Document:

Filed by sedaredgar.com - Liberty Star Uranium & 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: August ____, 2008
  

SECURED CONVERTIBLE PROMISSORY NOTE 

          FOR
VALUE RECEIVED, LIBERTY STAR URANIUM & METALS CORP., a Nevada corporation
(hereinafter called “Borrower”), hereby promises to pay to
_____________________, (the “Holder”) or its registered assigns or successors in
interest or order, without demand, the sum of __________________
__________________________ Dollars ($__________) (“Principal Amount”), on August
___, 2009 (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
February 11, 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 Common Stock pursuant to the terms hereof. Subject to Section 2.1 and
Article 3 below, on each 

1 

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 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 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

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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 Agreement, and the
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 $0.05 per share of Common Stock (“Fixed Conversion
Price”), as the same may be adjusted pursuant to this Note 

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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 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

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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 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. 

5 

                                   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 Noteholders 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 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

6 

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. 

          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. 

7 

          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 

SECURITY INTEREST 

          5.      Security
Interest/Waiver of Automatic Stay. This Note is secured by a security
interest granted to the Collateral Agent for the benefit of the Holder pursuant
to a Security Agreement, as delivered by Borrower to Holder. The Borrower
acknowledges and agrees that should a proceeding under any bankruptcy or
insolvency law be commenced by or against the Borrower, or if any of the
Collateral (as defined in the Security Agreement) should become the subject of
any bankruptcy or insolvency proceeding, then the Holder should be entitled to,
among other relief to which the Holder may be entitled under the Transaction
Documents and any other agreement to which the Borrower and Holder are parties
(collectively, "Loan Documents") and/or applicable law, an order from the court
granting immediate relief from the automatic stay pursuant to 11 U.S.C. Section
362 to permit the Holder to exercise all of its rights and remedies pursuant to
the Loan Documents and/or applicable law. THE BORROWER EXPRESSLY WAIVES THE
BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362.

8 

FURTHERMORE, THE BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES
THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE
OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105)
SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF
THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS
AND/OR APPLICABLE LAW. The Borrower hereby consents to any motion for relief
from stay that may be filed by the Holder in any bankruptcy or insolvency
proceeding initiated by or against the Borrower and, further, agrees not to file
any opposition to any motion for relief from stay filed by the Holder. The
Borrower represents, acknowledges and agrees that this provision is a specific
and material aspect of the Loan Documents, and that the Holder would not agree
to the terms of the Loan Documents if this waiver were not a part of this Note.
The Borrower further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Holder nor any
person acting on behalf of the Holder has made any representations to induce
this waiver, that the Borrower has been represented (or has had the opportunity
to he represented) in the signing of this Note and the Loan Documents and in the
making of this waiver by independent legal counsel selected by the Borrower and
that the Borrower has discussed this waiver with counsel. 

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., 3024 E. Fort Lowell Road, Tucson, Arizona 85716-1572, 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. 

9 

          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 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. 

10 

          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. 

          IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by
an authorized officer as of the ____ day of August, 2008. 

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 August ___, 2008 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:   
_____________________________________________________________________________

          
         
____________________________________________________________________________

  12Filed by sedaredgar.com - Liberty Star Uranium & Metals Corp. - Exhibit 10.3

FUNDS ESCROW AGREEMENT 

          This
Agreement is dated as of the 27th day of August, 2008 among Liberty Star Uranium
& Metals Corp., a Nevada corporation (the "Company"), the Subscribers
identified on Schedule A hereto (each a “Subscriber” and collectively
“Subscribers”), and Grushko & Mittman, P.C. (the "Escrow Agent"): 

W I T N E S S
E T H: 

          WHEREAS,
the Company and Subscribers have entered into a Subscription Agreement calling
for the sale by the Company to the Subscribers of secured convertible Notes for
an aggregate purchase price of up to $500,000 in the amounts set forth on
Schedule A hereto; and 

          WHEREAS,
the parties hereto require the Company to deliver the Notes against payment
therefor, with such Notes and the Escrowed Funds to be delivered to the Escrow
Agent, along with the other documents, instruments and payments hereinafter
described, to be held in escrow and released by the Escrow Agent in accordance
with the terms and conditions of this Agreement; and 

          WHEREAS,
the Escrow Agent is willing to serve as escrow agent pursuant to the terms and
conditions of this Agreement; 

          NOW
THEREFORE, the parties agree as follows: 

ARTICLE I 

INTERPRETATION 

         
1.1.     Definitions. Capitalized terms used and not
otherwise defined herein that are defined in the Subscription Agreement shall
have the meanings given to such terms in the Subscription Agreement. Whenever
used in this Agreement, the following terms shall have the following respective
meanings: 

                         •       
  “Additional Security Documents” shall have the meaning set forth in
  Section 3 of the Subscription Agreement; 

