rule or regulation applicable to any Debtor
      or
      (ii) conflict with, or constitute a default (or an event that with notice or
      lapse of time or both would become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation (with or without
      notice, lapse of time or both) of, any agreement, credit facility, debt or
      other
      instrument (evidencing any Debtor's debt or otherwise) or other understanding
      to
      which any Debtor is a party or by which any property or asset of any Debtor
      is
      bound or affected. If any, all required consents (including, without limitation,
      from stockholders or creditors of any Debtor) necessary for any Debtor to enter
      into and perform its obligations hereunder have been obtained.

    

     (i)
       Except
      as
      excluded in Section 1(a) hereof, the capital stock and other equity interests
      listed on Schedule
      H
      hereto
      (the “Pledged
      Securities”)
      represent all of the capital stock and other equity interests of the Guarantors,
      and represent all capital stock and other equity interests owned, directly
      or
      indirectly, by the Company, other than the Dormant Subsidiaries (as defined
      below). All of the Pledged Securities are validly issued, fully paid and
      nonassessable, and the Company is the legal and beneficial owner of the Pledged
      Securities, free and clear of any lien, security interest or other encumbrance
      except for the security interests created by this Agreement and other Permitted
      Encumbrances (as defined in the Note).
      To the
      extent the Company owns capital stock or other equity interests in any
      Subsidiary that is not set forth on Schedule H hereto (such Subsidiaries, the
      “Dormant Subsidiaries”), such entity or entities shall be dissolved within 45
      days of the date hereof.

    

    (j)
       The
      ownership and other equity interests in partnerships and limited liability
      companies (if any)
      included
      in the Collateral
      (the
“Pledged
      Interests”)
      by
      their express terms do not provide that they are securities governed by Article
      8 of the UCC and are not held in a securities account or by any financial
      intermediary.

    

    (k)
       Except
      for Permitted Encumbrances (as defined in the Note), each Debtor shall at all
      times maintain the liens and Security Interests provided for hereunder as valid
      and perfected first priority liens and security interests in the Collateral
      in
      favor of the Secured Party until this Agreement and the Security Interest
      hereunder shall be terminated pursuant to Section 11 hereof. Each Debtor hereby
      agrees to defend the same against the claims of any and all persons and
      entities. Each Debtor shall safeguard and protect all Collateral for the account
      of the Secured Party. At the request of the Secured Party, each Debtor will
      sign
      and deliver to the Secured Party at any time or from time to time one or more
      financing statements pursuant to the UCC in form reasonably satisfactory to
      the
      Secured Party and will pay the cost of filing the same in all public offices
      wherever filing is, or is deemed by the Secured Party to be, necessary or
      desirable to effect the rights and obligations provided for herein. Without
      limiting the generality of the foregoing, each Debtor shall pay all fees, taxes
      and other amounts necessary to maintain the Collateral and the Security
      Interests hereunder, and each Debtor shall obtain and furnish to the Secured
      Party from time to time, upon demand, such releases and/or subordinations of
      claims and liens which may be required to maintain the priority of the Security
      Interests hereunder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (l)
       Except
      for Permitted Encumbrances (as defined in the Note), no Debtor will transfer,
      pledge, hypothecate, encumber, license, sell or otherwise dispose of any of
      the
      Collateral (except for non-exclusive licenses granted by a Debtor in its
      ordinary course of business and sales of inventory by a Debtor in its ordinary
      course of business) without the prior written consent of the
      Secured Party.

    

    (m) Each
      Debtor shall keep and preserve its equipment, inventory and other tangible
      Collateral in good condition, repair and order and shall not operate or locate
      any such Collateral (or cause to be operated or located) in any area excluded
      from insurance coverage.

    

    (n) Each
      Debtor shall maintain with financially sound and reputable insurers, insurance
      with respect to the Collateral, including Collateral hereafter acquired, against
      loss or damage of the kinds and in the amounts customarily insured against
      by
      entities of established reputation having similar properties similarly situated
      and in such amounts as are customarily carried under similar circumstances
      by
      other such entities and otherwise as is prudent for entities engaged in similar
      businesses but in any event sufficient to cover the full replacement cost
      thereof. Each Debtor shall cause each insurance policy issued in connection
      herewith to provide, and the insurer issuing such policy to certify to the
      Secured
      Party
      that (a)
      the Secured
      Party
      will be
      named as lender loss payee and additional insured under each such insurance
      policy; (b) if such insurance be proposed to be cancelled or materially changed
      for any reason whatsoever, such insurer will promptly notify the Secured
      Party
      and such
      cancellation or change shall not be effective as to the Secured
      Party
      for at
      least thirty (30) days after receipt by the Secured
      Party
      of such
      notice, unless the effect of such change is to extend or increase coverage
      under
      the policy; and (c) the Secured
      Party
      will
      have the right (but no obligation) at its election to remedy any default in
      the
      payment of premiums within thirty (30) days of notice from the insurer of such
      default. If no Event of Default (as defined in the Note) exists and if the
      proceeds arising out of any claim or series of related claims do not exceed
      $100,000, loss payments in each instance will be applied by the applicable
      Debtor to the repair and/or replacement of property with respect to which the
      loss was incurred to the extent reasonably feasible, and any loss payments
      or
      the balance thereof remaining, to the extent not so applied, shall be payable
      to
      the applicable Debtor, provided, however, that payments received by any Debtor
      after an Event of Default occurs and is continuing or in excess of $100,000
      for
      any occurrence or series of related occurrences shall be paid to the
Secured
      Party
      and, if
      received by such Debtor, shall be held in trust for the Secured Party and
      immediately paid over to the Secured
      Party
      unless
      otherwise directed in writing by the Secured
      Party.
      Copies
      of such policies or the related certificates, in each case, naming the
Secured
      Party
      as
      lender loss payee and additional insured shall be delivered to the Secured
      Party
      at least
      annually and at the time any new policy of insurance is issued.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (o)
       Each
      Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
      Secured Party promptly, in sufficient detail, of any material adverse change
      in
      the Collateral, and of the occurrence of any event which would have a material
      adverse effect on the value of the Collateral or on the Secured Party’s security
      interest therein.

