Document:

Filed by sedaredgar.com - Liberty Star Unranium & Metals Corp. - Exhibit 10.1

SUBSCRIPTION AGREEMENT 

          THIS
SUBSCRIPTION AGREEMENT (this “Agreement”), is dated as of May ___,
2009, by and among Liberty Star Uranium & Metals Corp., a Nevada corporation
(the “Company”), and the subscribers identified on the signature page
hereto (each a “Subscriber” and collectively “Subscribers”). 

          WHEREAS,
the Company and the Subscribers are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by the
provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange Commission
(the “Commission”) under the Securities Act of 1933, as amended (the
“1933 Act”). 

          WHEREAS,
the parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Subscribers, as provided herein,
and the Subscribers, in the aggregate, shall purchase up to $210,000 (the
"Purchase Price") of principal amount of promissory notes of the Company
(“Note” or “Notes”), a form of which is annexed hereto as
Exhibit A, convertible into shares of the Company's Common Stock, $0.001
par value (the "Common Stock") at a per share conversion price set forth
in the Note (“Conversion Price”) (the “Offering”). The Notes and
shares of Common Stock issuable upon conversion of the Notes (the
“Shares” or “Conversion Shares”) are collectively referred to
herein as the "Securities"; and 

          WHEREAS,
the aggregate proceeds of the sale of the Notes contemplated hereby shall be
held in escrow pursuant to the terms of an Escrow Agreement to be executed by
the parties substantially in the form attached hereto as Exhibit B (the
“Escrow Agreement”). 

          NOW,
THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Subscribers hereby agree as
follows: 

                         1.      Closing
Date. The “Closing Date” shall be the date that the Purchase Price is
transmitted by wire transfer or otherwise credited to or for the benefit of the
Company. The consummation of the transactions contemplated herein shall take
place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
1601, New York, New York 10176, upon the satisfaction or waiver of all
conditions to closing set forth in this Agreement. Subject to the satisfaction
or waiver of the terms and conditions of this Agreement, on the Closing Date,
each Subscriber shall purchase and the Company shall sell to each Subscriber a
Note in the Principal Amount designated on the signature page hereto for the
Purchase Price indicated thereon. 

                         2.     
(a)      Prior Offerings. On May 11, 2007, the
Company issued convertible promissory notes (“2007 Notes”) to the
Subscribers and other investors pursuant to a subscription agreement (“2007
Subscription Agreement”) and “transaction documents” as defined in the 2007
Subscription Agreement (“2007 Transaction Documents”). On August 28,
2008, the Company issued convertible promissory notes (“2008 Notes”) to
the Subscribers and other investors pursuant to a subscription agreement
(“2008 Subscription Agreement”) and “transaction documents” as defined in
the 2008 Subscription Agreement (“2008 Transaction Documents”).
Schedule 3.3 hereto sets forth the principal and interest outstanding on
the 2007 Notes and 2008 Notes as of the Closing Date. 

                                   (b)      Payment
Subordination. Pursuant to the authority of the Subscribers constituting a
Majority in Interest (as defined in the 2007 Transaction Documents and 2008
Transaction Documents), the following actions, modifications and terms shall
apply to the 2007 Transaction Documents 

1

and 2008 Transaction Documents: 

                                                  (i)      The
term “Obligations” as employed in the Security Agreement and Collateral
Agent Agreement components of the 2008 Transaction Documents shall include all
amounts payable or owing to the Subscribers under the Notes, the Subsidiary
Guaranty and pursuant to the 2009 Transaction Documents. 

                                                  (ii)     
The terms “Note” and “Notes” as employed in the Security Agreement
component of the 2008 Transaction Documents shall include respectively,
“Note” and “Notes” as employed in the 2009 Transaction Documents.

                                                  (iii)      The
rights described in Section 12(a) of the 2008 Subscription Agreement are waived
with respect to the Offering. 

                                                  (iv)     
Rights and benefits granted to the Subscribers pursuant to the 2009 Transaction
Documents including but not limited to the rights described in Sections 9(f) and
12(a) of this Agreement which conflict with rights granted pursuant to the terms
of the 2007 Transaction Documents and 2008 Transaction Documents shall supersede
and be superior to such other rights. 

                                                  (v)      The
Company will not issue shares of Common Stock upon conversion of 2007 Notes and
2008 Notes to any entity not a Subscriber hereunder until holders of Notes have
converted or have been paid principal of the 2007 Notes, 2008 Notes or Notes, in
the aggregate, after the Closing Date, equal to or greater than 75% of the
amount of Note principal issued in the Offering. 

                                                  (vi)      The
Subscribers hereunder are granted priority in payment of any amount equal to the
Notes acquired pursuant to this Agreement. To the extent the Company is unable
to fully satisfy all of the 2007 Notes, 2008 Notes and the Notes, regardless of
the existence of a security interest and the terms of the Security Agreement and
Collateral Agent Agreement components of the 2008 Transaction Documents, payment
shall be made first to satisfy all amounts payable to the Subscribers pursuant
to the 2009 Transaction Documents and thereafter in the priority set forth in
the 2008 Transaction Documents. It is the intention of the Subscribers and
Company that the 2007 Notes, 2008 Notes and all sums payable in connection with
the 2007 Transaction Documents and 2008 Transaction Documents be subordinate to
the Notes in terms of conversion, payment, priority, security and share
reservation. 

                                                  (vii)      The
Subscribers agree that they will not authorize nor instruct the Collateral Agent
to enforce any rights under the 2007 Transaction Documents or 2008 Transaction
Documents inconsistent with any of the foregoing or the rights granted to the
Subscribers pursuant to the 2009 Transaction Documents or arising as a result of
or in connection with the Offering and 2009 Transaction Documents. 

                    3.      Guaranty.
The Subsidiary (as defined in Section 5(a) of this Agreement) will guaranty the
Company’s obligations under the 2009 Transaction Documents [as defined in
Section 5(c)] (as defined in Section 4(b) below). Such guaranty will be
memorialized in a “Subsidiary Guaranty”, the form of which is annexed
hereto as Exhibit C. 

                    4.      Subscriber
Representations and Warranties. Each Subscriber hereby represents and
warrants to and agrees with the Company only as to such Subscriber that: 

                                   (a)     
Organization and Standing of the Subscribers. If such Subscriber is an
entity, such Subscriber is a corporation, partnership or other entity duly
incorporated or organized, validly 

2

existing and in good standing under the laws of the
jurisdiction of its incorporation or organization. 

                                   (b)     
Authorization and Power. Such Subscriber has the requisite power and
authority to enter into and perform this Agreement and the other 2009
Transaction Documents and to purchase the Notes being sold to it hereunder. The
execution, delivery and performance of this Agreement and the other 2009
Transaction Documents by such Subscriber and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of such Subscriber or its Board of Directors, stockholders,
partners, members, as the case may be, is required. This Agreement and the other
2009 Transaction Documents have been duly authorized, executed and delivered by
such Subscriber and constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of such Subscriber enforceable against
such Subscriber in accordance with the terms thereof. 

                                   (c)     
No Conflicts. The execution, delivery and performance of this Agreement
and the other 2009 Transaction Documents and the consummation by such Subscriber
of the transactions contemplated hereby and thereby or relating hereto do not
and will not (i) result in a violation of such Subscriber’s charter documents or
bylaws or other organizational documents or (ii) conflict with, or constitute a
default (or an event which 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 of any agreement, indenture or instrument or
obligation to which such Subscriber is a party or by which its properties or
assets are bound, or result in a violation of any law, rule, or regulation, or
any order, judgment or decree of any court or governmental agency applicable to
such Subscriber or its properties (except for such conflicts, defaults and
violations as would not, individually or in the aggregate, have a material
adverse effect on such Subscriber). Such Subscriber is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement and the other 2009 Transaction
Documents or to purchase the Securities in accordance with the terms hereof,
provided that for purposes of the representation made in this sentence, such
Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein. 

                                   (d)      Information
on Company. Such Subscriber has been furnished with or has had access at the
EDGAR Website of the Commission to the Company's Form 10-KSB for the fiscal year
ended January 31, 2009, and the financial statements included therein for the
year ended January 31, 2009, together with all subsequent filings made with the
Commission available at the EDGAR website until five days before the Closing
Date (hereinafter referred to collectively as the "Reports"). In
addition, such Subscriber may have received in writing from the Company such
other information concerning its operations, financial condition and other
matters as such Subscriber has requested in writing, identified thereon as OTHER
WRITTEN INFORMATION (such other information is collectively, the "Other
Written Information"), and considered all factors such Subscriber deems
material in deciding on the advisability of investing in the Securities.

                                   (e)      Information
on Subscriber. Subscriber is, and will be at the time of the conversion of
the Notes, an "accredited investor", as such term is defined in
Regulation D promulgated by the Commission under the 1933 Act, is experienced in
investments and business matters, has made investments of a speculative nature
and has purchased securities of United States publicly-owned companies in
private placements in the past and, with its representatives, has such knowledge
and experience in financial, tax and other business matters as to enable such
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the proposed purchase, which represents a speculative investment. Such
Subscriber has the authority and is duly and legally qualified to purchase and
own the Securities. Such Subscriber is able to bear the risk of such 

3

investment for an indefinite period and to afford a complete
loss thereof. The information set forth on the signature page hereto regarding
such Subscriber is accurate. 

                                   (f)      Purchase
of Notes. On the Closing Date, such Subscriber will purchase the Notes as
principal for its own account for investment only and not with a view toward, or
for resale in connection with, the public sale or any distribution thereof. 

                                   (g)     
Compliance with Securities Act. Such Subscriber understands and agrees
that the Securities have not been registered under the 1933 Act or any
applicable state securities laws, by reason of their issuance in a transaction
that does not require registration under the 1933 Act (based in part on the
accuracy of the representations and warranties of such Subscriber contained
herein), and that such Securities must be held indefinitely unless a subsequent
disposition is registered under the 1933 Act or any applicable state securities
laws or is exempt from such registration. In any event, and subject to
compliance with applicable securities laws, the Subscriber may enter into lawful
hedging transactions in the course of hedging the position they assume and the
Subscriber may also enter into lawful short positions or other derivative
transactions relating to the Securities, or interests in the Securities, and
deliver the Securities, or interests in the Securities, to close out their short
or other positions or otherwise settle other transactions, or loan or pledge the
Securities, or interests in the Securities, to third parties that in turn may
dispose of these Securities. 

                                   (h)     
Shares Legend. The Shares shall bear the following or similar legend:

  
    
      
        
          "THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
            BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
            OF 1933, AS AMENDED, NOR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
            MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
            THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
            UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
            COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
            ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
            OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
            NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
            WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
            SECURED BY THE SECURITIES." 

        

      

    

  

                                   (i)     
Note Legend. The Note shall bear the following legend: 

  
    
      
        
          "NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
            REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
            SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
            ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
            SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
            (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
            THE 

        

      

    

  

4

  
    
      
        
          SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
            AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED
            BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
            IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
            144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
            SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
            OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
            " 

        

      

    

  

                                   (j)     
Communication of Offer. The offer to sell the Securities was directly
communicated to such Subscriber by the Company. At no time was such Subscriber
presented with or solicited by any leaflet, newspaper or magazine article, radio
or television advertisement, or any other form of general advertising or
solicited or invited to attend a promotional meeting otherwise than in
connection and concurrently with such communicated offer. 

                                   (k)     
Restricted Securities. Such Subscriber understands that the Securities
have not been registered under the 1933 Act and such Subscriber will not sell,
offer to sell, assign, pledge, hypothecate or otherwise transfer any of the
Securities unless pursuant to an effective registration statement under the 1933
Act, or unless an exemption from registration is available. Notwithstanding
anything to the contrary contained in this Agreement, such Subscriber may
transfer (without restriction and without the need for an opinion of counsel)
the Securities to its Affiliates (as defined below) provided that each such
Affiliate is an “accredited investor” under Regulation D and such Affiliate
agrees to be bound by the terms and conditions of this Agreement. For the
purposes of this Agreement, an “Affiliate” of any person or entity means
any other person or entity directly or indirectly controlling, controlled by or
under direct or indirect common control with such person or entity. Affiliate
includes each Subsidiary of the Company. For purposes of this definition,
“control” means the power to direct the management and policies of such
person or firm, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise. 

                                   (l)      No
Governmental Review. Such Subscriber understands that no United States
federal or state agency or any other governmental or state agency has passed on
or made recommendations or endorsement of the Securities or the suitability of
the investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.

                                  (m)     
Correctness of Representations. Such Subscriber represents as to such
Subscriber that the foregoing representations and warranties are true and
correct as of the date hereof and, unless such Subscriber otherwise notifies the
Company prior to the Closing Date shall be true and correct as of the Closing
Date. 

                                   (n)     
Survival. The foregoing representations and warranties shall survive the
Closing Date. 

                    5.     
Company Representations and Warranties. The Company represents and
warrants to and agrees with each Subscriber that: 

                                   (a)     
Due Incorporation. The Company is a corporation or other entity duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and has the requisite
corporate power to own its properties and to carry on its business as presently
conducted. The Company is duly qualified as a foreign corporation to do business
and 

5

is in good standing in each jurisdiction where the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those jurisdictions in which the failure to so qualify
would not have a Material Adverse Effect. For purposes of this Agreement, a
“Material Adverse Effect” shall mean a material adverse effect on the
financial condition, results of operations, prospects, properties or business of
the Company and its Subsidiaries taken as a whole. For purposes of this
Agreement, “Subsidiary” means, with respect to any entity at any date,
any corporation, limited or general partnership, limited liability company,
trust, estate, association, joint venture or other business entity of which more
than 30% of (i) the outstanding capital stock having (in the absence of
contingencies) ordinary voting power to elect a majority of the board of
directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly through one or
more intermediaries, by such entity. As of the Closing Date, the Company’s only
Subsidiary is Big Chunk Corp., an Alaska corporation, which is wholly-owned by
the Company. 