                         •       "Agreement"
  means this Agreement and all amendments made hereto and thereto by written agreement
  between the parties; 

                         •       “Closing
  Date” shall have the meaning set forth in Section 1 of the Subscription
  Agreement; 

                     
     •       “Collateral
  Agent” shall have the meaning set forth in Section 3 of the Subscription
  Agreement; 

                         •       “Collateral
  Agent Agreement” shall have the meaning set forth in Section 3 of the Subscription
  Agreement; 

                         •       "Escrowed
  Payment" means an aggregate cash payment of up to $500,000 which is the Purchase
  Price; 

                         •       “Legal
  Fees” shall have the meaning set forth in Section 8(b) of the Subscription
  Agreement; 

1

                         •       “Legal
  Opinion” means the original signed legal opinion referred to in Section
  6 of the Subscription Agreement; 

                         •       “Lockup
  Agreements” means the original Lockup Agreements referred to in Section
  9(t) of the Subscription Agreement, executed by each of the persons and entities
  identified on Schedule 9(t) to the Subscription Agreement; 

                         •       “Notes”
  shall have the meaning set forth in the second recital to the Subscription Agreement;

                        
  •       “Principal Amount”
  shall mean up to $500,000; 

                         •       
  “Security Agreement” shall have the meaning set forth in Section 3
  of the Subscription Agreement; 

                         •       "Subscription
  Agreement" means the Subscription Agreement (and the exhibits and schedules
  thereto) entered into or to be entered into by the Company and Subscribers in
  reference to the sale and purchase of the Notes and Warrants; 

                         •       “Subsidiary
  Guaranty” shall have the meaning set forth in Section 3 of the Subscription
  Agreement; 

                         •       “Third
  Modification, Waiver and Acknowledgement Agreement” shall have the meaning
  set forth in Section 9(u) of the Subscription Agreement; 

                         •       Collectively,
  Additional Security Documents, Collateral Agent Agreement, Subsidiary Guaranty,
  Legal Opinion, Lockup Agreements, Notes, Security Agreement, the executed Subscription
  Agreement, and Third Modification, Waiver and Acknowledgement Agreement are
  referred to as "Company Documents"; and 

                         •       Collectively,
  the Escrowed Payment and the Subscriber executed Subscription Agreement, Security
  Agreement, Collateral Agent Agreement and Third Modification, Waiver and Acknowledgement
  Agreement are referred to as "Subscriber Documents". 

         
1.2.     Entire Agreement. This Agreement along with
the Company Documents and the Subscriber Documents constitute the entire
agreement between the parties hereto pertaining to the Company Documents and
Subscriber Documents and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties. There are
no warranties, representations and other agreements made by the parties in
connection with the subject matter hereof except as specifically set forth in
this Agreement, the Company Documents and the Subscriber Documents. 

         
1.3.     Extended Meanings. In this Agreement words
importing the singular number include the plural and vice versa; words importing
the masculine gender include the feminine and neuter genders. The word "person"
includes an individual, body corporate, partnership, trustee or trust or
unincorporated association, executor, administrator or legal representative.

         
1.4.     Waivers and Amendments. This Agreement may
be amended, modified, superseded, cancelled, renewed or extended, and the terms
and conditions hereof may be waived, only by a written instrument signed by all
parties, or, in the case of a waiver, by the party waiving compliance. Except as
expressly stated herein, no delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right, 

2 

power or privilege hereunder preclude any other or future
exercise of any other right, power or privilege hereunder. 

         
1.5.     Headings. The division of this Agreement
into articles, sections, subsections and paragraphs and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. 

         
1.6.     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 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 state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party (which shall be the party which receives an award
most closely resembling the remedy or action sought) 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. 

         
1.7.     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 an injuction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity. Subject to Section 1.6 hereof, each of the Company
and Subscriber hereby waives, and agrees not to assert in any such suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction
of such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. Nothing
in this Section shall affect or limit any right to serve process in any other
manner permitted by law. 

ARTICLE II 

DELIVERIES TO THE ESCROW AGENT 

         
2.1.     Company Deliveries. On or before the Closing
Date, the Company shall deliver the Company Documents to the Escrow Agent. 

         
2.2.     Subscriber Deliveries. On or before the
Closing Date, each Subscriber shall deliver to the Escrow Agent such
Subscriber’s portion of the Purchase Price, the executed Subscription Agreement,
Security Agreement and Collateral Agent Agreement. The Escrowed Payment will be
delivered pursuant to the following wire transfer instructions: 

Citibank, N.A. 
1155 6th Avenue 
New York, NY
10036 
ABA Number: 0210-00089 
For Credit to: Grushko & Mittman, IOLA
Trust Account 
Account Number: 45208884 

3

         
2.3.     Intention to Create Escrow Over Company
Documents and Subscriber Documents. The Subscriber and Company intend that
the Company Documents and Subscriber Documents shall be held in escrow by the
Escrow Agent pursuant to this Agreement for their benefit as set forth herein.