    

    (p)
       Each
      Debtor shall promptly execute and deliver to the Secured Party such further
      deeds, mortgages, assignments, security agreements, financing statements or
      other instruments, documents, certificates and assurances and take such further
      action as the Secured Party may from time to time request and may in its sole
      discretion deem necessary to perfect, protect or enforce the Secured Party’s
      security interest in the Collateral including, without limitation, if applicable
      and requested in writing by the Secured Party, the execution and delivery of
      a
      separate security agreement with respect to each Debtor’s Intellectual Property
      (“Intellectual
      Property Security Agreement”)
      in
      which the Secured Party have been granted a security interest hereunder,
      substantially in a form reasonably acceptable to the Secured Party, which
      Intellectual Property Security Agreement, other than as stated therein, shall
      be
      subject to all of the terms and conditions hereof. Without limiting the
      generality of the foregoing, Debtors shall cooperate with Secured Party to
      perfect the Secured Party’s security interests in (i) the Company’s rights in
      and to the Hunter Gold Mining Corporation assets in Colorado, (ii) the Company’s
      rights in the Vianey Mine Concession in the State of Guerrero, Mexico, and
      (iii)
      any other mining or mining related asset disclosed in the Company’s filings with
      the Securities and Exchange Commission and held by the Company on the date
      hereof, subject to the exclusions set forth in Section 1(a) hereof (each of
      (i)
      and (ii) above as described in the Company’s filings with the Securities and
      Exchange Commission). 

    

    (q)
       Each
      Debtor shall permit the Secured Party and its representatives and agents to
      inspect the Collateral during normal business hours and upon reasonable prior
      notice, and to make copies of records pertaining to the Collateral as may be
      reasonably requested by the Secured Party from time to time.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (r)
       Each
      Debtor shall take all steps reasonably necessary to diligently pursue and seek
      to preserve, enforce and collect any rights, claims, causes of action and
      accounts receivable in respect of the Collateral.

    

    (s)
       Each
      Debtor shall promptly notify the Secured Party in sufficient detail upon
      becoming aware of any attachment, garnishment, execution or other legal process
      levied against any Collateral and of any other information received by such
      Debtor that may materially affect the value of the Collateral, the Security
      Interest or the rights and remedies of the Secured Party hereunder.

    

    (t)
       All
      information heretofore, herein or hereafter supplied to the Secured Party by
      or
      on behalf of any Debtor with respect to the Collateral is accurate and complete
      in all material respects as of the date furnished.

    

    (u)
       The
      Debtors shall at all times preserve and keep in full force and effect their
      respective valid existence and good standing and any rights and franchises
      material to its business.

    

    (v)
       No
      Debtor
      will change its name, type of organization, jurisdiction of organization,
      organizational identification number (if it has one), legal or corporate
      structure, or identity, or add any new fictitious name unless it provides at
      least 30 days prior written notice to the Secured Party of such change and,
      at
      the time of such written notification, such Debtor provides any financing
      statements or fixture filings necessary to perfect and continue the perfection
      of the Security Interests granted and evidenced by this Agreement.

    

    (w) Except
      in
      the ordinary course of business and except for Permitted Encumbrances (as
      defined in the Note), no Debtor may consign any of its Inventory or sell any
      of
      its Inventory on bill and hold, sale or return, sale on approval, or other
      conditional terms of sale without the consent of the
      Secured Party, which shall not be unreasonably withheld.

    

    (x)
       No
      Debtor
      may relocate its chief executive office to a new location without providing
      30
      days prior written notification thereof to the Secured Party and so long as,
      at
      the time of such written notification, such Debtor provides any financing
      statements or fixture filings necessary to perfect and continue the perfection
      of the Security Interests granted and evidenced by this Agreement.

    

    (y) Each
      Debtor was organized and remains organized solely under the laws of the state
      set forth next to such Debtor’s name in Schedule
      D
      attached
      hereto, which Schedule
      D
      sets
      forth each Debtor’s organizational identification number or, if any Debtor does
      not have one, states that one does not exist.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (z) 
      (i) The
      actual name of each Debtor is the name set forth in Schedule
      D
      attached
      hereto; (ii) no Debtor has any trade names except as set forth on Schedule
      E
      attached
      hereto; (iii) no Debtor has used any name other than that stated in the preamble
      hereto or as set forth on Schedule
      E
      for the
      preceding five years; and (iv) no entity has merged into any Debtor or been
      acquired by any Debtor within the past five years except as set forth on
Schedule
      E.

    

    (aa) At
      any
      time and from time to time that any Collateral consists of instruments,
      certificated securities or other items that require or permit possession by
      the
      secured party to perfect the security interest created hereby, the applicable
      Debtor shall deliver such Collateral to the Secured Party.

    

    (bb)
       Each
      Debtor, in its capacity as issuer, hereby agrees to comply with any and all
      orders and instructions of Secured
      Party
      regarding the Pledged Interests consistent with the terms of this Agreement
      without the further consent of any Debtor as contemplated by Section 8-106
      (or
      any successor section) of the UCC. Further, each Debtor agrees that it shall
      not
      enter into a similar agreement (or one that would confer “control” within the
      meaning of Article 8 of the UCC) with any other person or entity.

     

    (cc) Each
      Debtor shall cause all tangible chattel paper constituting Collateral to be
      delivered to the Secured Party, or, if such delivery is not possible, then
      to
      cause such tangible chattel paper to contain a legend noting that it is subject
      to the security interest created by this Agreement. To the extent that any
      Collateral consists of electronic chattel paper, the applicable Debtor shall
      cause the underlying chattel paper to be “marked” within the meaning of Section
      9-105 of the UCC (or successor section thereto).

    

    (dd) If
      there
      is any investment property or deposit account included as Collateral that can
      be
      perfected by “control” through an account control agreement, the applicable
      Debtor shall cause such an account control agreement, in form and substance
      in
      each case satisfactory to the Secured Party, to be entered into and delivered
      to
      the Secured Party.

    

    (ee)
       To
      the
      extent that any Collateral consists of letter-of-credit rights, the applicable
      Debtor shall cause the issuer of each underlying letter of credit to consent
      to
      an assignment of the proceeds thereof to the Secured Party.