                                   (b)     
Outstanding Stock. All issued and outstanding shares of capital stock of
the Company and Subsidiary have been duly authorized and validly issued and are
fully paid and non-assessable. 

                                   (c)     
Authority; Enforceability. This Agreement, the Note, the Subsidiary
Guaranty and the Escrow Agreement and any other agreements delivered together
with this Agreement or in connection herewith (collectively “2009 Transaction
Documents”) have been duly authorized, executed and delivered by the Company
and Subsidiaries (as applicable) and are valid and binding agreements of the
Company enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity. The Company has full corporate power and
authority necessary to enter into and deliver the 2009 Transaction Documents and
to perform its obligations thereunder. 

                                   (d)     
Additional Issuances. There are no outstanding agreements or preemptive
or similar rights affecting the Company's Common Stock or equity and no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of any shares of Common Stock or equity of the Company or
Subsidiaries or other equity interest in the Company except as described on
Schedule 5(d). The Common Stock of the Company on a fully diluted basis
outstanding as of the last Business Day preceding the Closing Date and the
components thereof are set forth on Schedule 5(d). 

                                   (e)      Consents.
No consent, approval, authorization or order of any court, governmental agency
or body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, the OTC Bulletin Board (the “Bulletin Board”) or the
Company's shareholders is required for the execution by the Company of the 2009
Transaction Documents and compliance and performance by the Company of its
obligations under the 2009 Transaction Documents, including, without limitation,
the issuance and sale of the Securities. The 2009 Transaction Documents and the
Company’s performance of its obligations thereunder has been unanimously
approved by the Company’s Board of Directors. 

                                   (f)      No
Violation or Conflict. Assuming the representations and warranties of the
Subscribers in Section 4 are true and correct, neither the issuance and sale of
the Securities nor the performance of the Company’s obligations under this
Agreement and all other agreements entered into by the Company relating thereto
by the Company will: 

                                                  (i)     
violate, conflict with, result in a breach of, or constitute a default (or an
event which with the giving of notice or the lapse of time or both would be
reasonably likely to constitute a default) under (A) the articles or certificate
of incorporation, charter or bylaws of the Company, (B) to the 

6

Company's knowledge, any decree, judgment, order, law, treaty,
rule, regulation or determination applicable to the Company of any court,
governmental agency or body, or arbitrator having jurisdiction over the Company
or over the properties or assets of the Company or any of its Affiliates, (C)
the terms of any bond, debenture, note or any other evidence of indebtedness, or
any agreement, stock option or other similar plan, indenture, lease, mortgage,
deed of trust or other instrument to which the Company or any of its Affiliates
is a party, by which the Company or any of its Affiliates is bound, or to which
any of the properties of the Company or any of its Affiliates is subject, or (D)
the terms of any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company, or any of its Affiliates is a party except the
violation, conflict, breach, or default of which would not have a Material
Adverse Effect; or 

                                                  (ii)      result
in the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates except
as described herein; or 

                                                  (iii)      except
as described in Schedule 5(d), or in connection with the 2007 Transaction
Documents and 2008 Transaction Documents, result in the activation of any
anti-dilution rights or a reset or repricing of any debt, equity or security
instrument of any other creditor or equity holder of the Company, or the holder
of the right to receive any debt, equity or security instrument of the Company
nor result in the acceleration of the due date of any obligation of the Company;
or 

                                                  
(iv)      will result in the triggering of any
piggy-back or other registration rights of any person or entity holding
securities of the Company or having the right to receive securities of the
Company. 

                                   (g)     
The Securities. The Securities upon issuance: 

                                                  (i)      are,
or will be, free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the 1933 Act and any
applicable state securities laws; 

                                                  (ii)     
have been, or will be, duly and validly authorized and on the date of issuance
of the Shares upon conversion of the Notes, the Shares will be duly and validly
issued, fully paid and non-assessable and if registered pursuant to the 1933 Act
and resold pursuant to an effective registration statement will be free trading
and unrestricted; 

                                                  (iii)     
will not have been issued or sold in violation of any preemptive or other
similar rights of the holders of any securities of the Company; 

                                                  (iv)      will
not subject the holders thereof to personal liability by reason of being such
holders; and 

                                                  
(v)      assuming the representations warranties
of the Subscribers as set forth in Section 4 hereof are true and correct, will
not result in a violation of Section 5 under the 1933 Act. 

                                   (h)     
Litigation. There is no pending or, to the best knowledge of the Company,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under the 2009 Transaction
Documents. Except as disclosed in the Reports, there is no pending or, to the
best knowledge of the Company, basis for or threatened action, suit, proceeding
or investigation before any court, governmental agency or body, or 

7

arbitrator having jurisdiction over the Company, or any of its
Affiliates which litigation if adversely determined would have a Material
Adverse Effect. 

                                   (i)      No
Market Manipulation. The Company and its Affiliates have not taken, and will
not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Securities
or affect the price at which the Securities may be issued or resold. 

                                   (j)     
Information Concerning Company. The Reports and Other Written Information
contain all material information relating to the Company and its operations and
financial condition as of their respective dates which information is required
to be disclosed therein. Since January 31, 2009 and except as modified in the
Other Written Information or in the Schedules hereto, there has been no Material
Adverse Event relating to the Company's business, financial condition or affairs
not disclosed in the Reports. The Reports and Other Written Information
including the financial statements included therein do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, taken as a whole,
not misleading in light of the circumstances when made. 

                                   (k)     
Solvency. Based on the financial condition of the Company as of the
Closing Date after giving effect to the receipt by the Company of the proceeds
from the sale of the Notes hereunder, (i) the Company’s fair saleable value of
its assets exceeds the amount that will be required to be paid on or in respect
of the Company’s existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt). 

                                   (l)     
Defaults. The Company is not in violation of its articles of
incorporation or bylaws. The Company is (i) not in default under or in violation
of any other material agreement or instrument to which it is a party or by which
it or any of its properties are bound or affected, which default or violation
would have a Material Adverse Effect, (ii) not in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action, suit
or proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) not in
violation of any statute, rule or regulation of any governmental authority which
violation would have a Material Adverse Effect. 

                                   (m)     
No Integrated Offering. Neither the Company, nor any of its Affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offer of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of the Bulletin Board. No
prior integrated offering will impair the exemptions relied upon in this
Offering or the Company’s ability to timely comply with its obligations
hereunder. Neither the Company nor any of its Affiliates will take any action or
steps that would cause the offer or issuance of the Securities to be integrated
with other offerings which would impair the exemptions relied upon in this
Offering or the Company’s ability to timely comply with its obligations
hereunder. The Company will not conduct any 

8

offering other than the transactions contemplated hereby that
will be integrated with the offer or issuance of the Securities that would
impair the exemptions relied upon in this Offering or the Company’s ability to
timely comply with its obligations hereunder. 

                                   (n)      No
General Solicitation. Neither the Company, nor any of its Affiliates, nor to
its knowledge, any person acting on its or their behalf, has engaged in any form
of general solicitation or general advertising (within the meaning of Regulation
D under the 1933 Act) in connection with the offer or sale of the Securities.

                                   (o)      No
Undisclosed Liabilities. The Company has no liabilities or obligations which
are material, individually or in the aggregate, other than those incurred in the
ordinary course of the Company businesses since January 31, 2009 and which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except as disclosed in the Reports or on Schedule
5(o). 

                                   (p)     
No Undisclosed Events or Circumstances. Since January 31, 2009, except as
disclosed in the Reports, no event or circumstance has occurred or exists with
respect to the Company or its businesses, properties, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the Reports. 

                                   (q)      Capitalization.
The authorized and outstanding capital stock of the Company and Subsidiaries as
of the date of this Agreement and the Closing Date (not including the
Securities) are set forth on Schedule 5(d). Except as set forth on
Schedule 5(d), there are no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or giving
any right to subscribe for any shares of capital stock of the Company or any of
its Subsidiaries. The only officer, director, employee and consultant stock
option or stock incentive plan currently in effect or contemplated by the
Company is described on Schedule 5(d). 

                                   (r)     
Dilution. The Company's executive officers and directors understand the
nature of the Securities being sold hereby and recognize that the issuance of
the Securities will have a potential dilutive effect on the equity holdings of
other holders of the Company’s equity or rights to receive equity of the
Company. The board of directors of the Company has concluded, in its good faith
business judgment that the issuance of the Securities is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Shares upon conversion of the Notes is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company or parties entitled to receive
equity of the Company. 

                                   (s)      No
Disagreements with Accountants and Lawyers. There are no material
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise between the Company and the accountants and lawyers presently
employed by the Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers, nor have there been any such
disagreements during the two years prior to the Closing Date. 

                                   (t)      Investment
Company. Neither the Company nor any Affiliate of the Company is an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended. 

                                   (u)      Foreign
Corrupt Practices. Neither the Company, nor to the knowledge of the Company,
any agent or other person acting on behalf of the Company, has (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to foreign or domestic political activity, (ii)
made any unlawful payment to foreign or domestic government officials or 

9

employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any contribution
made by the Company (or made by any person acting on its behalf of which the
Company is aware) which is in violation of law, or (iv) violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

                                   (v)      Reporting
Company. The Company is a publicly-held company subject to reporting
obligations pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended (the "1934 Act") and has a class of Common Stock registered
pursuant to Section 12(g) of the 1934 Act. Pursuant to the provisions of the
1934 Act, the Company has timely filed all reports and other materials required
to be filed thereunder with the Commission during the preceding twelve months.

                                   (w)     
Listing. The Company's Common Stock is quoted on the Bulletin Board under
the symbol LBSU. The Company has not received any oral or written notice that
its Common Stock is not eligible nor will become ineligible for quotation on the
Bulletin Board nor that its Common Stock does not meet all requirements for the
continuation of such quotation. The Company satisfies all the requirements for
the continued quotation of its Common Stock on the Bulletin Board. 

                                   (x)      DTC
Status. The Company’s transfer agent is a participant in, and the Common
Stock is eligible for transfer pursuant to, the Depository Trust Company
Automated Securities Transfer Program. The name, address, telephone number, fax
number, contact person and email address of the Company transfer agent is set
forth on Schedule 5(x) hereto. 

                                   (y)      Company
Predecessor and Subsidiaries. The Company makes each of the representations
contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (l), (o), (p),
(q), (s), (t) and (u) of this Agreement, as same relate to the Subsidiary of the
Company. All representations made by or relating to the Company of a historical
or prospective nature and all undertakings described in Sections 9(g) through
9(l) shall relate, apply and refer to the Company and its predecessors. The
Company represents that it owns the equity of the Subsidiaries and rights to
receive equity of the Subsidiaries as set forth on Schedule 5(a), free
and clear of all liens, encumbrances and claims, except as set forth on
Schedule 5(a). No person or entity other than the Company has the right
to receive any equity interest in the Subsidiaries. 

                                   (z)     
Banking. Schedule 5(z) contains a list of all financial
institutions at which the Company maintains deposit and checking accounts. The
list includes the address of such financial institution and account number of
such accounts. 

                                   (AA)      Correctness
of Representations. The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all
material respects, and, unless the Company otherwise notifies the Subscribers
prior to the Closing Date, shall be true and correct in all material respects as
of the Closing Date; provided, that, if such representation or warranty is made
as of a different date in which case such representation or warranty shall be
true as of such date. 

                                   (BB)      Survival.
The foregoing representations and warranties shall survive the Closing Date.

                         6.      Regulation
D Offering/Legal Opinion. The offer and issuance of the Securities to the
Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder. On the Closing Date,
the Company will provide an opinion reasonably acceptable to the Subscribers
from the Company's legal counsel opining on the availability of an exemption
from registration under the 1933 Act as it relates to the offer and issuance of
the Securities and other matters reasonably requested by Subscribers. A 

10

form of the legal opinion is annexed hereto as Exhibit
D. The Company will provide, at the Company's expense, such other legal
opinions, if any, as are reasonably necessary in each Subscriber’s opinion for
the issuance and resale of the Common Stock issuable upon conversion of the
Notes pursuant to an effective registration statement, Rule 144 under the 1933
Act or an exemption from registration. 

                         7.1.      Conversion
of Note. 

                                   (a)      Upon
the conversion of a Note or part thereof, the Company shall, at its own cost and
expense, take all necessary action, including obtaining and delivering, an
opinion of counsel to assure that the Company's transfer agent shall issue stock
certificates in the name of Subscriber (or its permitted nominee) or such other
persons as designated by Subscriber and in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable upon such
conversion. The Company warrants that no instructions other than these
instructions have been or will be given to the transfer agent of the Company's
Common Stock and that the certificates representing such shares shall contain no
legend other than the legend set forth in Section 4(h). If and when a Subscriber
sells the Shares, assuming (i) a registration statement including such Shares
for registration, filed with the Commission is effective and the prospectus, as
supplemented or amended, contained therein is current and (ii) such Subscriber
or its agent confirms in writing to the transfer agent that such Subscriber has
complied with the prospectus delivery requirements, the Company will reissue the
Shares without restrictive legend and the Shares will be free-trading, and
freely transferable. In the event that the Shares are sold in a manner that
complies with an exemption from registration, the Company will promptly instruct
its counsel to issue to the transfer agent an opinion permitting removal of the
legend indefinitely, if pursuant to Rule 144(b)(1)(i) of the 1933 Act, or for 90
days if pursuant to the other provisions of Rule 144 of the 1933 Act, provided
that Subscriber delivers all reasonably requested representations in support of
such opinion. 