         
2.4.     Escrow Agent to Deliver Company Documents and
Subscriber Documents. The Escrow Agent shall hold and release the Company
Documents and Subscriber Documents only in accordance with the terms and
conditions of this Agreement. 

ARTICLE III 

RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS

         
3.1.     Release of Escrow. Subject to the provisions
of Section 4.2, the Escrow Agent shall release the Company Documents and
Subscriber Documents as follows: 

                        
  (a)       On the Closing Date, the Escrow Agent
  will simultaneously release the Company Documents to the Subscriber and release
  the Subscriber Documents to the Company except that (i) the Escrow Agent will
  directly release the sums set forth on Schedule 3.1(a) hereto the payees on
  the dates and for the purposes specified thereon; (ii) Legal Fees will be released
  to the Subscribers’ attorneys, and (iii) the Security Agreement, Subsidiary
  Guaranty, Collateral Agent Agreement and Additional Security Documents will
  also be released to the Collateral Agent. 

                        
  (b)      Any funds not used for the purposes designated
  on Schedule 3.1(a) shall be returned pro rata to the Subscribers based on the
  principal amount of the Notes issued to the Subscribers and the Company will
  receive a like credit for the amounts so returned to a Subscriber against amounts
  owed by the Company to such Subscriber. 

                        
  (c)      All funds to be delivered to the Company shall
  be delivered pursuant to the wire instructions to be provided in writing by
  the Company to the Escrow Agent.

                         (d)
       Notwithstanding the above, upon receipt by the
  Escrow Agent of joint written instructions ("Joint Instructions") signed by
  the Company and the Subscriber, it shall deliver the Company Documents and Subscriber
  Documents in accordance with the terms of the Joint Instructions. 

                        
  (e)      Notwithstanding the above, upon receipt by
  the Escrow Agent of a final and non-appealable judgment, order, decree or award
  of a court of competent jurisdiction (a "Court Order"), the Escrow Agent shall
  deliver the Company Documents and Subscriber Documents in accordance with the
  Court Order. Any Court Order shall be accompanied by an opinion of counsel for
  the party presenting the Court Order to the Escrow Agent (which opinion shall
  be satisfactory to the Escrow Agent) to the effect that the court issuing the
  Court Order has competent jurisdiction and that the Court Order is final and
  non-appealable. 

         
3.2.     If a Closing does not take place prior to August
30, 2008, then at the request of the Subscribers or the Company, the Escrow
Agent will promptly return the applicable Company Documents to the Company and
return the Subscriber Documents to the Subscribers. 

         
3.3.     Acknowledgement of Company and Subscriber;
Disputes. The Company and the Subscriber acknowledge that the only terms and
conditions upon which the Company Documents and Subscriber Documents are to be
released are set forth in Sections 3 and 4 of this Agreement. The Company and
the Subscriber reaffirm their agreement to abide by the terms and conditions of
this Agreement with respect to the release of the Company Documents and
Subscriber Documents. Any dispute with respect to the release of the Company
Documents and Subscriber Documents shall be resolved pursuant to Section 4.2 or
by agreement between the Company and Subscriber. 

4

ARTICLE IV 

CONCERNING THE ESCROW AGENT 

         
4.1.     Duties and Responsibilities of the Escrow
Agent. The Escrow Agent's duties and responsibilities shall be subject to
the following terms and conditions: 

                        
(a)           The Subscriber
and Company acknowledge and agree that the Escrow Agent (i) shall not be
responsible for or bound by, and shall not be required to inquire into whether
either the Subscriber or Company is entitled to receipt of the Company Documents
and Subscriber Documents pursuant to, any other agreement or otherwise; (ii)
shall be obligated only for the performance of such duties as are specifically
assumed by the Escrow Agent pursuant to this Agreement; (iii) may rely on and
shall be protected in acting or refraining from acting upon any written notice,
instruction, instrument, statement, request or document furnished to it
hereunder and believed by the Escrow Agent in good faith to be genuine and to
have been signed or presented by the proper person or party, without being
required to determine the authenticity or correctness of any fact stated therein
or the propriety or validity or the service thereof; (iv) may assume that any
person believed by the Escrow Agent in good faith to be authorized to give
notice or make any statement or execute any document in connection with the
provisions hereof is so authorized; (v) shall not be under any duty to give the
property held by Escrow Agent hereunder any greater degree of care than Escrow
Agent gives its own similar property; and (vi) may consult counsel satisfactory
to Escrow Agent, the opinion of such counsel to be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by Escrow Agent hereunder in good faith and in accordance with the opinion of
such counsel. 