    

    (ff)
       To
      the
      extent that any Collateral is in the possession of any third party, the
      applicable Debtor shall join with the Secured Party in notifying such third
      party of the Secured Party’s security interest in such Collateral and shall
      obtain an acknowledgement and agreement from such third party with respect
      to
      the Collateral, in form and substance reasonably satisfactory to the Secured
      Party.

    

    (gg) If
      any
      Debtor shall at any time hold or acquire a commercial tort claim, such Debtor
      shall promptly notify the Secured Party in a writing signed by such Debtor
      of
      the particulars thereof and grant to the Secured Party in such writing a
      security interest therein and in the proceeds thereof, all upon the terms of
      this Agreement, with such writing to be in form and substance satisfactory
      to
      the Secured Party.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (hh) Each
      Debtor shall immediately provide written notice to the Secured Party of any
      and
      all accounts which arise out of contracts with any governmental authority and,
      to the extent necessary to perfect or continue the perfected status of the
      Security Interests in such accounts and proceeds thereof, shall execute and
      deliver to the Secured Party an assignment of claims for such accounts and
      cooperate with the Secured Party in taking any other steps required, in its
      judgment, under the Federal Assignment of Claims Act or any similar federal,
      state or local statute or rule to perfect or continue the perfected status
      of
      the Security Interests in such accounts and proceeds thereof.

    

    (ii) Each
      Debtor shall cause each subsidiary
      of such
      Debtor with operations or material operations (which, if in doubt, shall be
      in
      the sole determination of the Secured Party) to immediately become a party
      hereto (an “Additional
      Debtor”),
      by
      executing and delivering an Additional Debtor Joinder in substantially the
      form
      of Annex
      A
      attached
      hereto and comply with the provisions hereof applicable to the Debtors. As
      of
      the date hereof, the Company represents and warrants that none of its
      subsidiaries have any operations or material assets. Concurrent therewith,
      the
      Additional Debtor shall deliver replacement schedules for, or supplements to
      all
      other Schedules to (or referred to in) this Agreement, as applicable, which
      replacement schedules shall supersede, or supplements shall modify, the
      Schedules then in effect. The Additional Debtor shall also deliver such opinions
      of counsel, authorizing resolutions, good standing certificates, incumbency
      certificates, organizational documents, financing statements and other
      information and documentation as the Secured Party may reasonably request.
      Upon
      delivery of the foregoing to the Secured Party, the Additional Debtor shall
      be
      and become a party to this Agreement with the same rights and obligations as
      the
      Debtors, for all purposes hereof as fully and to the same extent as if it were
      an original signatory hereto and shall be deemed to have made the
      representations, warranties and covenants set forth herein as of the date of
      execution and delivery of such Additional Debtor Joinder, and all references
      herein to the “Debtors” shall be deemed to include each Additional
      Debtor.

    

    (jj)
       Each
      Debtor shall vote the Pledged Securities to comply with the covenants and
      agreements set forth herein and in the Note.

    

    (kk) Each
      Debtor shall register the pledge of the applicable Pledged Securities on the
      books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities
      to register the pledge of the applicable Pledged Securities in the name of
      the
      Secured Party on the books of such issuer. Further, except with respect to
      certificated securities delivered to the Secured
      Party,
      the
      applicable Debtor shall deliver to Secured
      Party
      an
      acknowledgement of pledge (which, where appropriate, shall comply with the
      requirements of the relevant UCC with respect to perfection by registration)
      signed by the issuer of the applicable Pledged Securities, which acknowledgement
      shall confirm that: (a) it has registered the pledge on its books and records;
      and (b) at any time directed by Secured
      Party
      during
      the continuation of an Event of Default, such issuer will transfer the record
      ownership of such Pledged Securities into the name of any designee of
Secured
      Party,
      will
      take such steps as may be necessary to effect the transfer, and will comply
      with
      all other instructions of Secured
      Party
      regarding such Pledged Securities without the further consent of the applicable
      Debtor.
      The
      Debtor shall vote the Pledged Securities so as to comply with the covenants
      and
      agreements of the Debtor set forth in the Note and the Transaction Documents
      (as
      defined in the Purchase Agreement).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (ll)
      In
      the
      event that, upon an occurrence of an Event of Default, Secured
      Party
      shall
      sell all or any of the Pledged Securities to another party or parties (herein
      called the “Transferee”)
      or
      shall purchase or retain all or any of the Pledged Securities, each Debtor
      shall, to the extent applicable: (i) deliver to Secured
      Party
      or the
      Transferee, as the case may be, the articles of incorporation, bylaws, minute
      books, stock certificate books, corporate seals, deeds, leases, indentures,
      agreements, evidences of indebtedness, books of account, financial records
      and
      all other Organizational Documents and records of the Debtors and their direct
      and indirect subsidiaries; (ii) use its best efforts to obtain resignations
      of
      the persons then serving as officers and directors of the Debtors and their
      direct and indirect subsidiaries, if so requested; and (iii) use its best
      efforts to obtain any approvals that are required by any governmental or
      regulatory body in order to permit the sale of the Pledged Securities to the
      Transferee or the purchase or retention of the Pledged Securities by
Secured
      Party
      and
      allow the Transferee or Secured
      Party
      to
      continue the business of the Debtors and their direct and indirect
      subsidiaries.

     

    (mm) Without
      limiting the generality of the other obligations of the Debtors hereunder,
      each
      Debtor shall promptly give the Secured Party notice whenever it acquires
      (whether absolutely or by license) or creates any additional material
      Intellectual Property.

    

    (nn) Each
      Debtor will from time to time, at the joint and several expense of the Debtors,
      promptly execute and deliver all such further instruments and documents, and
      take all such further action as may be necessary or desirable, or as the Secured
      Party may reasonably request, in order to perfect and protect any security
      interest granted or purported to be granted hereby or to enable the Secured
      Party to exercise and enforce their rights and remedies hereunder and with
      respect to any Collateral or to otherwise carry out the purposes of this
      Agreement.

    

    (oo) Schedule
      F
      attached
      hereto lists all of the patents, patent applications, trademarks, trademark
      applications, registered copyrights, and domain names owned by any of the
      Debtors as of the date hereof. Schedule
      F
      lists
      all material licenses in favor of any Debtor for the use of any patents,
      trademarks, copyrights and domain names as of the date hereof. All material
      patents and trademarks of the Debtors have been duly recorded at the United
      States Patent and Trademark Office and all material copyrights of the Debtors
      have been duly recorded at the United States Copyright Office.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (pp) Except
      as
      set forth on Schedule
      G
      attached
      hereto, none of the account debtors or other persons or entities obligated
      on
      any of the Collateral is a governmental authority covered by the Federal
      Assignment of Claims Act or any similar federal, state or local statute or
      rule
      in respect of such Collateral.