                                   (b)     
A Subscriber will give notice of its decision to exercise its right to convert
the Note, interest, or part thereof by telecopying, or otherwise delivering a
completed Notice of Conversion (a form of which is annexed as Exhibit A
to the Note) to the Company via confirmed telecopier transmission or otherwise
pursuant to Section 13(a) of this Agreement. Such Subscriber will not be
required to surrender the Note until the Note has been fully converted or
satisfied. Each date on which a Notice of Conversion is telecopied to the
Company in accordance with the provisions hereof by 6 PM Eastern Time (“ET”) (or
if received by the Company after 6 PM ET then the next business day) shall be
deemed a “Conversion Date.” The Company will itself or cause the
Company’s transfer agent to transmit the Company's Common Stock certificates
representing the Shares issuable upon conversion of the Note to such Subscriber
via express courier for receipt by such Subscriber within three (3) business
days after the Notice of Conversion is given by the Subscriber (such third day
being the "Delivery Date"). In the event the Shares are electronically
transferable, then delivery of the Shares must be made by electronic
transfer provided request for such electronic transfer has been made by the
Subscriber. A Note representing the balance of the Note not so converted will be
provided by the Company to such Subscriber if requested by Subscriber, provided
such Subscriber delivers the original Note to the Company. In the event that a
Subscriber elects not to surrender a Note for reissuance upon partial payment or
conversion of a Note, such Subscriber hereby indemnifies the Company against
loss or damage attributable to a third-party claim in an amount in excess of the
actual amount then due under the Note. 

                                   (c)      The
Company understands that a delay in the delivery of the Shares in the form
required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
described in Section 7.2 hereof, respectively later than the Delivery Date or
the Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber. As compensation to Subscriber for such loss,
the Company agrees to pay (as liquidated damages and not as a penalty) to such
Subscriber for late issuance of Shares in the form required pursuant to Section
7.1 hereof upon Conversion of the Note in the amount of $100 

11

per business day after the Delivery Date for each $10,000 of
Note principal amount (and proportionately for other amounts) being converted of
the corresponding Shares which are not timely delivered. The Company shall pay
any payments incurred under this Section upon demand. Furthermore, in addition
to any other remedies which may be available to the Subscriber, in the event
that the Company fails for any reason to effect delivery of the Shares within
seven (7) business days after the Delivery Date or make payment within seven (7)
business days after the Mandatory Redemption Payment Date (as defined in Section
7.2 below), such Subscriber will be entitled to revoke all or part of the
relevant Notice of Conversion or rescind all or part of the notice of Mandatory
Redemption by delivery of a notice to such effect to the Company whereupon the
Company and such Subscriber shall each be restored to their respective positions
immediately prior to the delivery of such notice, except that the liquidated
damages described above shall be payable through the date notice of revocation
or rescission is given to the Company. 

                         
7.2.      Mandatory Redemption at Subscriber’s
Election. In the event (i) the Company is prohibited from issuing Shares,
(ii) upon the occurrence of any other Event of Default (as defined in the Note
or in this Agreement), that continues for more than thirty (30) business days,
(iii) a Change in Control (as defined below), or (iv) of the liquidation,
dissolution or winding up of the Company, then at the Subscriber's election, the
Company must pay to each Subscriber ten (10) business days after request by each
Subscriber (“Calculation Period”), a sum of money determined by
multiplying up to the outstanding principal amount of the Note designated by
each such Subscriber by 115%, plus accrued but unpaid interest and any other
amounts due under the 2009 Transaction Documents ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by each
Subscriber on the same date as the Shares otherwise deliverable or within ten
(10) business days after request, whichever is sooner ("Mandatory Redemption
Payment Date"). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal, interest and other amounts will be deemed paid and
no longer outstanding. The Subscriber may rescind the election to receive a
Mandatory Redemption Payment at any time until such payment is actually
received. Liquidated damages calculated pursuant to Section 7.1(c) hereof, that
have been paid or accrued for the ten day period prior to the actual receipt of
the Mandatory Redemption Payment by a Subscriber shall be credited against the
Mandatory Redemption Payment. For purposes of this Section 7.2, “Change in
Control” shall mean (i) the Company becoming a Subsidiary of another entity
(other than a corporation formed by the Company for purposes of reincorporation
in another U.S. jurisdiction), (ii) the sale, lease or transfer of substantially
all the assets of the Company or its Subsidiaries, and (iii) if the holders of
the Company’s Common Stock as of the Closing Date beneficially own at any time
after the Closing Date less than 40% of the Common Stock owned by them on the
Closing Date (other than as a result of their having sold their stock except
under a tender offer). 

                         7.3.      Maximum
Conversion. A Subscriber shall not be entitled to convert on a Conversion
Date that amount of the Note nor may the Company make any payment including
principal, interest, or liquidated or other damages in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by such Subscriber and its
Affiliates on a Conversion Date or payment date, and (ii) the number of shares
of Common Stock issuable upon the conversion of the Note with respect to which
the determination of this provision is being made on a Conversion Date, which
would result in beneficial ownership by such Subscriber and its Affiliates of
more than 4.99% of the outstanding shares of Common Stock of the Company on such
Conversion Date. For the purposes of the provision to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3
thereunder. Subject to the foregoing, the Subscriber shall not be limited to
aggregate conversions of only 4.99% and aggregate conversions by the Subscriber
may exceed 4.99% . The Subscriber may increase the permitted beneficial
ownership amount up to 9.99% upon and effective after 61 days’ prior written
notice to the Company. Such Subscriber may allocate which of the equity of the
Company deemed beneficially owned 

12

by such Subscriber shall be included in the 4.99% amount
described above and which shall be allocated to the excess above 4.99% . 

                         7.4.     
Injunction/ Posting of Bond. In the event a Subscriber shall elect to
convert a Note or part thereof, the Company may not refuse conversion or
exercise based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of law, or for
any other reason, unless, an injunction from a court, on notice, restraining and
or enjoining conversion of all or part of such Note shall have been sought and
obtained by the Company or at the Company’s request or with the Company’s
assistance, and the Company has posted a surety bond for the benefit of such
Subscriber in the amount of 120% of the outstanding principal and interest of
the Note, or aggregate purchase price of the Shares which are sought to be
subject to the injunction, 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 Subscriber to the extent Subscriber obtains judgment in
Subscriber’s favor. 

                         
7.5.      Buy-In. In addition to any other
rights available to a Subscriber, if the Company fails to deliver to a
Subscriber such shares issuable upon conversion of a Note by the Delivery Date
and if after seven (7) business days after the Delivery Date such Subscriber or
a broker on such Subscriber’s behalf purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
Subscriber of the Common Stock which such Subscriber was entitled to receive
upon such conversion (a "Buy-In"), then the Company shall pay to such
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) such Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion was not timely honored together with interest thereon
at a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if a Subscriber purchases shares of Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of $10,000 of note principal and/or interest, the Company
shall be required to pay such Subscriber $1,000 plus interest. Such Subscriber
shall provide the Company written notice and evidence indicating the amounts
payable to such Subscriber in respect of the Buy-In. 

                         7.6      Adjustments.
The Conversion Price and amount of Shares issuable upon conversion of the
Notes shall be equitably adjusted and as otherwise described in this Agreement
and the Notes. 

                         7.7.      Redemption.
  The Notes shall not be redeemable or callable by the Company except as described
  in the Notes.

                         8.        
Broker/Due Diligence/Legal Fees. 

                                   
(a)      Broker. The Company on the one hand,
and each Subscriber (for himself only) on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
persons claiming brokerage commissions, finder’s fees or due diligence fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby or in connection with any investment in the Company at any
time, whether or not such investment was consummated and arising out of such
party’s actions. The Company represents that there are no parties entitled to
receive fees, commissions, due diligence fees, lead investor fees, or similar
payments in connection with the Offering. 

                                   (b)     
Subscriber’s Legal Fees. The Company shall pay to Grushko & Mittman,
P.C., a fee of $13,000 (“Subscribers’ Legal Fees”) as reimbursement for
services rendered to the Subscribers in connection with this Agreement and the
purchase and sale of the Notes. The Legal Fees and Subscribers’ other expenses
in connection with the Offering (to the extent known as of the Closing) will be
payable out of 

13

funds held pursuant to the Escrow Agreement. Grushko &
Mittman, P.C. will be reimbursed at Closing for all lien searches, filing fees,
and printing and shipping costs for the closing statements to be delivered to
Subscribers. 

                         9.      Covenants
of the Company. The Company covenants and agrees with the Subscribers as
follows: 

                                   (a)     
Stop Orders. The Company will advise the Subscribers, within twenty-four
hours after it receives notice of issuance by the Commission, any state
securities commission or any other regulatory authority of any stop order or of
any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose. The Company will not issue any stop transfer
order or other order impeding the sale, resale or delivery of any of the
Securities, except as may be required by any applicable federal or state
securities laws and unless contemporaneous notice of such instruction is given
to the Subscriber. 

                                   (b)     
Listing/Quotation. The Company shall promptly secure the quotation or
listing of the Shares upon each national securities exchange, or automated
quotation system upon which they are or become eligible for quotation or listing
(subject to official notice of issuance) and shall maintain same so long as any
Notess are outstanding. The Company will maintain the quotation or listing of
its Common Stock on the American Stock Exchange, Nasdaq Capital Market, Nasdaq
Global Market, Nasdaq Global Select Market, Bulletin Board, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock (the “Principal Market”), and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common Stock
from any Principal Market. As of the date of this Agreement and the Closing
Date, the Bulletin Board is and will be the Principal Market. 

                                   (c)      Market
Regulations. If required, the Company shall notify the Commission, the
Principal Market and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities to the Subscribers and promptly provide copies thereof to the
Subscribers. 

                                   (d)      Filing
Requirements. From the date of this Agreement and until the last to occur of
(i) two (2) years after the Closing Date, (ii) until all the Shares have been
resold or transferred by all the Subscribers pursuant to a registration
statement or pursuant to Rule 144(b)(1)(i), or (iii) the Notes are no longer
outstanding (the date of such latest occurrence being the “End Date”),
the Company will (A) cause its Common Stock to continue to be registered under
Section 12(b) or 12(g) of the 1934 Act, (B) comply in all respects with its
reporting and filing obligations under the 1934 Act, (C) voluntarily comply with
all reporting requirements that are applicable to an issuer with a class of
shares registered pursuant to Section 12(g) of the 1934 Act, if the Company is
not subject to such reporting requirements, and (D) comply with all requirements
related to any registration statement filed pursuant to this Agreement. The
Company will use its best efforts not to take any action or file any document
(whether or not permitted by the 1933 Act or the 1934 Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said acts until the End Date. Until
the End Date, the Company will continue the listing or quotation of the Common
Stock on a Principal Market and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Principal Market. The Company agrees to timely file a Form D with respect to the
Securities if required under Regulation D and to provide a copy thereof to each
Subscriber promptly after such filing. 

14

                                   (e)     
Use of Proceeds. The proceeds of the Offering will be employed by the
Company for the purposes and in the priority set forth on Schedule 9(e)
unless otherwise agreed to by Subscribers. Except as described on Schedule
9(e), the Purchase Price may not and will not be used for accrued and unpaid
officer and director salaries, payment of financing related debt, redemption of
outstanding notes or equity instruments of the Company nor non-trade obligations
outstanding on a Closing Date. For so long as any Notes are outstanding, the
Company will not prepay any financing related debt obligations, except equipment
payments, nor redeem any equity instruments of the Company without the prior
consent of the Subscribers. 

                                   (f)      Reservation.
Prior to the Closing, the Company undertakes to reserve and maintain such
reservation, pro rata, on behalf of each holder of a Note, from
its authorized but unissued Common Stock, a number of shares of Common Stock
equal to 175% of the amount of Common Stock necessary to allow each holder of a
Note to be able to convert all such outstanding Notes (“Required
Reservation”). Failure to have sufficient shares reserved pursuant to this
Section 9(f) at any time shall be a material default of the Company’s
obligations under this Agreement and an Event of Default under the Note. If at
any time after June 15, 2009 when Notes are outstanding the Company has
insufficient Common Stock reserved on behalf of the Subscribers in an amount
equal to at least 125% of the amount necessary for full conversion of all the
outstanding Notes (“Minimum Required Reservation”), the Company will
promptly take all action necessary to increase its authorized capital to be able
to fully satisfy its reservation requirements hereunder, including the filing of
a preliminary proxy with the Commission not later than thirty days after the
first day the Company has less than the Minimum Required Reservation. The
Company agrees to provide notice to the Subscribers not later than three days
after the date the Company has less than the Minimum Required Reservation
reserved on behalf of the Subscribers. For purposes of determining the
Required Reservation and Minimum Required Reservation, the lesser of the Fixed
Conversion Price or the Conversion Price set forth in Section 2.1(ii)(B) of the
Note shall be employed. In any event, the Company undertakes to increase its
authorized Common Stock to not less than 1,500,000,000 shares of Common Stock.
It will be an Event of Default under the Note if such increase is not
effectuated within 150 calendar days after the Closing Date. To the extent there
are insufficient shares of Common Stock reserved to allow the complete
conversion of the 2007 Notes, the 2008 Notes and the Notes issued in the
Offering, then the available shares of Common Stock will be allocated pari
passu, first to the Subscribers in an amount equal to that number of Shares
issuable upon conversion of the Notes issued in the Offering, which such Shares
may be employed by the Subscribers, in their individual discretion, for issuance
upon conversion of the 2007 Notes, 2008 Notes or the Notes issuable in
connection with this Agreement. Thereafter the available shares of Common Stock
will be allocated as described in the 2007 Transaction Documents and 2008
Transaction Documents.

                                   (g)      DTC
Program. At all times that Notes are outstanding, the Company will employ as
the transfer agent for the Common Stock and Shares a participant in the
Depository Trust Company Automated Securities Transfer Program. 

                                   (h)      Taxes.
From the date of this Agreement and until the End Date, the Company will
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto, and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefore. 

                                   (i)     
Insurance. From the date of this Agreement and until the End Date, the
Company will keep its assets which are of an insurable character insured by
financially sound and reputable 

15

insurers against loss or damage by fire, explosion and other
risks customarily insured against by companies in the Company’s line of business
and location, in amounts sufficient to prevent the Company from becoming a
co-insurer and not in any event less than one hundred percent (100%) of the
insurable value of the property insured less reasonable deductible amounts; and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated and located and to the extent available on commercially
reasonable terms. 