    

    5. Effect
      of Pledge on Certain Rights. If
      any of
      the Collateral subject to this Agreement consists of nonvoting equity or
      ownership interests (regardless of class, designation, preference or rights)
      that may be converted into voting equity or ownership interests upon the
      occurrence of certain events (including, without limitation, upon the transfer
      of all or any of the other stock or assets of the issuer), it is agreed that
      the
      pledge of such equity or ownership interests pursuant to this Agreement or
      the
      enforcement of any of Secured
      Party’s
      rights
      hereunder shall not be deemed to be the type of event which would trigger such
      conversion rights notwithstanding any provisions in the Organizational Documents
      or agreements to which any Debtor is subject or to which any Debtor is
      party.

    

    6.
       Defaults.
      The
      following events shall be “Events
      of Default”:

    

    (a)
      The
      occurrence of an Event of Default (as defined in the Note) under the
      Note;

    

    (b)
      Any
      representation or warranty of any Debtor in this Agreement shall prove to have
      been incorrect in any material respect when made;

    

    (c)
      The
      failure by any Debtor to observe or perform any of its obligations hereunder
      for
      three (3) days after delivery to such Debtor of notice of such failure by or
      on
      behalf of a Secured Party unless such default is capable of cure but cannot
      be
      cured within such time frame and such Debtor is using best efforts to cure
      same
      in a timely fashion; or

    

    (d)
      If
      any provision of this Agreement shall at any time for any reason be declared
      to
      be null and void, or the validity or enforceability thereof shall be contested
      by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
      governmental authority having jurisdiction over any Debtor, seeking to establish
      the invalidity or unenforceability thereof, or any Debtor shall deny that any
      Debtor has any liability or obligation purported to be created under this
      Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     7.  Duty
      To Hold In Trust.
      

    

    (a) Upon
      the
      occurrence of any Event of Default and at any time thereafter, each Debtor
      shall, upon receipt of any revenue, income,
      dividend, interest
      or other
      sums subject to the Security Interests, whether payable pursuant to the Note
      or
      otherwise, or of any check, draft, note, trade acceptance or other instrument
      evidencing an obligation to pay any such sum, hold the same in trust for the
      Secured Party and shall forthwith endorse and transfer any such sums or
      instruments, or both, to the Secured Party. 

    

    (b) If
      any
      Debtor shall become entitled to receive or shall receive any securities or
      other
      property (including, without limitation, shares of Pledged Securities or
      instruments representing Pledged Securities acquired after the date hereof,
      or
      any options, warrants, rights or other similar property or certificates
      representing a dividend, or any distribution in connection with any
      recapitalization, reclassification or increase or reduction of capital, or
      issued in connection with any reorganization of such Debtor or any of its direct
      or indirect subsidiaries) in respect of the Pledged Securities (whether as
      an
      addition to, in substitution of, or in exchange for, such Pledged Securities
      or
      otherwise), such Debtor agrees to (i) accept the same as the agent of the
      Secured Party; (ii) hold the same in trust on behalf of and for the benefit
      of
      the Secured Party; and (iii) to deliver any and all certificates or instruments
      evidencing the same to Secured
      Party
      on or
      before the close of business on the fifth business day following the receipt
      thereof by such Debtor, in the exact form received together with the Necessary
      Endorsements, to be held by Secured
      Party
      subject
      to the terms of this Agreement as Collateral.

    

     8.  Rights
      and Remedies Upon Default.
      

    

    (a) Upon
      the
      occurrence of any Event of Default and at any time thereafter, the Secured
      Party
      shall have the right to exercise all of the remedies conferred hereunder and
      under the Note, and the Secured Party shall have all the rights and remedies
      of
      a secured party under the UCC. Without limitation, the Secured Party shall
      have
      the following rights and powers:

    

    (i)
      The
      Secured Party shall have the right to take possession of the Collateral and,
      for
      that purpose, enter, with the aid and assistance of any person, any premises
      where the Collateral, or any part thereof, is or may be placed and remove the
      same, and each Debtor shall assemble the Collateral and make it available to
      the
      Secured Party at places which the Secured Party shall reasonably select, whether
      at such Debtor's premises or elsewhere, and make available to the Secured Party,
      without rent, all of such Debtor’s respective premises and facilities for the
      purpose of the Secured Party taking possession of, removing or putting the
      Collateral in saleable or disposable form.

    

    (ii) Upon
      notice to the Debtors by Secured
      Party,
      all
      rights of each Debtor to exercise the voting and other consensual rights which
      it would otherwise be entitled to exercise and all rights of each Debtor to
      receive the dividends and interest which it would otherwise be authorized to
      receive and retain, shall cease. Upon such notice, Secured
      Party
      shall
      have the right to receive any interest, cash dividends or other payments on
      the
      Collateral and, at the option of Secured
      Party,
      to
      exercise in the Secured
      Party’s
      discretion all voting rights pertaining thereto. Without limiting the generality
      of the foregoing, Secured
      Party
      shall
      have the right (but not the obligation) to exercise all rights with respect
      to
      the Collateral as it were the sole and absolute owner thereof, including,
      without limitation, to vote and/or to exchange, at its sole discretion, any
      or
      all of the Collateral in connection with a merger, reorganization,
      consolidation, recapitalization or other readjustment concerning or involving
      the Collateral or any Debtor or any of its direct or indirect
      subsidiaries.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (iii)
      The
      Secured Party shall have the right to operate the business of each Debtor using
      the Collateral and shall have the right to assign, sell, lease or otherwise
      dispose of and deliver all or any part of the Collateral, at public or private
      sale or otherwise, either with or without special conditions or stipulations,
      for cash or on credit or for future delivery, in such parcel or parcels and
      at
      such time or times and at such place or places, and upon such terms and
      conditions as the Secured Party may deem commercially reasonable, all without
      (except as shall be required by applicable statute and cannot be waived)
      advertisement or demand upon or notice to any Debtor or right of redemption
      of a
      Debtor, which are hereby expressly waived. Upon each such sale, lease,
      assignment or other transfer of Collateral, the Secured Party, may, unless
      prohibited by applicable law which cannot be waived, purchase all or any part
      of
      the Collateral being sold, free from and discharged of all trusts, claims,
      right
      of redemption and equities of any Debtor, which are hereby waived and
      released.

    

    (iv) The
      Secured Party shall have the right (but not the obligation) to notify any
      account debtors and any obligors under instruments or accounts to make payments
      directly to the Secured Party, and to enforce the Debtors’ rights against such
      account debtors and obligors.

    

    (v) The
      Secured Party, may (but is not obligated to) direct any financial intermediary
      or any other person or entity holding any investment property to transfer the
      same to the Secured Party, or its designee.

    

    (vi) The
      Secured Party may (but is not obligated to) transfer any or all Intellectual
      Property registered in the name of any Debtor at the United States Patent and
      Trademark Office and/or Copyright Office into the name of the Secured Party
      or
      any designee or any purchaser of any Collateral.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (b) The
      Secured Party shall comply with any applicable law in connection with a
      disposition of Collateral and such compliance will not be considered adversely
      to affect the commercial reasonableness of any sale of the Collateral. The
      Secured Party may sell the Collateral without giving any warranties and may
      specifically disclaim such warranties. If the Secured Party sells any of the
      Collateral on credit, the Debtors will only be credited with payments actually
      made by the purchaser. In addition, each Debtor waives any and all rights that
      it may have to a judicial hearing in advance of the enforcement of any of the
      Secured Party’s rights and remedies hereunder, including, without limitation,
      its right following an Event of Default to take immediate possession of the
      Collateral and to exercise its rights and remedies with respect
      thereto.

     

    (c) For
      the
      purpose of enabling the Secured Party to further exercise rights and remedies
      under this Section 8 or elsewhere provided by agreement or applicable law,
      each
      Debtor hereby grants to the Secured Party, an irrevocable, nonexclusive license
      (exercisable without payment of royalty or other compensation to such Debtor)
      to
      use, license or sublicense following an Event of Default, any Intellectual
      Property now owned or hereafter acquired by such Debtor, and wherever the same
      may be located, and including in such license access to all media in which
      any
      of the licensed items may be recorded or stored and to all computer software
      and
      programs used for the compilation or printout thereof.

    

     9.  Applications
      of Proceeds.
      The
      proceeds of any such sale, lease or other disposition of the Collateral
      hereunder or from payments made on account of any insurance policy insuring
      any
      portion of the Collateral shall be applied first, to the expenses of retaking,
      holding, storing, processing and preparing for sale, selling, and the like
      (including, without limitation, any taxes, fees and other costs incurred in
      connection therewith) of the Collateral, to the reasonable attorneys’ fees and
      expenses incurred by the Secured Party in enforcing the Secured Party’s rights
      hereunder and in connection with collecting, storing and disposing of the
      Collateral, and then to satisfaction of the Obligations, and to the payment
      of
      any other amounts required by applicable law, after which the Secured Party
      shall pay to the applicable Debtor any surplus proceeds. If, upon the sale,
      license or other disposition of the Collateral, the proceeds thereof are
      insufficient to pay all amounts to which the Secured Party is legally entitled,
      the Debtors will be liable for the deficiency, together with interest thereon,
      at the rate of 20% per annum or the lesser amount permitted by applicable law
      (the “Default
      Rate”),
      and
      the reasonable fees of any attorneys employed by the Secured Party to collect
      such deficiency. To the extent permitted by applicable law, each Debtor waives
      all claims, damages and demands against the Secured Party arising out of the
      repossession, removal, retention or sale of the Collateral, unless due solely
      to
      the gross negligence or willful misconduct of the Secured Party as determined
      by
      a final judgment (not subject to further appeal) of a court of competent
      jurisdiction.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    10. Securities
      Law Provision.
      Each
      Debtor recognizes that Secured Party may be limited in its ability to effect
      a
      sale to the public of all or part of the Pledged Securities by reason of certain
      prohibitions in the Securities Act of 1933, as amended, or other federal or
      state securities laws (collectively, the “Securities
      Laws”),
      and
      may be compelled to resort to one or more sales to a restricted group of
      purchasers who may be required to agree to acquire the Pledged Securities for
      their own account, for investment and not with a view to the distribution or
      resale thereof. Each Debtor agrees that sales so made may be at prices and
      on
      terms less favorable than if the Pledged Securities were sold to the public,
      and
      that Secured Party has no obligation to delay the sale of any Pledged Securities
      for the period of time necessary to register the Pledged Securities for sale
      to
      the public under the Securities Laws. Each Debtor shall cooperate with Secured
      Party in its attempt to satisfy any requirements under the Securities Laws
      (including, without limitation, registration thereunder if requested by Secured
      Party) applicable to the sale of the Pledged Securities by Secured
      Party.

     

     11.  Costs
      and Expenses.
      Each
      Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
      incurred in connection with any filing required hereunder, including without
      limitation, any financing statements pursuant to the UCC, continuation
      statements, partial releases and/or termination statements related thereto
      or
      any expenses of any searches reasonably required by the Secured Party. The
      Debtors shall also pay all other claims and charges which in the reasonable
      opinion of the Secured Party is reasonably likely to prejudice, imperil or
      otherwise affect the Collateral or the Security Interests therein. The Debtors
      will also, upon demand, pay to the Secured Party the amount of any and all
      reasonable expenses, including the reasonable fees and expenses of its counsel
      and of any experts and agents, which the Secured Party, may incur in connection
      with (i) the enforcement of this Agreement, (ii) the custody or preservation
      of,
      or the sale of, collection from, or other realization upon, any of the
      Collateral, or (iii) the exercise or enforcement of any of the rights of the
      Secured Party under the Note. Until so paid, any fees payable hereunder shall
      be
      added to the principal amount of the Note and shall bear interest at the Default
      Rate.