                                   (j)     
Books and Records. From the date of this Agreement and until the End
Date, the Company will keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis. 

                                   (k)     
Governmental Authorities. From the date of this Agreement and until the
End Date, the Company shall duly observe and conform in all material respects to
all valid requirements of governmental authorities relating to the conduct of
its business or to its properties or assets. 

                                   (l)      Intellectual
Property. From the date of this Agreement and until the End Date, the
Company shall maintain in full force and effect its corporate existence, rights
and franchises and all licenses and other rights to use intellectual property
owned or possessed by it and reasonably deemed to be necessary to the conduct of
its business, unless it is sold for value. 

                                   (m)     
Properties. From the date of this Agreement and until the End Date, the
Company will keep its properties in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time make all necessary and
proper repairs, renewals, replacements, additions and improvements thereto; and
the Company will at all times comply with each provision of all leases and
claims to which it is a party or under which it occupies or has rights to
property if the breach of such provision could reasonably be expected to have a
Material Adverse Effect. The Company will not abandon any of its assets except
for those assets which have negligible or marginal value or for which it is
prudent to do so under the circumstances. 

                                   (n)     
Confidentiality/Public Announcement. From the date of this Agreement and
until the End Date, the Company agrees that except in connection with a Form 8-K
and the registration statement or statements regarding the Subscribers’
securities or in correspondence with the SEC regarding same, it will not
disclose publicly or privately the identity of the Subscribers unless expressly
agreed to in writing by a Subscriber or only to the extent required by law and
then only upon not less than three days prior notice to Subscriber. In any event
and subject to the foregoing, the Company undertakes to file a Form 8-K or make
a public announcement describing the Offering not later than the fourth business
day after the Closing Date and each Additional Closing Date. Prior to filing or
announcement, such Form 8-K or public announcement will be provided to
Subscribers for their review and approval. In the Form 8-K or public
announcement, the Company will specifically disclose the amount of Common Stock
outstanding immediately after the Closing. Upon delivery by the Company to the
Subscribers after the Closing Date of any notice or information, in writing,
electronically or otherwise, and while a Note or Shares are held by such
Subscribers, unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, nonpublic information
relating to the Company or Subsidiaries, the Company shall within one business
day after any such delivery publicly disclose such material, nonpublic
information on a Report on Form 8-K or otherwise. In the event that the
Company believes that a notice or communication to a Subscriber contains
material, nonpublic information, relating to the Company or Subsidiaries, the
Company shall so indicate to such Subscriber prior to delivery of such notice or
information. Subscriber will be granted sufficient time to notify the Company
that Subscriber elects not to receive such information. In such case, the
Company will not deliver such information to 

16

Subscriber. In the absence of any such indication, such
Subscriber shall be allowed to presume that all matters relating to such notice
and information do not constitute material, nonpublic information relating to
the Company or its Subsidiaries. 

                                   
(o)      Non-Public Information. The Company
covenants and agrees that except for the Reports, Other Written Information and
schedules and exhibits to this Agreement and any other disclosure required under
the 2009 Transaction Documents, which information the Company undertakes to
publicly disclose not later than the sooner of the required or actual filing
date of the Form 8-K described in Section 9(n) above, neither it nor any other
person acting on its behalf will at any time provide any Subscriber or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Subscriber shall have
agreed in writing to accept such information. The Company understands and
confirms that each Subscriber shall be relying on the foregoing representations
in effecting transactions in securities of the Company. 

                                   (p)     
Negative Covenants. So long as a Note is outstanding, without the consent
of the Subscribers, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly: 

                                             (i)      create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction) (each, a “Lien”) upon any of its property, whether now
owned or hereafter acquired except for: (A) the Excepted Issuances (as defined
in Section 12 hereof), and the 2007 Notes and 2008 Notes held by Subscribers, up
to 75% of the aggregate principal amount of Notes issued in the Offering, and
(B) (a) Liens imposed by law for taxes that are not yet due or are being
contested in good faith and for which adequate reserves have been established in
accordance with generally accepted accounting principles; (b) carriers’,
warehousemen’s, mechanics’, material men’s, repairmen’s and other like Liens
imposed by law, arising in the ordinary course of business and securing
obligations that are not overdue by more than 30 days or that are being
contested in good faith and by appropriate proceedings; (c) pledges and deposits
made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations; (d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business; (e) Liens created with respect to the financing of the purchase of new
property in the ordinary course of the Company’s business up to the amount of
the purchase price of such property; and (f) easements, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the affected
property (each of (a) through (f), a “Permitted Lien”) and (g)
indebtedness for borrowed money which is not senior or pari passu in right of
payment of the Notes, or distribution or interest in the Company’s assets. 

                                        
(ii)      except as required pursuant to Section
9(f) of this Agreement, amend its certificate of incorporation, bylaws or its
charter documents so as to materially and adversely affect any rights of the
Subscriber (an increase in the amount of authorized shares and an increase in
the number of directors will not be deemed adverse to the rights of the
Subscribers); 

                                        (iii)      repay,
repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred stock,
or other equity securities other than to the extent permitted or required under
the 2009 Transaction Documents. 

17

                                             (iv)     
engage in any transactions with any officer, director, employee or any Affiliate
of the Company, including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $100,000 other than (i) for payment of salary, or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company, and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company; or 

                                             (v)      prepay
or redeem any financing related debt or past due obligations outstanding as of
the Closing Date, except prepayment of equipment leases. 

The Company agrees to provide Subscribers not less than ten
(10) days notice prior to becoming obligated to or effectuating a Permitted Lien
or Excepted Issuance. 

                                   
(q)      Further Registration Statements. Except
for a registration statement filed on behalf of the Subscribers, or pursuant to
the 2007 Transaction Documents or 2008 Transaction Documents, the Company will
not, without the consent of the Subscribers, file with the Commission or with
state regulatory authorities any registration statements or amend any already
filed registration statement to increase the amount of Common Stock registered
therein, or reduce the price of which such Common Stock is registered therein,
(including but not limited to Forms S-8), until the expiration of the
“Exclusion Period,” which shall be defined as the sooner of (i) eighteen
months after the Closing Date, or (ii) until all the Shares have been resold or
transferable by the Subscribers for 270 consecutive days pursuant to a
registration statement or Rule 144b(1)(i), without regard to volume limitations.
The Exclusion Period will be tolled or reinstated, as the case may be, during
the pendency of an Event of Default as defined in the Note. Registration
Statement priority shall be given to a registration statement to be filed on
behalf of the Subscribers to this Offering. 

                                   
(r)      Offering Restrictions. For so long as
the Notes are outstanding, the Company will not enter into any Equity Line of
Credit or similar agreement, nor issue nor agree to issue any floating or
Variable Priced Equity Linked Instruments nor any of the foregoing or equity
with price reset rights (collectively, the “Variable Rate Restrictions”),
unless the proceeds of which are used to pay out the Notes and the convertible
promissory notes issued to the Subscribers by the Company or about May 11, 2007
in full. For purposes hereof, “Equity Line of Credit” shall include any
transaction involving a written agreement between the Company and an investor or
underwriter whereby the Company has the right to “put” its securities to the
investor or underwriter over an agreed period of time and at an agreed price or
price formula, and “Variable Priced Equity Linked Instruments” shall
include: (A) any debt or equity securities which are convertible into,
exercisable or exchangeable for, or carry the right to receive additional shares
of Common Stock either (1) at any conversion, exercise or exchange rate or other
price that is based upon and/or varies with the trading prices of or quotations
for Common Stock at any time after the initial issuance of such debt or equity
security, or (2) with a fixed conversion, exercise or exchange price that is
subject to being reset at some future date at any time after the initial
issuance of such debt or equity security due to a change in the market price of
the Company’s Common Stock since date of initial issuance, and (B) any
amortizing convertible security which amortizes prior to its maturity date,
where the Company is required or has the option to (or any investor in such
transaction has the option to require the Company to) make such amortization
payments in shares of Common Stock which are valued at a price that is based
upon and/or varies with the trading prices of or quotations for Common Stock at
any time after the initial issuance of such debt or equity security (whether or
not such payments in stock are subject to certain equity conditions). 

18

                                   
(s)      Seniority. Except for Permitted Liens
and as otherwise provided for herein, until the Notes are fully satisfied or
converted, the Company shall not grant any security interest to be taken in the
assets of the Company or any Subsidiary; nor issue any debt, equity or other
instrument which would give the holder thereof directly or indirectly, a right
in any assets of the Company or any Subsidiary equal to or superior to any right
of the holder of a Note in or to such assets. 

                                   
(t)      Lockup Agreement. The Company will
deliver to the Subscribers on or before the Closing Date and enforce the
provisions of an irrevocable lockup agreement (“Lockup Agreement”) in the
form annexed hereto as Exhibit E, with James Briscoe, President of the
Company. 

                                   
(u)      Notices. For so long as the Subscribers
hold any Securities, the Company will maintain a United States address and
United States fax number for notice purposes under the 2009 Transaction
Documents. 

                                   (v)      Transactions
With Insiders. So long as any Note is outstanding, the Company shall not,
and shall cause each of its subsidiaries not to, enter into, amend, modify or
supplement, or permit any subsidiary to enter into, amend, modify or supplement
any agreement, transaction, commitment, or arrangement relating to the sale,
transfer or assignment of any of the Company’s tangible or intangible assets
(including but not limited to the Company’s mineral rights, mineral claims, and
federal mining claims) with any of its Insiders (as defined below)(or any
persons who were Insiders at any time during the previous two (2) years), or any
Affiliates (as defined below) thereof, or with any individual related by blood,
marriage, or adoption to any such individual. Affiliate for purposes of this
Section 9(v) means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. “Control” or “Controls”
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity. For
purposes hereof, “Insiders” shall mean any officer, director or manager of the
Company, including but not limited to the Company’s president, chief executive
officer, chief financial officer and chief operations officer, and any of their
affiliates or family members. 

                         10.    
    Covenants of the Company and Subscriber Regarding
Indemnification. The Company agrees to indemnify, hold harmless, reimburse
and defend the Subscribers, the Subscribers' officers, directors, agents,
Affiliates, members, managers, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Subscriber or any such person which results, arises out of or is based upon (i)
any material misrepresentation by Company or breach of any representation or
warranty by Company in this Agreement or in any Exhibits or Schedules attached
hereto, or other agreement delivered pursuant hereto; or (ii) after any
applicable notice and/or cure periods, any breach or default in performance by
the Company of any covenant or undertaking to be performed by the Company
hereunder, or any other agreement entered into by the Company and Subscriber
relating hereto. 

                         11.      
  Additional Post-Closing Obligations. 

                         11.1.     
Piggy-Back Registrations. If at any time until eighteen months after the
Closing Date there is not an effective registration statement covering all of
the Shares (“Registrable Securities”) and the Company shall determine to
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the 1933 Act of any
of its equity securities, including on Form S-4 (as promulgated under the 1933
Act) or its then equivalent form but excluding Form S-8, , then the Company
shall send to each holder of any of the Securities written notice of such
determination and, if within fifteen calendar days after receipt of such notice,
any such holder shall so request in writing, the Company shall include in such
registration statement all or any part of the Shares such holder requests to be

19

registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights. The obligations of the Company
under this Section may be waived by any holder of any of the Securities entitled
to registration rights under this Section 11.1. The holders whose Shares are
included or required to be included in such registration statement are granted
the same rights, benefits, liquidated or other damages and indemnification
granted to other holders of Securities included in such registration statement.
Notwithstanding anything to the contrary herein, the registration rights granted
hereunder to the holders of Securities shall not be applicable for such times as
such Shares may be sold by the holder thereof without restriction pursuant to
Section 144(b)(1) of the 1933 Act. In no event shall the liability of any holder
of Securities or permitted successor in connection with any Shares included in
any such registration statement be greater in amount than the dollar amount of
the net proceeds actually received by such Subscriber upon the sale of the
Shares sold pursuant to such registration or such lesser amount applicable to
other holders of Securities included in such registration statement. All
expenses incurred by the Company in complying with Section 11, including,
without limitation, all registration and filing fees, printing expenses (if
required), fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including reasonable counsel fees) incurred
in connection with complying with state securities or “blue sky” laws, fees of
the NASD, transfer taxes, and fees of transfer agents and registrars, are called
“Registration Expenses.” All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities are called
"Selling Expenses." The Company will pay all Registration Expenses in
connection with the registration statement under Section 11. Selling Expenses in
connection with each registration statement under Section 11 shall be borne by
the holder and will be apportioned among such holders in proportion to the
number of Shares included therein for a holder relative to all the Securities
included therein for all selling holders, or as all holders may agree. Priority
in Registration Statements shall be given first to the Shares issuable upon
conversion of the Notes; thereafter to Common Stock issuable upon conversion of
the 2008 Notes; and thereafter to Common Stock issuable upon conversion of the
2007 Notes. 

                         11.2.     
  Delivery of Unlegended Shares.

                                   (a)      Within
three (3) business days (such third business day being the “Unlegended Shares
Delivery Date”) after the business day on which the Company has received (i)
a notice that Shares or any other Common Stock held by a Subscriber have been
sold pursuant to the Registration Statement or Rule 144 under the 1933 Act, (ii)
a representation that the prospectus delivery requirements, or the requirements
of Rule 144, as applicable and if required, have been satisfied, and (iii) the
original share certificates representing the shares of Common Stock that have
been sold, and (iv) in the case of sales under Rule 144, customary
representation letters of the Subscriber and, if required, Subscriber’s broker
regarding compliance with the requirements of Rule 144, the Company at its
expense, (y) shall deliver, and shall cause legal counsel selected by the
Company to deliver to its transfer agent (with copies to Subscriber) an
appropriate instruction and opinion of such counsel, directing the delivery of
shares of Common Stock without any legends including the legend set forth in
Section 4(i) above (the “Unlegended Shares”); and (z) cause the
transmission of the certificates representing the Unlegended Shares together
with a legended certificate representing the balance of the submitted Shares
certificate, if any, to the Subscriber at the address specified in the notice of
sale, via express courier, by electronic transfer or otherwise on or before the
Unlegended Shares Delivery Date. 