    

     12.  Responsibility
      for Collateral.
      The
      Debtors assume all liabilities and responsibility in connection with all
      Collateral, and the Obligations shall in no way be affected or diminished by
      reason of the loss, destruction, damage or theft of any of the Collateral or
      its
      unavailability for any reason. Without limiting the generality of the foregoing,
      (a) in no event shall the Secured Party (i) have any duty (either before or
      after an Event of Default) to collect any amounts in respect of the Collateral
      or to preserve any rights relating to the Collateral, or (ii) have any
      obligation to clean-up or otherwise prepare the Collateral for sale, and (b)
      each Debtor shall remain obligated and liable under each contract or agreement
      included in the Collateral to be observed or performed by such Debtor
      thereunder. The Secured Party shall not have any obligation or liability under
      any such contract or agreement by reason of or arising out of this Agreement
      or
      the receipt by the Secured Party of any payment relating to any of the
      Collateral, nor shall the Secured Party be obligated in any manner to perform
      any of the obligations of any Debtor under or pursuant to any such contract
      or
      agreement, to make inquiry as to the nature or sufficiency of any payment
      received by the Secured Party in respect of the Collateral or as to the
      sufficiency of any performance by any party under any such contract or
      agreement, to present or file any claim, to take any action to enforce any
      performance or to collect the payment of any amounts which may have been
      assigned to the Secured Party or to which the Secured Party may be entitled
      at
      any time or times.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    13.  Security
      Interests Absolute.
      All
      rights of the Secured Party and all obligations of the Debtors hereunder, shall
      be absolute and unconditional, irrespective of: (a) any lack of validity or
      enforceability of the Note or any agreement entered into in connection with
      the
      Note, or any portion hereof or thereof; (b) any change in the time, manner
      or
      place of payment or performance of, or in any other term of, all or any of
      the
      Obligations, or any other amendment or waiver of or any consent to any departure
      from the Note or any other agreement entered into in connection with the
      foregoing; (c) any exchange, release or nonperfection of any of the Collateral,
      or any release or amendment or waiver of or consent to departure from any other
      collateral for, or any guarantee, or any other security, for all or any of
      the
      Obligations; (d) any action by the Secured Party to obtain, adjust, settle
      and
      cancel in its sole discretion any insurance claims or matters made or arising
      in
      connection with the Collateral; or (e) any other circumstance which might
      otherwise constitute any legal or equitable defense available to a Debtor,
      or a
      discharge of all or any part of the Security Interests granted hereby. Until
      the
      Obligations shall have been paid and performed in full, the rights of the
      Secured Party shall continue even if the Obligations are barred for any reason,
      including, without limitation, the running of the statute of limitations or
      bankruptcy. Each Debtor expressly waives presentment, protest, notice of
      protest, demand, notice of nonpayment and demand for performance. In the event
      that at any time any transfer of any Collateral or any payment received by
      the
      Secured Party hereunder shall be deemed by final order of a court of competent
      jurisdiction to have been a voidable preference or fraudulent conveyance under
      the bankruptcy or insolvency laws of the United States, or shall be deemed
      to be
      otherwise due to any party other than the Secured Party, then, in any such
      event, each Debtor’s obligations hereunder shall survive cancellation of this
      Agreement, and shall not be discharged or satisfied by any prior payment thereof
      and/or cancellation of this Agreement, but shall remain a valid and binding
      obligation enforceable in accordance with the terms and provisions hereof.
      Each
      Debtor waives all right to require the Secured Party to proceed against any
      other person or entity
      or
to
      apply
      any Collateral which the Secured Party may hold at any time, or to marshal
      assets, or to pursue any other remedy. Each Debtor waives any defense arising
      by
      reason of the application of the statute of limitations to any obligation
      secured hereby.

    

     14.
       Term
      of Agreement; Release of Security.
      This
      Agreement and the Security Interests shall terminate on the date on which all
      payments under the Note have been indefeasibly paid in full and all other
      Obligations have been paid or discharged; provided, however, that all
      indemnities of the Debtors contained in this Agreement shall survive and remain
      operative and in full force and effect regardless of the termination of this
      Agreement. With respect to any Subsidiary Dividend, so long as the Note has
      not
      matured and remain unpaid or so long as the Secured Party has not accelerated
      the obligations of the Company under the Note, the Secured Party’s security
      interest in the assets of any Subsidiary or Dividend Subsidiary and the security
      interest in the portion of the equity interest in such Subsidiary or Dividend
      Subsidiary so distributed shall be released and discharged. With respect to
      any
      other dividend to the Company’s common stock holders of any equity interest in
      any Subsidiary, so long as the Note has not matured and remain unpaid or so
      long
      as the Secured Party has not accelerated the obligations of the Company under
      the Note, and upon the prior written consent of the Secured Party (not to be
      unreasonably withheld or delayed), the Secured Party’s security interest in the
      assets of such Subsidiary and the security interest in the portion of the equity
      interest in such Subsidiary so distributed shall be released and
      discharged.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    15.
       Power
      of Attorney; Further Assurances.

    

    (a)
       Each
      Debtor authorizes the Secured Party, and does hereby make, constitute and
      appoint the Secured Party and its officers, agents, successors or assigns with
      full power of substitution, as such Debtor’s true and lawful attorney-in-fact,
      with power, in the name of the Secured Party or such Debtor, to, after the
      occurrence and during the continuance of an Event of Default, (i) endorse any
      note, checks, drafts, money orders or other instruments of payment (including
      payments payable under or in respect of any policy of insurance) in respect
      of
      the Collateral that may come into possession of the Secured Party; (ii) to
      sign
      and endorse any financing statement pursuant to the UCC or any invoice, freight
      or express bill, bill of lading, storage or warehouse receipts, drafts against
      debtors, assignments, verifications and notices in connection with accounts,
      and
      other documents relating to the Collateral; (iii) to pay or discharge taxes,
      liens, security interests or other encumbrances at any time levied or placed
      on
      or threatened against the Collateral; (iv) to demand, collect, receipt for,
      compromise, settle and sue for monies due in respect of the Collateral; (v)
      to
      transfer any Intellectual Property or provide licenses respecting any
      Intellectual Property; and (vi) generally, at the option of the Secured Party,
      and at the expense of the Debtors, at any time, or from time to time, to execute
      and deliver any and all documents and instruments and to do all acts and things
      which the Secured Party deems necessary to protect, preserve and realize upon
      the Collateral and the Security Interests granted therein in order to effect
      the
      intent of this Agreement and the Note all as fully and effectually as the
      Debtors might or could do; and each Debtor hereby ratifies all that said
      attorney shall lawfully do or cause to be done by virtue hereof. This power
      of
      attorney is coupled with an interest and shall be irrevocable for the term
      of
      this Agreement and thereafter as long as any of the Obligations shall be
      outstanding. The
      designation set forth herein shall be deemed to amend and supersede any
      inconsistent provision in the Organizational Documents or other documents or
      agreements to which any Debtor is subject or to which any Debtor is a party.
      Without
      limiting the generality of the foregoing, after the occurrence and during the
      continuance of an Event of Default, each Secured Party is specifically
      authorized to execute and file any applications for or instruments of transfer
      and assignment of any patents, trademarks, copyrights or other Intellectual
      Property with the United States Patent and Trademark Office and the United
      States Copyright Office.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (b)
       On
      a
      continuing basis, each Debtor will make, execute, acknowledge, deliver, file
      and
      record, as the case may be, with the proper filing and recording agencies in
      any
      jurisdiction, including, without limitation, the jurisdictions indicated on
      Schedule
      C
      attached
      hereto, all such instruments, and take all such action as may reasonably be
      deemed necessary or advisable, or as reasonably requested by the Secured Party,
      to perfect the Security Interests granted hereunder and otherwise to carry
      out
      the intent and purposes of this Agreement, or for assuring and confirming to
      the
      Secured Party the grant or perfection of a perfected security interest in all
      the Collateral under the UCC.

    

    (c)
       Each
      Debtor hereby irrevocably appoints the Secured Party as such Debtor’s
      attorney-in-fact, with full authority in the place and stead of such Debtor
      and
      in the name of such Debtor, from time to time in the Secured Party’s discretion,
      to take any action and to execute any instrument which the Secured Party may
      deem necessary or advisable to accomplish the purposes of this Agreement,
      including the filing, in its sole discretion, of one or more financing or
      continuation statements and amendments thereto, relative to any of the
      Collateral without the signature of such Debtor where permitted by law, which
      financing statements may (but need not), describe the Collateral as “all assets”
or “all personal property” or words of like import, and ratifies all such
      actions taken by the Secured Party. This power of attorney is coupled with
      an
      interest and shall be irrevocable for the term of this Agreement and thereafter
      as long as any of the Obligations shall be outstanding.

    

     16.  Notices.
      Any
      demand upon or notice to the Debtors hereunder shall be effective when delivered
      by hand or when properly deposited in the mails postage prepaid, or sent by
      telex, answerback received, or electronic facsimile transmission, receipt
      acknowledged, or delivered to a telegraph company or overnight courier, in
      each
      case addressed to the Debtor at the address shown below. Any notice by the
      Debtors to the Secured Party shall be given as aforesaid, addressed to the
      Secured Party at the address shown below or such other address as the Secured
      Party may advise the Debtors in writing.

    

    Secured
      Party: 

    Platinum
      Long Term Growth V, LLC

    Carnegie
      Hall Tower

    152
      W.
      57th Street

    54th
      Floor

    New
      York,
      NY 10019

    Fax:
      _____________________

     

    Debtors: 

    c/o
      Wits
      Basin Precious Minerals Inc.

    80
      South
      Eighth Street, Suite 900

    Minneapolis,
      MN 55402

    Fax:
      (612) 395-5276

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

      17.  Other
      Security.
      To the
      extent that the Obligations are now or hereafter secured by property other
      than
      the Collateral or by the guarantee, endorsement or property of any other person,
      firm, corporation or other entity, then the Secured Party shall have the right,
      in its sole discretion, to pursue, relinquish, subordinate, modify or take
      any
      other action with respect thereto, without in any way modifying or affecting
      any
      of the Secured Party’s rights and remedies hereunder.

    

     18.  Miscellaneous.

    

    (a)
       No
      course
      of dealing between the Debtors and the Secured Party, nor any failure to
      exercise, nor any delay in exercising, on the part of the Secured Party, any
      right, power or privilege hereunder or under the Note shall operate as a waiver
      thereof; nor shall any single or partial exercise of any right, power or
      privilege hereunder or thereunder preclude any other or further exercise thereof
      or the exercise of any other right, power or privilege.

    

    (b)
       All
      of
      the rights and remedies of the Secured Party with respect to the Collateral,
      whether established hereby or by the Note or by any other agreements,
      instruments or documents or by law shall be cumulative and may be exercised
      singly or concurrently.

    

    (c)
       This
      Agreement,
      together with the exhibits and schedules hereto, contain the entire
      understanding of the parties with respect to the subject matter hereof and
      supersede all prior agreements and understandings, oral or written, with respect
      to such matters, which the parties acknowledge have been merged into this
      Agreement and the exhibits and schedules hereto.
      No
      provision of this Agreement may be waived, modified, supplemented or amended
      except in a written instrument signed, in the case of an amendment, by the
      Debtors and the Secured Party or, in the case of a waiver, by the party against
      whom enforcement of any such waived provision is sought. 

    

    (d)
       If
      any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their commercially reasonable
      efforts to find and employ an alternative means to achieve the same or
      substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (e)
       No
      waiver
      of any default with respect to any provision, condition or requirement of this
      Agreement shall be deemed to be a continuing waiver in the future or a waiver
      of
      any subsequent default or a waiver of any other provision, condition or
      requirement hereof, nor shall any delay or omission of any party to exercise
      any
      right hereunder in any manner impair the exercise of any such
      right.

    

    (f)
       This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company and the Guarantors may
      not
      assign this Agreement or any rights or obligations hereunder without the prior
      written consent of the Secured Party (other than by merger). The Secured Party
      may assign any or all of its rights under this Agreement to any Person to whom
      such Secured Party assigns or transfers any Securities, provided such transferee
      agrees in writing to be bound, with respect to the transferred Securities,
      by
      the provisions of this Agreement that apply to the “Secured Party.”

    

    (g)
       Each
      party shall take such further action and execute and deliver such further
      documents as may be necessary or appropriate in order to carry out the
      provisions and purposes of this Agreement.