                                   (b)     
In lieu of delivering physical certificates representing the Unlegended Shares,
upon request of a Subscriber, so long as the certificates therefor do not bear a
legend and the Subscriber is not obligated to return such certificate for the
placement of a legend thereon, the Company shall cause its transfer agent to
electronically transmit the Unlegended Shares by crediting the account of
Subscriber’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission system, if such transfer agent participates in such
DWAC system. Such delivery must be made on or before the Unlegended Shares
Delivery Date. 

20

                                   (c)      The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof later than two business days after the Unlegended
Shares Delivery Date could result in economic loss to a Subscriber. As
compensation to a Subscriber for such loss, the Company agrees to pay late
payment fees (as liquidated damages and not as a penalty) to the Subscriber for
late delivery of Unlegended Shares in the amount of $100 per business day after
the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
subject to the delivery default. If during any 360 day period, the Company fails
to deliver Unlegended Shares as required by this Section 11.2 for an aggregate
of thirty (30) days, then each Subscriber or assignee holding Securities subject
to such default may, at its option, require the Company to redeem all or any
portion of the Shares subject to such default at a price per share equal to the
greater of (i) 120%, or (ii) a fraction in which the numerator is the highest
closing price of the Common Stock during the aforedescribed thirty day period
and the denominator of which is the lowest conversion price during such thirty
day period, multiplied by the price paid by Subscriber for such Common Stock
(“Unlegended Redemption Amount”). The Company shall pay any payments
incurred under this Section in immediately available funds upon demand. 

                                   (d)     
In addition to any other rights available to a Subscriber, if the Company fails
to deliver to a Subscriber Unlegended Shares as required pursuant to this
Agreement, within seven (7) business days after the Unlegended Shares Delivery
Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
open market transaction or otherwise) shares of common stock to deliver in
satisfaction of a sale by such Subscriber of the shares of Common Stock which
the Subscriber was entitled to receive from the Company (a "Buy-In"),
then the Company shall pay in cash to the Subscriber (in addition to any
remedies available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any) for
the shares of common stock so purchased exceeds (B) the aggregate purchase price
of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together with interest thereon at a rate of 15% per annum
accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the Buy-In. 

                                   (e)     
In the event a Subscriber shall request delivery of Unlegended Shares as
described in Section 11.2 and the Company is required to deliver such Unlegended
Shares pursuant to Section 11.2, the Company may not refuse to deliver
Unlegended Shares based on any claim that such Subscriber or any one associated
or affiliated with such Subscriber has been engaged in any violation of law, or
for any other reason, unless, an injunction or temporary restraining order from
a court, on notice, restraining and or enjoining delivery of such Unlegended
Shares shall have been sought and obtained by the Company or at the Company’s
request or with the Company’s assistance, and the Company has posted a surety
bond for the benefit of such Subscriber in the amount of 120% of the amount of
the aggregate purchase price of the Common Stock which are subject to the
injunction or temporary restraining order, 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 Subscriber to the extent Subscriber obtains
judgment in Subscriber’s favor. 

                         11.3.     
In the event commencing six months after the Closing Date and ending twenty-four
months thereafter, the Subscriber is not permitted to resell any of the Shares,
without any restrictive legend or if such sales are permitted but subject to
volume limitations or further restrictions on resale as a result of the
unavailability to non-affiliate Subscribers of Rule 144(b)(1)(i) under the 1933
Act or any successor rule (a “144 Default”), for any reason except for
Subscriber’s status as an Affiliate or “control person” of the Company or change
in current applicable securities laws, then the Company shall pay such
Subscriber as 

21

liquidated damages and not as a penalty an amount equal to
1.75% for each thirty days (or such lesser pro-rata amount for any period less
than thirty days) thereafter of the purchase price of the Shares by the
Subscriber during the pendency of the 144 Default. Liquidated Damages shall not
be payable pursuant to this Section 11.3 in connection with Shares for such
times as such Shares may be sold by the holder thereof without volume or other
restrictions pursuant to Section 144(b)(1)(i) of the 1933 Act. 

                         12.     
(a)      Right of Participation. Until
eighteen months after the Closing Date, the Subscribers shall be given not less
than ten business days prior written notice of any proposed sale by the Company
of its Common Stock or other securities or equity linked debt obligations,
except in connection with (i) full or partial consideration in connection with a
strategic merger, acquisition, consolidation or purchase of substantially all of
the securities or assets of corporation or other entity which holders of such
securities or debt are not at any time granted registration rights, (ii) the
Company’s issuance of securities in connection with strategic license agreements
and other partnering arrangements so long as such issuances are not for the
purpose of raising capital and which holders of such securities or debt are not
at any time granted registration rights, (iii) the Company’s issuance of Common
Stock or the issuances or grants of options to purchase Common Stock to
employees, directors, and consultants, pursuant to plans described on
Schedule 5(d), (iv) securities upon the exercise or exchange of or
conversion of any securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this Agreement and
described on Schedule 5(d), and (v) as a result of the conversion of
Notes which are granted or issued pursuant to this Agreement on the terms
described in the 2009 Transaction Documents as of the Closing Date (collectively
the foregoing (i) through (v) are “Excepted Issuances”). The Subscribers
who exercise their rights pursuant to this Section 12(a) shall have the right
during the ten business days following receipt of the notice to purchase for
cash or by using the outstanding balance including principal, interest,
liquidated damages and any other amount then owing to such Subscriber by the
Company, such offered Common Stock, debt or other securities in accordance with
the terms and conditions set forth in the notice of sale, and if the aggregate
other offering is for less than the amounts owned to the Subscribers,
collectively; in the same proportion to each other as their purchase of Notes in
the Offering. In the event such terms and conditions are modified during the
notice period, the Subscribers shall be given prompt notice of such modification
and shall have the right during the ten business days following the notice of
modification to exercise the right to participate in such offering. The rights
granted to the Subscribers in this Section 12(a) shall have priority over
similar rights granted pursuant to the 2007 Transaction Documents and the 2008
Transaction Documents. 

                                   (b)     
Favored Nations Provision. Other than in connection with the Excepted
Issuances, if at any time the Notes are outstanding, the Company shall agree to
or issue (the “Lower Price Issuance”) any Common Stock or securities convertible
into or exercisable for shares of Common Stock (or modify any of the foregoing
which may be outstanding) to any person or entity at a price per share or
conversion or exercise price per share which shall be less than the Fixed
Conversion Price in effect at such time, without the consent of the Subscribers,
then the Company shall issue, for each such occasion, additional shares of
Common Stock to the Subscribers respecting the Shares that are then still owned
by the Subscriber at the time of the Lower Price Issuance so that the average
per share purchase price of the Shares owned by the Subscriber on the date of
the Lower Price Issuance is equal to such other lower price per share and the
Conversion Price shall automatically and without the requirement of further
action be reduced to such other lower price. The delivery to a Subscriber of the
additional shares of Common Stock shall be not later than the closing date of
the transaction giving rise to the requirement to issue additional shares of
Common Stock. Each Subscriber is granted the registration rights described in
Section 11 hereof in relation to such additional shares of Common Stock. For
purposes of the issuance and adjustment described in this paragraph, the
issuance of any security of the Company carrying the right to convert such
security into shares of Common Stock or of any warrant, right or option to
purchase Common Stock shall result in the issuance of the additional shares of
Common Stock upon the sooner of the agreement to or actual issuance of such
convertible security, warrant, right or option and again at any time upon any
subsequent issuances of shares of 

22

Common Stock upon exercise of such conversion or purchase
rights if such issuance is at a price lower than the Conversion Price in effect
upon such issuance or lower than the Conversion Price paid for Shares held on
the day the adjustment required hereunder is made. Common Stock issued or
issuable by the Company for no consideration will be deemed issuable or to have
been issued for $0.001 per share of Common Stock. The rights of each Subscriber
set forth in this Section 12 are in addition to any other rights the Subscriber
has pursuant to this Agreement, the Note, any 2009 Transaction Document, and any
other agreement referred to or entered into in connection herewith or to which
such Subscriber and Company are parties. The Company acknowledges that the
Offering is not an Excepted Issuance as that term is employed in the 2007
Transaction Documents and 2008 Transaction Documents and that the Offering
constitutes a Lower Price Issuance as that term is employed in the 2007
Transaction Documents and 2008 Transaction Documents. 

                                   (c)      Maximum
Exercise of Rights. In the event the exercise of the rights described in
Sections 12(a) and 12(b) would or could result in the issuance of an amount of
Common Stock of the Company that would exceed the maximum amount that may be
issued to a Subscriber calculated in the manner described in Section 7.3 of this
Agreement, then the issuance of such additional shares of Common Stock of the
Company to such Subscriber will be deferred in whole or in part until such time
as such Subscriber is able to beneficially own such Common Stock without
exceeding the applicable maximum amount set forth calculated in the manner
described in Section 7.3 of this Agreement. The determination of when such
Common Stock may be issued shall be made by each Subscriber as to only such
Subscriber. 

                         13.      Miscellaneous.

                                   (a)      Notices.
All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (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 addresses for such
communications shall be: (i) if to the Company, to: Liberty Star Uranium &
Metals Corp., 5610 E. Sutler Lane, Tucson, Arizona 85712, Attn: James A.
Briscoe, President, telecopier: (520) 844-1118, with a copy by telecopier only
to: Clark Wilson LLP, 800-885 West Georgia Street, Vancouver, B.C. Canada, Attn:
Bernard Pinsky, Esq., telecopier: (604) 687-6314, and (ii) if to the Subscriber,
to: the one or more addresses and fax numbers indicated on the signature pages
hereto, with an additional copy by fax only to: Grushko & Mittman, P.C., 551
Fifth Avenue, Suite 1601, New York, New York 10176, fax number: (212) 697-3575.

                                   
(b)      Entire Agreement; Assignment. This
Agreement and other documents delivered in connection herewith represent the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. Neither
the Company nor the Subscribers have relied on any representations not contained
or referred to in this Agreement and the documents delivered herewith. No right
or obligation of the Company shall be assigned without prior notice to and the
written consent of the Subscribers.

                                   (c)      Counterparts/Execution.
This Agreement may be executed in any number of counterparts and by the
different signatories hereto on separate counterparts, each of which, when so

23

executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. This Agreement
may be executed by facsimile signature and delivered by facsimile transmission.

                                   (d)     
Law Governing this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state and county of New York. The parties to this Agreement hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. The parties
executing this Agreement and other agreements referred to herein or delivered in
connection herewith on behalf of the Company agree to submit to the in personam
jurisdiction of such courts and hereby irrevocably waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any suit, action or proceeding in connection with this
Agreement or any other 2009 Transaction Document 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 other manner permitted by law. 

                                   (e)     
Specific Enforcement, Consent to Jurisdiction. The Company and Subscriber
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity. Subject to Section 13(d)
hereof, the Company hereby irrevocably waives, and agrees not to assert in any
such suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction in New York 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. Nothing in this Section shall affect or limit any right
to serve process in any other manner permitted by law. 

                                   (f)     
Independent Nature of Subscribers. The Company acknowledges that the
obligations of each Subscriber under the 2009 Transaction Documents are several
and not joint with the obligations of any other Subscriber, and no Subscriber
shall be responsible in any way for the performance of the obligations of any
other Subscriber under the 2009 Transaction Documents. The Company acknowledges
that each Subscriber has represented that the decision of each Subscriber to
purchase Securities has been made by such Subscriber independently of any other
Subscriber and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other
Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The Company acknowledges that
nothing contained in any 2009 Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto (including, but not limited to, the (i)
inclusion of a Subscriber in a registration statement and (ii) review by, and
consent to, such registration statement by a Subscriber) shall be deemed to
constitute the 

24

Subscribers as a partnership, an association, a joint venture
or any other kind of entity, or create a presumption that the Subscribers are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the 2009 Transaction Documents. The Company
acknowledges that each Subscriber shall be entitled to independently protect and
enforce its rights, including without limitation, the rights arising out of the
2009 Transaction Documents, and it shall not be necessary for any other
Subscriber to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide all Subscribers
with the same terms and 2009 Transaction Documents for the convenience of the
Company and not because Company was required or requested to do so by the
Subscribers. The Company acknowledges that such procedure with respect to the
2009 Transaction Documents in no way creates a presumption that the Subscribers
are in any way acting in concert or as a group with respect to the 2009
Transaction Documents or the transactions contemplated thereby. 

                    (g)      Damages.
In the event the Subscriber is entitled to receive any liquidated damages
pursuant to the Transactions, the Subscriber may elect to receive the greater of
actual damages or such liquidated damages. 

                    (h)      Consent.
As used in this Agreement and the 2009 Transaction Documents and any other
agreement delivered in connection herewith, “consent of the Subscribers” or
similar language means the consent of holders of not less than 70% of the
outstanding principal amount of the Notes on the date consent is requested (such
amount being a “Majority in Interest”). A Majority in Interest may
consent to take or forebear from any action permitted under or in connection
with the 2009 Transaction Documents, modify any 2007 Transaction Documents, 2008
Transaction Documents and 2009 Transaction Documents or waive any default or
requirement applicable to the Company, Subsidiaries or Subscribers under the
2007 Transaction Documents, 2008 Transaction Documents and 2009 Transaction
Documents provided the effect of such action does not waive any accrued damages.

                    (i)      Equal
Treatment. No consideration shall be offered or paid to any person to amend
or consent to a waiver or modification of any provision of the 2009 Transaction
Documents unless the same consideration is also offered and paid to all the
Subscribers and their permitted successors and assigns who agree or are deemed
to have agreed to such amendment or consent. 

                    (j)      Maximum
Payments. Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or dividends
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Subscriber and thus refunded to the Company.

                    (k)      Calendar
  Days. All references to “days” in the 2009 Transaction Documents
  shall mean calendar days unless otherwise stated. The terms “business days”
  and “trading days” shall mean days that the New York Stock Exchange
  is open for trading for three or more hours. Time periods shall be determined
  as if the relevant action, calculation or time period were occurring in New
  York City. Any deadline that falls on a non-business day in any of the 2009
  Transaction Documents shall be automatically extended to the next business day
  and interest, if any, shall be calculated and payable through such extended
  period.

                    (l)      Maximum
Liability. In no event shall the liability of any Subscriber or permitted
successor hereunder or under any 2009 Transaction Document or other agreement
delivered in connection herewith be greater in amount than the dollar amount of
the net proceeds actually received by such Subscriber upon the sale of
Registrable Securities. 

25

                                   (m)     
Captions: Certain Definitions. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement. As used in this Agreement the term “person”
shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof. 

                                   (n)      Severability.
In the event that any term or provision of this Agreement shall be finally
determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by an authority having jurisdiction and venue, that
determination shall not impair or otherwise affect the validity, legality or
enforceability: (i) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted, or (ii) by or before any other authority of any
of the terms and provisions of this Agreement. 

                              (o)     
Successor Laws. References in the 2009 Transaction Documents to laws,
rules, regulations and forms shall also include successors to and functionally
equivalent replacements of such laws, rules, regulations and forms. A successor
rule to Rule 144(b)(1)(i) shall include any rule that would be available to a
non-Affiliate of the Company for the sale of Common Stock not subject to volume
restrictions and after a six month holding period.

26

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)

          Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us. 

LIBERTY STAR URANIUM & METALS
CORP. 
a Nevada corporation 

By:_________________________________
          Name: 
          Title:

Dated: May ___, 2009 

	SUBSCRIBER 
	PURCHASE PRICE AND
      
PRINCIPAL AMOUNT 
	ALPHA CAPITAL ANSTALT 
Pradafant 7 
9490 Furstentums
      
Vaduz, Lichtenstein 
Fax: 011-42-32323196
      

____________________________________________________________________
(Signature)
      
By: 	$91,658.00
      

27

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)

          Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us. 

LIBERTY STAR URANIUM & METALS
CORP. 
a Nevada corporation 

By:_________________________________
          Name: 
          Title:

Dated: May ___, 2009 

	SUBSCRIBER 
	PURCHASE PRICE AND
      
PRINCIPAL AMOUNT 
	HARBORVIEW MASTER FUND L.P. 
2nd Floor,
      Harbor House 
Waterfront Drive, Road Town 
Tortola, British Virgin
      Islands 
Fax: (284) 494-4771
      

____________________________________________________________________
(Signature)
      
By: 	$22,185.00
      

28

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)

          Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us. 

LIBERTY STAR URANIUM & METALS
CORP. 
a Nevada corporation 

By:_________________________________
          Name: 
          Title:

Dated: May ___, 2009 

	SUBSCRIBER 
	PURCHASE PRICE AND 
PRINCIPAL
      AMOUNT 
	PLATINUM PARTNERS LONG TERM GROWTH VI 
152 West
      57th Street 
New York, New York 10019 
Attn: Mark
      Nordlicht 
Fax: (212)
      

____________________________________________________________________
(Signature)
      
By: 	$34,561.00
      

29

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
(D) 

          Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us. 

LIBERTY STAR URANIUM & METALS
CORP. 
a Nevada corporation 

By:_________________________________
          Name: 
          Title:

Dated: May ___, 2009 

	SUBSCRIBER 
	PURCHASE PRICE AND 
PRINCIPAL
      AMOUNT 
	BRIDGEPOINTE MASTER FUND, LTD. 
a Cayman Islands
      exempted company 
1120 Sanctuary Parkway, Suite 325 
Alpharetta,
      Georgia 30004 
Fax: (770) 777-5844
      

____________________________________________________________________
(Signature)
      
By: 	$39,331.00
      

30

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (E)

          Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us. 

LIBERTY STAR URANIUM & METALS
CORP. 
a Nevada corporation 

By:_________________________________
          Name: 
          Title:

Dated: May ___, 2009 

	SUBSCRIBER 
	PURCHASE PRICE AND 
PRINCIPAL
      AMOUNT 
	BRIO CAPITAL LP 
401 E. 34th St.-Suite South
      33C 
New York, NY 10016 
Fax: (646) 390-2158
      

____________________________________________________________________
(Signature)
      
By: 	$8,324.00
    

31

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (F)

          Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us. 

LIBERTY STAR URANIUM & METALS
CORP. 
a Nevada corporation 

By:_________________________________
          Name: 
          Title:

Dated: May ___, 2009 

	SUBSCRIBER 
	PURCHASE PRICE AND
      
PRINCIPAL AMOUNT 
	DOUBLE U MASTER FUND LP 
Harbour House, 
Waterfront
      Drive, Road Town 
Tortola, BVI 
Fax: (284) 494-4771
      

____________________________________________________________________
(Signature)
      
By: 	$7,008.00
      

32

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (G)

          Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us. 

LIBERTY STAR URANIUM & METALS
CORP. 
a Nevada corporation 

By:_________________________________
          Name: 
          Title:

Dated: May ___, 2009 

	SUBSCRIBER 
	PURCHASE PRICE AND
      
PRINCIPAL AMOUNT 
	IROQUOIS MASTER FUND LTD. 
c/o Iroquois Capital
      Management, LLC 
641 Lexington Avenue, 26th Floor 
New
      York, NY 10022 
Fax: (212) 207-3452
      

____________________________________________________________________
(Signature)
      
By: 	$6,932.00
      

33

LIST OF EXHIBITS AND SCHEDULES

	Exhibit A 	Form of Note
  
	 	 
	Exhibit B 	Escrow Agreement
    
	 	 
	Exhibit C 	Form of
      Subsidiary Guaranty 
	 	 
	Exhibit D 	Form of Legal
      Opinion 
	 	 
	Exhibit E 	Form of Lock Up
      Agreement 
	 	 
	Schedule 5(a) 	Equity and
      encumbrances on ownership in Subsidiaries 
	 	 
	Schedule 5(d) 	Additional
      Issuances / Capitalization / Reset Rights 
	 	 
	Schedule 5(o) 	Undisclosed
      Liabilities 
	 	 
	Schedule 5(x) 	Transfer Agent
  
	 	 
	Schedule 5(z) 	Financial
      Accounts 
	 	 
	Schedule 9(e) 	Use of Proceeds
    

34

EXHIBIT E 

LOCKUP AGREEMENT 

          This
AGREEMENT (the "Agreement") is made as of the ____ day of May, 2009, by James
Briscoe ("Holder"), in connection with his ownership of shares of Liberty Star
Uranium & Metals Corp., a Nevada corporation (the "Company"). 

          NOW,
THEREFORE, for good and valuable consideration, the sufficiency and receipt of
which consideration are hereby acknowledged, Holder agrees as follows: 

         
1.          
Background. 

                       
a.           Holder is the
beneficial owner of the amount of shares of the Common Stock, $.001 par value,
of the Company (“Common Stock”) designated on the signature page hereto. 

                       
b.           Holder
acknowledges that the Company has entered into or will enter into at or about
the date hereof agreements with subscribers each a (“Subscription Agreement”) to
the Company’s Notes which are convertible into Common Stock (“Notes”) (the
“Subscribers”). Holder understands that, as a condition to proceeding with the
Offering, the Subscribers have required, and the Company has agreed to obtain on
behalf of the Subscribers an agreement from the Holder to refrain from selling
any securities of the Company from the date of the Subscription Agreement until
two years after the Closing Date (as defined in the Subscription Agreement) (the
"Restriction Period"), except as described below.

         
2.          
Share Restriction.

               
       
a.           Holder hereby
agrees that during the Restriction Period, the Holder will not sell or otherwise
dispose of any shares of Common Stock or any options, warrants or other rights
to purchase shares of Common Stock or any other security of the Company which
Holder owns or has a right to acquire as of the date hereof, other than in
connection with an offer made to all shareholders of the Company in connection
with merger, consolidation or similar transaction involving the Company. Holder
further agrees that the Company is authorized to and the Company agrees to place
"stop orders" on its books to prevent any transfer of shares of Common Stock or
other securities of the Company held by Holder in violation of this Agreement.
The Company agrees not to allow to occur any transaction inconsistent with this
Agreement. 

               
        b.           Any subsequent
issuance to and/or acquisition by Holder of Common Stock or options or
instruments convertible into Common Stock will be subject to the provisions of
this Agreement. 

               
        c.          Notwithstanding the
  foregoing restrictions on transfer, the Holder may, at any time and from time
  to time during the Restriction Period, transfer the Common Stock (i) as bona
  fide gifts or transfers by will or intestacy, (ii) to any trust for the direct
  or indirect benefit of the undersigned or the immediate family of the Holder,
  provided that any such transfer shall not involve a disposition for value, (iii)
  to a partnership which is the general partner of a partnership of which the
  Holder is a general partner, provided, that, in the case of any gift or transfer
  described in clauses (i), (ii) or (iii), each donee or transferee agrees in
  writing to be bound by the terms and conditions contained herein in the same
  manner as such terms and conditions apply to the undersigned, or (iv) a bona
  fide sale for cash at not less than $0.90 per share of Common Stock (which price
  shall be equitably adjusted in connection with stock splits, stock dividends,
  and similar events). For purposes hereof, "immediate family" means any relationship
  by blood, marriage or adoption, not more remote than first cousin.

35

         
3.          
Miscellaneous. 

                       
a.           At any time, and
from time to time, after the signing of this Agreement Holder will execute such
additional instruments and take such action as may be reasonably requested by
the Subscribers to carry out the intent and purposes of this Agreement. 

                       
b.           This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to principles of conflicts of laws. Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. The
parties executing this Agreement and other agreements referred to herein or
delivered in connection herewith agree to submit to the in personam jurisdiction
of such courts and hereby irrevocably waive trial by jury. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Agreement or
any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement. 

                       
c.           The restrictions
on transfer described in this Agreement are in addition to and cumulative with
any other restrictions on transfer otherwise agreed to by the Holder or to which
the Holder is subject to by applicable law. 

                       
d.           This Agreement
shall be binding upon Holder, its legal representatives, successors and assigns.

                       
e.           This Agreement
may be signed and delivered by facsimile and such facsimile signed and delivered
shall be enforceable. 

                       
f.           The Company
agrees not to take any action or allow any act to be taken which would be
inconsistent with this Agreement. 

36

          IN
WITNESS WHEREOF, and intending to be legally bound hereby, Holder has executed
this Agreement as of the day and year first above written. 

HOLDER: 

________________________________
(Signature of Holder) 

________________________________
(Print Name of Holder)

________________________________
Number of Shares of Common
Stock Beneficially Owned and as more fully described below if not in the form of
shares of Common Stock 

COMPANY: 

LIBERTY STAR URANIUM & METALS
CORP. 

 

By:______________________________ 

 

 

37

SCHEDULE 5(a) 

EQUITY AND ENCUMBRANCES ON OWNERSHIP IN
SUBSIDIARIES 

          Liberty
Star owns two common shares in the capital of Big Chunk Corp., representing 100%
of the outstanding equity and rights to receive equity of Big Chunk Corp. There
are no encumbrances on such ownership. 

38

SCHEDULE 5(x) 

TRANSFER AGENT 

Nevada Agency and Trust Company (NATCO) 
Bank of America
Plaza 
50 Wet Liberty Street, Suite 880 
Reno, NV 89501

Phone:     775-322-0626

Fax:          775-322-5623

Contact:  Mary Ramsey 
E-mail:     
mary@natco.org 

39

Schedule 5(z)

List of all financial institutions at which the Company
maintains deposit and checking accounts. 

  	Company 	Bank Name 	Bank Address 	Account Description 
	Liberty Star Uranium & Metals Corp 	Chase Bank 	4660 E Sunrise Dr Tucson, AZ 85718 	Commercial Checking 
	Liberty Star Uranium & Metals Corp 	Chase Bank 	4660 E Sunrise Dr Tucson, AZ 85718 	Business High Yield Savings 
	Liberty Star Uranium & Metals Corp 	Chase Bank 	4660 E Sunrise Dr Tucson, AZ 85718 	CD (restricted for bonding) 
	Liberty Star Uranium & Metals Corp 	Chase Bank 	4660 E Sunrise Dr Tucson, AZ 85718 	CD (restricted for bonding) 
	Liberty Star Uranium & Metals Corp 	Chase Bank 	4660 E Sunrise Dr Tucson, AZ 85718 	CD (restricted for bonding) 
	Redwall Drilling Inc. and Liberty Star Uranium & Metals
      Corp (joint account) 	Zions Bank 	41 East Center Kanab, UT 84741- 3543 	Commercial Checking 
	Redwall Drilling Inc. and Liberty Star Uranium & Metals
      Corp (joint account) 	Zions Bank 	41 East Center Kanab, UT 84741- 3543 	CD (security for loan) 
	Redwall Drilling Inc. and Liberty Star Uranium & Metals
      Corp (joint account) 	Chase Bank 	4660 E Sunrise Dr Tucson, AZ 85718 	Commercial Checking 
	Elle Venture and Liberty Star Uranium & Metals Corp
      (joint account) 	Chase Bank 	4660 E Sunrise Dr Tucson, AZ 85718 	Commercial Checking 
	Elle Venture and Liberty Star Uranium & Metals Corp
      (joint account) 	Chase Bank 	4660 E Sunrise Dr Tucson, AZ 85718 	CD (restricted for bonding) 
	Elle Venture and Liberty Star Uranium & Metals Corp
      (joint account) 	Chase Bank 	4660 E Sunrise Dr Tucson, AZ 85718 	CD (restricted for bonding)

40

	Company 	Bank Name 	Bank Address 	Account Description 
	XState Arizona Inc. and Liberty Star Uranium & Metals
      Corp (joint account) 	Chase Bank 	4660 E Sunrise Dr Tucson, AZ 85718 	Commercial Checking (requires dual signature of
      our joint venture partner) 

41Filed by sedaredgar.com - Liberty Star Unranium & Metals Corp. - Exhibit 10.2

  
    NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
      BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
      HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
      STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
      TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
      STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
      OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
      IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
      SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
      ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
      BY THE SECURITIES. 