    

    (h)
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each Debtor agrees that all proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement and the Note (whether brought against a party
      hereto or its respective affiliates, directors, officers, shareholders,
      partners, members, employees or agents) shall be commenced exclusively in the
      state and federal courts sitting in the City of New York, Borough of Manhattan.
      Each Debtor hereby irrevocably submits to the exclusive jurisdiction of the
      state and federal courts sitting in the City of New York, Borough of Manhattan
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any proceeding, any claim that it is not
      personally subject to the jurisdiction of any such court, that such proceeding
      is improper. Each party hereto hereby irrevocably waives personal service of
      process and consents to process being served in any such proceeding by mailing
      a
      copy thereof via registered or certified mail or overnight delivery (with
      evidence of delivery) to such party at the address in effect for notices to
      it
      under this Agreement and agrees that such service shall constitute good and
      sufficient service of process and notice thereof. Nothing contained herein
      shall
      be deemed to limit in any way any right to serve process in any manner permitted
      by law. Each party hereto hereby irrevocably waives, to the fullest extent
      permitted by applicable law, any and all right to trial by jury in any legal
      proceeding arising out of or relating to this Agreement or the transactions
      contemplated hereby. If any party shall commence a proceeding to enforce any
      provisions of this Agreement, then the prevailing party in such proceeding
      shall
      be reimbursed by the other party for its reasonable attorney’s fees and other
      costs and expenses incurred with the investigation, preparation and prosecution
      of such proceeding.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (i)
       This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

    

    (j) All
      Debtors shall jointly and severally be liable for the obligations of each Debtor
      to the Secured Party hereunder.

    

    (k) Each
      Debtor shall indemnify, reimburse and hold harmless the Secured Party and its
      partners, members, shareholders, officers, directors, employees and agents
      (and
      any other persons with other titles that have similar functions) (collectively,
      “Indemnitees”)
      from
      and against any and all losses, claims, liabilities, damages, penalties, suits,
      costs and expenses, of any kind or nature, (including fees relating to the
      cost
      of investigating and defending any of the foregoing) imposed on, incurred by
      or
      asserted against such Indemnitee in any way related to or arising from or
      alleged to arise from this Agreement or the Collateral, except any such losses,
      claims, liabilities, damages, penalties, suits, costs and expenses which result
      from the gross negligence or willful misconduct of the Indemnitee as determined
      by a final, nonappealable decision of a court of competent jurisdiction. This
      indemnification provision is in addition to, and not in limitation of, any
      other
      indemnification provision in the Note, the Purchase Agreement (as such term
      is
      defined in the Note) or any other agreement, instrument or other document
      executed or delivered in connection herewith or therewith.

    

    (l) Nothing
      in this Agreement shall be construed to subject the Secured Party to liability
      as a partner in any Debtor or any if its direct or indirect subsidiaries that
      is
      a partnership or as a member in any Debtor or any of its direct or indirect
      subsidiaries that is a limited liability company, nor shall the Secured Party
      be
      deemed to have assumed any obligations under any partnership agreement or
      limited liability company agreement, as applicable, of any such Debtor or any
      if
      its direct or indirect subsidiaries or otherwise, unless and until the Secured
      Party exercises its right to be substituted for such Debtor as a partner or
      member, as applicable, pursuant hereto.

    

    (m)
       To
      the
      extent that the grant of the security interest in the Collateral and the
      enforcement of the terms hereof require the consent, approval or action of
      any
      partner or member, as applicable, of any Debtor or any direct or indirect
      subsidiary of any Debtor or compliance with any provisions of any of the
      Organizational Documents, the Debtors hereby grant such consent and approval
      and
      waive any such noncompliance with the terms of said documents.

    

    [SIGNATURE
      PAGES FOLLOW]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Security
      Agreement to be duly executed on the day and year first above
      written.

     

    
      	
              WITS
                BASIN PRECIOUS MINERALS INC. 

            
	 	 
	
              By:

            	
              /s/
                Mark D. Dacko

            
	 	
              Name:
                Mark D. Dacko

            
	 	
              Title:
                Chief Financial Officer

            
	 	 
	
              GREGORY
                GOLD PRODUCERS, INCORPORATED 

            
	 	 
	
              By:

            	
              /s/
                Mark D. Dacko

            
	 	
              Name:
                Mark D. Dacko

            
	 	
              Title:
                Chief Financial Officer

            
	 	 
	
              PLATINUM
                LONG TERM GROWTH V, LLC

            
	 	 
	
              By:

            	
              /s/
                Mark Nordlicht 

            
	 	
              Name:
                Mark Nordlicht

            
	 	
              Title:
                General Manager

            

    

     

    Signature
      Page

    to
      Security Agreement

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ANNEX
      A

    to

    SECURITY

    AGREEMENT

    

    FORM
      OF ADDITIONAL DEBTOR JOINDER

    

    Security
      Agreement dated as of February 11, 2008 made by

    Wits
      Basin Precious Minerals Inc.

    and
      its
      subsidiaries party thereto from time to time, as Debtors

    to
      and in
      favor of

    the
      Secured Party identified therein (the “Security
      Agreement”)

    

    Reference
      is made to the Security Agreement as defined above; capitalized terms used
      herein and not otherwise defined herein shall have the meanings given to such
      terms in, or by reference in, the Security Agreement.

    

    The
      undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
      to the Secured Party referred to above, the undersigned shall (a) be an
      Additional Debtor under the Security Agreement, (b) have all the rights and
      obligations of the Debtors under the Security Agreement as fully and to the
      same
      extent as if the undersigned was an original signatory thereto and (c) be deemed
      to have made the representations and warranties set forth therein as of the
      date
      of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
      THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
      SECURED PARTY A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
      IN
      THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
      PROVISIONS SET FORTH THEREIN.

    

    Attached
      hereto are supplemental and/or replacement Schedules to the Security Agreement,
      as applicable.

    

    An
      executed copy of this Joinder shall be delivered to the Secured Party, and
      the
      Secured Party may rely on the matters set forth herein on or after the date
      hereof. This Joinder shall not be modified, amended or terminated without the
      prior written consent of the Secured Party.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
      the
      name and on behalf of the undersigned.

    

    
      	
              [Name
                of Additional Debtor]

            
	 
	
              By:

            
	 
	
              Name:

            
	
              Title:

            
	 
	
              Address:

            

    

     

    Dated:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}]]