  

	Principal Amount: $_________ 	Issue Date: May ___, 2009

SECURED CONVERTIBLE PROMISSORY NOTE 

          FOR
VALUE RECEIVED, LIBERTY STAR URANIUM & METALS CORP., a Nevada corporation
(hereinafter called “Borrower”), hereby promises to pay to ALPHA CAPITAL
ANSTALT, Pradafant 7, 9490 Furstentums, Vaduz, Lichtenstein, Fax:
011-42-32323196, (the “Holder”) or its registered assigns or successors in
interest or order, without demand, the sum of
_________________________________________________ Dollars ($_________)
(“Principal Amount”), on May ___, 2010 (the “Maturity Date”), if not sooner
paid. 

          This
Note has been entered into pursuant to the terms of a subscription agreement
between the Borrower, the Holder and certain other holders (the “Other Holders”)
of convertible promissory notes (the “Other Notes”), dated of even date herewith
(the “Subscription Agreement”), and shall be governed by the terms of such
Subscription Agreement. Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Subscription Agreement. The following terms shall apply to this Note:

ARTICLE I 

INTEREST; AMORTIZATION 

          1.1.      Interest
Rate. Subject to Section 6.7 hereof, interest payable on this Note shall
accrue on the outstanding Principal Amount at a rate per annum (the "Interest
Rate") of twelve percent (12%). Interest on the outstanding Principal Amount
shall accrue from the date of this Note and shall be payable in arrears together
with, at the same time and in the same manner as payment of Principal Amount and
on the Maturity Date, whether by acceleration or otherwise. 

          1.2.     
Minimum Monthly Principal Payments. Amortizing payments of the
outstanding Principal Amount of this Note and accrued interest shall commence on
October 15, 2009 and on the same day of each month thereafter (each a “Repayment
Date”) until the Principal Amount has been repaid in full, whether by the
payment of cash or by the conversion of such Principal Amount and interest into

1 

Common Stock pursuant to the terms hereof. Subject to Section
2.1 and Article 3 below, on each Repayment Date, the Borrower shall make
payments to the Holder in an amount equal to 14.28% of the initial Principal
Amount, the amount of accrued but unpaid or unconverted interest on the entire
Principal Amount as of such Repayment Date, and any other amounts which are then
owing under this Note that have not been paid (collectively, the “Monthly
Amount”). Amounts of conversions of Principal Amount made by the Holder or
Borrower pursuant to Section 2.1 or Article III and amounts redeemed pursuant to
Section 2.3 of this Note shall be applied first against outstanding fees and
damages, then outstanding already payable accrued interest and then to Principal
Amounts of not yet due Monthly Amounts commencing with the last Monthly Amount
next payable and thereafter to Monthly Amounts in reverse chronological order.
Any Principal Amount, interest and any other sum arising under this Note and the
Subscription Agreement that remains outstanding on the Maturity Date shall be
due and payable on the Maturity Date. 

          1.3.     
Mandatory Repayment. The entire Principal Interest and all other sums due
under and in connection with this Note and the 2009 Transaction Documents shall
be immediately due and payable upon the Borrower’s receipt of the net proceeds
from the sale and issuance by the Borrower and/or a Subsidiary of Borrower of
Debt and/or Equity for the gross amount of $3,000,000 in a single or series of
offerings of such debt and/or equity. 

          1.4.     
Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default (as defined in Article IV), which, if
susceptible to cure is not cured within twenty (20) days, otherwise then from
the first date of such occurrence, the annual interest rate on this Note shall
(subject to Section 6.7) be fifteen percent (15%). Such interest shall be due
and payable together with regular scheduled Monthly Amounts.

ARTICLE II 

CONVERSION AND REPAYMENT 

          2.1.      Payment
of Monthly Amount in Cash or Common Stock. Subject to Sections 2.3 and 3.2
hereof, the Borrower shall pay the Monthly Amount on the applicable Repayment
Date at the Borrower’s election, in either of the following manners: (i) in cash
equal to 110% of the Principal portion of the Monthly Amount and 100% of all
other components of the Monthly Amount, or (ii) with Common Stock at an applied
conversion rate equal to the lesser of (A) the Fixed Conversion Price (as
defined in section 3.1 hereof), or (B) eighty percent (80%) of the average daily
closing bid prices of the Common Stock as reported by Bloomberg L.P. for the
Principal Market for the five trading days preceding such Repayment Date (as
such amount may be adjusted as described herein). Amounts paid with cash or
shares of Common Stock must be delivered to the Holder not later than three
business days after the applicable Repayment Date. The Borrower must send notice
to the Holder by confirmed telecopier not later than 6:00 PM, New York City time
on the tenth calendar day preceding a Repayment Date notifying Holder of
Borrower’s election to pay the Monthly Amount in cash or Common Stock. The
Notice must state the amount of the Monthly Amount including a description of
the components of such Monthly Amount and, to the extent possible, include
supporting calculations. The same election must be made to all Holders and Other
Holders. If such notice is not given, or is not timely given or if the Monthly
Redemption Amount is not timely delivered, then the Holder shall at anytime
thereafter have the right on three business days prior notice to the Borrower to
elect to receive such Monthly Amount in cash or Common Stock as described in
Sections (i) and (ii) above. 

          2.2.      Restriction
on Payments in Kind. Notwithstanding anything to the contrary herein, the
Borrower may not exercise its right to pay any portion of the Monthly Amount
with Common Stock without 

2 

the Holder’s consent unless on the day the Common Stock issued
as payment of a Monthly Redemption Amount (a) an exemption from registration of
the resale of shares of Common Stock to be issued in payment of the Monthly
Amount is available to the Holder for the unrestricted public resale of the
Conversion Shares pursuant to Rule 144(b)(1) of the 1933 Act without volume or
manner of sale limitations, or such shares of Common Stock are included for the
unrestricted pubic resale thereof in an effective registration statement filed
with the Commission, (b) an Event of Default (or an event that with the passage
of time or the giving of notice could become an Event of Default) hereunder has
not occurred, (c) the delivery of such Common Stock to Holder is timely made,
(d) the amount of Common Stock (based on the aggregate Conversion Price) that
would be issued in satisfaction of the Monthly Amount may not exceed for the
Holder and Other Holders, in the aggregate, who could receive such Common Stock,
more than 33% of the aggregate daily trading volume of the Common Stock for the
seven trading days preceding such Repayment Date, as reported by Bloomberg L.P.
for the Principal Market, and (e) the Principal Market is either the OTC
Bulletin Board, American Stock Exchange, Nasdaq Capital Market, Nasdaq National
Market, or New York Stock Exchange (“Listing Condition”) from and after thirty
(30) days prior to a Repayment Date. 

          2.3.      Optional
Redemption. Provided an Event of Default or an event which with the passage
of time or the giving of notice would become an Event of Default is not pending,
then the Borrower will have the option of prepaying the unpaid and unconverted
Principal Amount then outstanding under this Note and the Other Notes ("Optional
Redemption"), in whole or in part in increments of not less than $100,000, or
the entire outstanding balance if less than $100,000 in the aggregate on this
Note and the Other Notes, by paying to the Holder a sum of money equal to the
Redemption Amount described below. Borrower’s election to exercise its right to
prepay must be by notice in writing (“Notice of Redemption”). The Redemption
Amount shall equal 125% of the outstanding Principal Amount being redeemed
together with all interest accrued on this Note and all other amounts payable
hereunder or pursuant to the Subscription Agreement. The Notice of Redemption
shall specify the date for such Optional Redemption (the "Redemption Payment
Date"), which date shall be twenty days after the date of the Notice of
Redemption. A Notice of Redemption shall not be effective with respect to any
portion of the principal amount under this Note for which the Holder has a
pending election to convert or for which a Conversion Notice is given prior to
the Redemption Payment Date. On the Redemption Payment Date, the Redemption
Amount, less any portion of the Redemption Amount against which the Holder has
previously exercised its rights pursuant to Section 3.1, shall be paid in good
funds to the Holder. In the event the Borrower fails to pay the Redemption
Amount on the Redemption Payment Date as set forth herein, then (i) at the
Holder’s election, such Notice of Redemption will be null and void or Holder may
enforce the Notice of Redemption, (ii) Borrower will not have the right to
deliver another Notice of Redemption, and (iii) Borrower’s failure may be deemed
by Holder to be a non-curable Event of Default. A Notice of Redemption may be
cancelled at the option of the Holder, if at any time during the Redemption
Period an Event of Default, or an event which with the passage of time or giving
of notice would become an Event of Default (whether or not such Event of Default
has been cured), occurs. Notices of Redemption must be given to the Holder and
all Other Holders with respect to all amounts owed by Borrower to Holder and
Other Holders in proportion to the outstanding Principal Amounts of the Notes
and Other Notes held by the Holder and Other Holders on the date Notice of
Redemption is given. 

ARTICLE III 

CONVERSION RIGHTS 

          3.1.     
Holder’s Conversion Rights. Subject to Section 3.2, the Holder shall have
the right, but not the obligation, to convert all or any portion of the then
aggregate outstanding Principal Amount of this Note, together with interest and
fees due hereon, and any sum arising under the Subscription 

3 

Agreement, and the 2009 Transaction Documents, including but
not limited to Liquidated Damages, into shares of Common Stock, subject to the
terms and conditions set forth in this Article III, at the rate of $0.005 per
share of Common Stock (“Fixed Conversion Price”), as the same may be adjusted
pursuant to this Note and the Subscription Agreement. The Holder may exercise
such right by delivery to the Borrower of a written Notice of Conversion
pursuant to Section 3.3. Anything to the contrary herein notwithstanding, the
Holder may convert up to one-twelfth (1/12th) of the initial
Principal Amount of this Note, on a cumulative basis, each 30 days during the
initial 180 days after the Issue Date at a conversion price equal to the lesser
of (i) the Fixed Conversion Price, or (ii) eighty percent (80%) of the average
daily closing bid prices of the Common Stock as reported by Bloomberg L.P. for
the Principal Market for the five trading days preceding the date of the Notice
of Conversion (as defined in Section 3.3) is given to the Borrower. 

          3.2.     
Conversion Limitation. Neither Holder nor the Borrower may convert on any
date that amount of the Note Principal or interest in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Holder and its
affiliates on a Conversion Date, Repayment Date, or interest payment date, as
the case may be, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made, which would result in beneficial ownership by
the Holder and its affiliates of more than 4.99% of the outstanding shares of
Common Stock of the Borrower on such Conversion Date. For the purposes of the
provision to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
Holder shall not be limited to aggregate conversions of only 4.99% and aggregate
conversion by the Holder may exceed 4.99% . The Holder shall have the authority
and obligation to determine whether the restriction contained in this Section
2.3 will limit any conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of the Notes are convertible shall be the
responsibility and obligation of the Holder. The Holder may waive the conversion
limitation described in this Section 2.3, in whole or in part, upon and
effective after 61 days prior written notice to the Borrower to increase such
percentage to up to 9.99% . 

          3.3.     
Mechanics of Holder’s Conversion.

                     
(a)      In the event that the Holder elects to convert
any amounts outstanding under this Note into Common Stock, the Holder shall give
notice of such election by delivering an executed and completed notice of
conversion (a “Notice of Conversion”) to the Borrower, which Notice of
Conversion shall provide a breakdown in reasonable detail of the Principal
Amount, accrued interest and amounts being converted. The original Note is not
required to be surrendered to the Borrower until all sums due under the Note
have been paid. On each Conversion Date (as hereinafter defined) and in
accordance with its Notice of Conversion, the Holder shall make the appropriate
reduction to the Principal Amount, accrued interest and fees as entered in its
records. Each date on which a Notice of Conversion is delivered or telecopied to
the Borrower in accordance with the provisions hereof shall be deemed a
“Conversion Date.” A form of Notice of Conversion to be employed by the Holder
is annexed hereto as Exhibit A. 

                     
(b)      Pursuant to the terms of a Notice of
Conversion, the Borrower will issue instructions to the transfer agent
accompanied by an opinion of counsel (if so required by the Borrower’s transfer
agent), and, except as otherwise provided below, shall cause the transfer agent
to transmit the certificates representing the Conversion Shares to the Holder by
crediting the account of the Holder’s 

4 

designated broker with the Depository Trust Corporation (“DTC”)
through its Deposit Withdrawal Agent Commission (“DWAC”) system within three (3)
business days after receipt by the Borrower of the Notice of Conversion (the
“Delivery Date”). In the case of the exercise of the conversion rights set forth
herein, the conversion privilege shall be deemed to have been exercised and the
Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Borrower of the Notice of Conversion. The
Holder shall be treated for all purposes as the beneficial holder of such shares
of Common Stock, or, in the case that Borrower delivers physical certificates as
set forth below, the record holder of such shares of Common Stock, unless the
Holder provides the Borrower written instructions to the contrary.
Notwithstanding the foregoing to the contrary, the Borrower 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 the
registration statement providing for the resale of the shares of Common Stock
issuable upon the conversion of this Note is effective and the Holder has
complied with all applicable securities laws in connection with the sale of the
Common Stock, including, without limitation, the prospectus delivery
requirements and has provided representations accordingly. In the event that
Conversion Shares cannot be delivered to the Holder via DWAC, the Borrower shall
deliver physical certificates representing the Conversion Shares by the Delivery
Date to an address designated by Holder in the U.S. 

          3.4.     
Conversion Mechanics. 

                      
(a)      The number of shares of Common Stock to
be issued upon each conversion of this Note pursuant to this Article III shall
be determined by dividing that portion of the Principal Amount and interest and
fees to be converted, if any, by the then applicable Fixed Conversion Price or
the conversion price described in Section 3.1(ii), as applicable. 

            
          (b)      The
Fixed Conversion Price and number and kind of shares or other securities to be
issued upon conversion shall be subject to adjustment from time to time upon the
happening of certain events while this conversion right remains outstanding, as
follows: 

                                   A.     
Merger, Sale of Assets, etc. If (A) the Borrower effects any merger or
consolidation of the Borrower with or into another entity, (B) the Borrower
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (C) any tender offer or exchange offer (whether by the
Borrower or another entity) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, (D) the Borrower consummates a stock purchase agreement or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with one or more persons or
entities whereby such other persons or entities acquire more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by such other persons or entities making or party to, or associated or
affiliated with the other persons or entities making or party to, such stock
purchase agreement or other business combination), (E) any "person" or "group"
(as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934
Act) is or shall become the "beneficial owner" (as defined in Rule 13d-3 under
the 1934 Act), directly or indirectly, of 50% of the aggregate Common Stock of
the Borrower, or (F) the Borrower effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a "Fundamental Transaction"), this Note, as to the unpaid
principal portion thereof and accrued interest thereon, shall thereafter be
deemed to evidence the right to convert into such number and kind of shares or
other securities and property as would have been issuable or distributable on
account of such Fundamental Transaction, upon or with respect to the securities
subject to the conversion right immediately prior to 

5 

such Fundamental Transaction. The foregoing provision shall
similarly apply to successive Fundamental Transactions of a similar nature by
any such successor or purchaser. Without limiting the generality of the
foregoing, the anti-dilution provisions of this Section shall apply to such
securities of such successor or purchaser after any such Fundamental
Transaction. 

                                   B.      Reclassification,
etc. If the Borrower at any time shall, by reclassification or otherwise,
change the Common Stock into the same or a different number of securities of any
class or classes, this Note, as to the unpaid principal portion hereof and
accrued interest hereon, shall thereafter be deemed to evidence the right to
convert into an adjusted number of such securities and kind of securities as
would have been issuable as the result of such change with respect to the Common
Stock immediately prior to such reclassification or other change. 

                                   C.     
Stock Splits, Combinations and Dividends. If the shares of Common Stock
are subdivided or combined into a greater or smaller number of shares of Common
Stock, or if a dividend is paid on the Common Stock in shares of Common Stock,
the Fixed Conversion Price shall be proportionately reduced in case of
subdivision of shares or stock dividend or proportionately increased in the case
of combination of shares, in each such case by the ratio which the total number
of shares of Common Stock outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding immediately prior to such
event. 

                                   
D.      Share Issuance. So long as this
Note is outstanding, if the Borrower shall issue any Common Stock except for the
Excepted Issuances (as defined in the Subscription Agreement), and except for
payments to other Holders due on a Repayment Date, prior to the complete
conversion or payment of this Note, for a consideration per share that is less
than the Fixed Conversion Price that would be in effect at the time of such
issue, then, and thereafter successively upon each such issuance, the Fixed
Conversion Price shall be reduced to such other lower issue price. For purposes
of this adjustment, the issuance of any security or debt instrument of the
Borrower carrying the right to convert such security or debt instrument into
Common Stock or of any warrant, right or option to purchase Common Stock shall
result in an adjustment to the Fixed Conversion Price upon the issuance of the
above-described security, debt instrument, warrant, right, or option and again
upon the issuance of shares of Common Stock upon exercise of such conversion or
purchase rights if such issuance is at a price lower than the then applicable
Fixed Conversion Price. The reduction of the Fixed Conversion Price described in
this paragraph is in addition to the other rights of the Holder described in the
Subscription Agreement. Common Stock issued or issuable by the Borrower for no
consideration will be deemed issuable or to have been issued for $0.001 per
share of Common Stock. The reduction of the Fixed Conversion Price described in
this paragraph is in addition to the other rights of the Holder described in the
Subscription Agreement. 

                         (c)      Whenever
the Conversion Price is adjusted pursuant to Section 3.4(b) above, the Borrower
shall promptly mail to the Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a statement of the facts requiring such
adjustment. 

          3.5.      Reservation.
During the period the conversion right exists, Borrower will reserve from its
authorized and unissued Common Stock not less than one hundred seventy-five
percent (175%) of the number of shares to provide for the issuance of Common
Stock upon the full conversion of this Note. Borrower represents that upon
issuance, such shares will be duly and validly issued, fully paid and
non-assessable. Borrower agrees that its issuance of this Note shall constitute
full authority to its officers, agents, and transfer agents who are charged with
the duty of executing and issuing stock certificates to 

6 

execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note. 

          3.6     
Issuance of Replacement Note. Upon any partial conversion of this Note, a
replacement Note containing the same date and provisions of this Note shall, at
the written request of the Holder, be issued by the Borrower to the Holder for
the outstanding Principal Amount of this Note and accrued interest which shall
not have been converted or paid, provided Holder has surrendered an original
Note to the Borrower. In the event that the Holder elects not to surrender a
Note for reissuance upon partial payment or conversion, the Holder hereby
indemnifies the Borrower against any and all loss or damage attributable to a
third-party claim in an amount in excess of the actual amount then due under the
Note, and the Borrower is hereby expressly authorized to offset any such amounts
mutually agreed upon by Borrower and Holder or pursuant to a judgment in
Borrower’s favor against amounts then due under the Note. 

ARTICLE IV 

EVENTS OF DEFAULT 

          The
occurrence of any of the following events of default (“Event of Default”) shall,
at the option of the Holder hereof, make all sums of principal and interest then
remaining unpaid hereon and all other amounts payable hereunder immediately due
and payable, upon demand, without presentment, or grace period, all of which
hereby are expressly waived, except as set forth below: 

          4.1     
Failure to Pay Principal or Interest. The Borrower fails to pay any
installment of Principal Amount, interest or other sum due under this Note or
any Transaction Document when due and such failure continues for a period of
five (5) business days after the due date. 

          4.2     
Breach of Covenant. The Borrower breaches any material covenant or other
term or condition of the Subscription Agreement, this Note or Transaction
Document in any material respect and such breach, if subject to cure, continues
for a period of ten (10) business days after written notice to the Borrower from
the Holder. 

          4.3     
Breach of Representations and Warranties. Any material representation or
warranty of the Borrower made herein, in the Subscription Agreement, Transaction
Document or in any agreement, statement or certificate given in writing pursuant
hereto or in connection herewith or therewith shall be false or misleading in
any material respect as of the date made and the Closing Date. 

          4.4      Receiver
or Trustee. The Borrower or any Subsidiary of Borrower shall make an
assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for them or for a substantial part of their
property or business; or such a receiver or trustee shall otherwise be
appointed. 

          4.5      Judgments.
Any money judgment, writ or similar final process shall be entered or filed
against Borrower or any subsidiary of Borrower or any of their property or other
assets for more than $50,000, and shall remain unvacated, unbonded, unappealed,
unsatisfied, or unstayed for a period of forty-five (45) days. 

7 

          4.6      Non-Payment.
A default by the Borrower under any one or more obligations in an aggregate
monetary amount in excess of $100,000 for more than twenty (20) days after the
due date, unless the Borrower is contesting the validity of such obligation in
good faith. 

          4.7      Bankruptcy.
Bankruptcy, insolvency, reorganization, or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law, or the issuance of
any notice in relation to such event, for the relief of debtors shall be
instituted by or against the Borrower or any Subsidiary of Borrower. 

          4.8     
Delisting. Delisting of the Common Stock from any Principal Market for a
period of seven consecutive trading days; or notification from a Principal
Market that the Borrower is not in compliance with the conditions for such
continued listing on such Principal Market. 

          4.9     
Stop Trade. An SEC or judicial stop trade order or Principal Market
trading suspension with respect to Borrower’s Common Stock that lasts for five
or more consecutive trading days. 

          4.10    Failure
to Deliver Common Stock or Replacement Note. Borrower’s failure to timely
deliver Common Stock to the Holder pursuant to and in the form required by this
Note or the Subscription Agreement, or if required, a replacement Note. 

          4.11  
 Reverse Splits. The Borrower effectuates a reverse split of its
Common Stock without twenty days prior written notice to the Holder. 

          4.12  
 Cross Default. A default by the Borrower of a material term,
covenant, warranty or undertaking of any Transaction Document or other agreement
to which the Borrower and Holder are parties, or the occurrence of a material
event of default under any such other agreement which is not cured after any
required notice and/or cure period. 

          4.13  
 Reservation Default. Failure by the Borrower to have authorized and
reserved for issuance upon conversion of the Note the amount of Common Stock as
set forth in this Note and the Subscription Agreement. 

          4.14   
Financial Statement Restatement. The restatement of any financial
statements filed by the Borrower for any date or period from two years prior to
the Issue Date of this Note and until this Note is no longer outstanding, if the
result of such restatement would, by comparison to the unrestated financial
statements, have constituted a Material Adverse Effect. 

          4.15   
Event Described in Subscription Agreement. The occurrence of an Event of
Default as described in the Subscription Agreement that, if susceptible to cure,
is not cured during any designated cure period. 

          4.16  
 Other Note Default. The occurrence of any Event of Default under
any Other Note that endures for longer than any applicable cure period in such
Other Note. 

ARTICLE V 

PRIORITY 

8 

          5.      Priority.
The holder of this Note has been granted rights and benefits senior and superior
to the rights granted to or held by other creditors and equity holders of the
Borrower. These rights are described in the Subscription Agreement and the 2009
Transaction Documents. 

ARTICLE VI 

MISCELLANEOUS 

          6.1     
  Failure or Indulgence Not Waiver. No failure or delay on the part of
  Holder hereof 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. All rights and remedies existing hereunder
  are cumulative to, and not exclusive of, any rights or remedies otherwise available.

          6.2      Notices.
All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (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 addresses for such
communications shall be: (i) if to the Borrower to: Liberty Star Uranium &
Metals Corp., 5610 E. Sutler Lane, Tucson, Arizona 85712, Attn: James A.
Briscoe, President, telecopier: (520) 844-1118, with a copy by telecopier only
to: Clark Wilson LLP, 800-885 West Georgia Street, Vancouver, B.C. Canada, Attn:
Bernard Pinsky, Esq., telecopier: (604) 687-6314, and (ii) if to the Holder, to
the name, address and telecopy number set forth on the front page of this Note,
with a copy by telecopier only to Grushko & Mittman, P.C., 551 Fifth Avenue,
Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575. 

          6.3      Amendment
Provision. The term “Note” and all reference thereto, as used throughout
this instrument, shall mean this instrument as originally executed, or if later
amended or supplemented, then as so amended or supplemented. 

          6.4     
Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns. 

          6.5      Cost
of Collection. If default is made in the payment of this Note, Borrower
shall pay the Holder hereof reasonable costs of collection, including reasonable
attorneys’ fees. 

          6.6     
Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of New York without regard to conflicts of laws
principles that would result in the application of the substantive laws of
another jurisdiction. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the civil or state courts of New York or in the federal courts located in the
State and county of New York. Both 

9 

parties and the individual signing this Agreement on behalf of
the Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other decision in favor of the Holder. This Note shall
be deemed an unconditional obligation of Borrower for the payment of money and,
without limitation to any other remedies of Holder, may be enforced against
Borrower by summary proceeding pursuant to New York Civil Procedure Law and
Rules Section 3213 or any similar rule or statute in the jurisdiction where
enforcement is sought. For purposes of such rule or statute, any other document
or agreement to which Holder and Borrower are parties or which Borrower
delivered to Holder, which may be convenient or necessary to determine Holder’s
rights hereunder or Borrower’s obligations to Holder are deemed a part of this
Note, whether or not such other document or agreement was delivered together
herewith or was executed apart from this Note. 

          6.7      Maximum
Payments. Nothing contained herein shall be deemed to establish or require
the payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest required to
be paid or other charges hereunder exceed the maximum permitted by such law, any
payments in excess of such maximum shall be credited against amounts owed by the
Borrower to the Holder and thus refunded to the Borrower. 

          6.8.     
Construction. Each party acknowledges that its legal counsel participated
in the preparation of this Note and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the drafting party
shall not be applied in the interpretation of this Note to favor any party
against the other. 

          6.9      Redemption.
This Note may not be redeemed or called without the consent of the Holder except
as described in this Note or the Subscription Agreement. 

          6.10   
Shareholder Status. The Holder shall not have rights as a shareholder of
the Borrower with respect to unconverted portions of this Note. However, the
Holder will have the rights of a shareholder of the Borrower with respect to the
Shares of Common Stock to be received after delivery by the Holder of a
Conversion Notice to the Borrower. 

          6.11  
 Non-Business Days. Whenever any payment or any action 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 or action shall be required on
the next succeeding business day and, for such payment, such next succeeding day
shall be included in the calculation of the amount of accrued interest payable
on such date. 

          6.12  
 Modification. The terms, provisions, convertability, enforcement
and other matters relating to this Note may be modified, amended and controlled
by a Majority in Interest as defined in the Subscription Agreement. 

10 

          IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by
an authorized officer as of the ____ day of May, 2009. 

LIBERTY STAR URANIUM & METALS
CORP. 

By:________________________________
               Name: 
               Title:

WITNESS: 

 

______________________________________ 

 

11 

NOTICE OF CONVERSION 

(To be executed by the Registered Holder in order to convert
the Note) 

          The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Note issued by Liberty Star Uranium & Metals
Corp. on May ___, 2009 into Shares of Common Stock of Liberty Star Uranium &
Metals Corp. (the “Borrower”) according to the conditions set forth in such
Note, as of the date written below. 

 

Date of
Conversion:____________________________________________________________________

Conversion
Price:______________________________________________________________________

Number of Shares of Common Stock Beneficially Owned on the
Conversion Date: Less than 5% of the outstanding Common Stock of Liberty Star
Uranium & Metals Corp. 

Shares To Be Delivered:
_________________________________________________________________

Signature
:____________________________________________________________________________

 

Print Name:   
__________________________________________________________________________

 

Address: 
_____________________________________________________________________________

                  
_____________________________________________________________________________

12

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