                         (b)          
The Subscriber and Company acknowledge that the Escrow Agent is acting solely as
a stakeholder at their request and that the Escrow Agent shall not be liable for
any action taken by Escrow Agent in good faith and believed by Escrow Agent to
be authorized or within the rights or powers conferred upon Escrow Agent by this
Agreement. The Subscriber and Company, jointly and severally, agree to indemnify
and hold harmless the Escrow Agent and any of Escrow Agent's partners,
employees, agents and representatives for any action taken or omitted to be
taken by Escrow Agent or any of them hereunder, including the fees of outside
counsel and other costs and expenses of defending itself against any claim or
liability under this Agreement, except in the case of gross negligence or
willful misconduct on Escrow Agent's part committed in its capacity as Escrow
Agent under this Agreement. The Escrow Agent shall owe a duty only to the
Subscriber and Company under this Agreement and to no other person. 

            
           
(c)           The Subscriber
and Company jointly and severally agree to reimburse the Escrow Agent for
outside counsel fees, to the extent authorized hereunder and incurred in
connection with the performance of its duties and responsibilities hereunder.

                    
   
(d)           The Escrow Agent
may at any time resign as Escrow Agent hereunder by giving five (5) days prior
written notice of resignation to the Subscriber and the Company. Prior to the
effective date of the resignation as specified in such notice, the Subscriber
and Company will issue to the Escrow Agent a Joint Instruction authorizing
delivery of the Company Documents and Subscriber Documents to a substitute
Escrow Agent selected by the Subscriber and Company. If no successor Escrow
Agent is named by the Subscriber and Company, the Escrow Agent may apply to a
court of competent jurisdiction in the State of New York for appointment of a
successor Escrow Agent, and to deposit the Company Documents and Subscriber
Documents with the clerk of any such court. 

                        
(e)           The Escrow Agent
does not have and will not have any interest in the Company Documents and
Subscriber Documents, but is serving only as escrow agent, having only
possession thereof. The Escrow Agent shall not be liable for any loss resulting
from the making or retention of any investment in accordance with this Escrow
Agreement. 

5

                        
(f)           This Agreement
sets forth exclusively the duties of the Escrow Agent with respect to any and
all matters pertinent thereto and no implied duties or obligations shall be read
into this Agreement. 

                        
(g)           The Escrow Agent
shall be permitted to act as counsel for the Subscribers in any dispute as to
the disposition of the Company Documents and Subscriber Documents, in any other
dispute between the Subscriber and Company, whether or not the Escrow Agent is
then holding the Company Documents and Subscriber Documents and continues to act
as the Escrow Agent hereunder. 

                        
(h)           The
provisions of this Section 4.1 shall survive the resignation of the Escrow Agent
or the termination of this Agreement. 

         
4.2.     Dispute Resolution: Judgments. Resolution of
disputes arising under this Agreement shall be subject to the following terms
and conditions: 

                        
(a)           If any dispute
shall arise with respect to the delivery, ownership, right of possession or
disposition of the Company Documents and Subscriber Documents, or if the Escrow
Agent shall in good faith be uncertain as to its duties or rights hereunder, the
Escrow Agent shall be authorized, without liability to anyone, to (i) refrain
from taking any action other than to continue to hold the Company Documents and
Subscriber Documents pending receipt of a Joint Instruction from the Subscriber
and Company, or (ii) deposit the Company Documents and Subscriber Documents with
any court of competent jurisdiction in the State of New York, in which event the
Escrow Agent shall give written notice thereof to the Subscriber and the Company
and shall thereupon be relieved and discharged from all further obligations
pursuant to this Agreement. The Escrow Agent may, but shall be under no duty to,
institute or defend any legal proceedings which relate to the Company Documents
and Subscriber Documents. The Escrow Agent shall have the right to retain
counsel if it becomes involved in any disagreement, dispute or litigation on
account of this Agreement or otherwise determines that it is necessary to
consult counsel. 

                        
(b)           The Escrow Agent
is hereby expressly authorized to comply with and obey any Court Order. In case
the Escrow Agent obeys or complies with a Court Order, the Escrow Agent shall
not be liable to the Subscriber and Company or to any other person, firm,
corporation or entity by reason of such compliance. 

ARTICLE V 

GENERAL MATTERS 

         
5.1.     Termination. This escrow shall terminate
upon the release of all of the Company Documents and Subscriber Documents or at
any time upon the agreement in writing of the Subscriber and Company. 

         
5.2.     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

6

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:

(a)          
If to the Company, to: 

Liberty Star Uranium & Metals
Corp. 
3024 E. Fort Lowell Road 
Tucson, Arizona 85716-1572 
Attn:
James A. Briscoe, President 
Fax: (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.

Fax: (604) 687-6314 

(b)          
If to the Subscribers, to: the addresses and fax numbers listed on Schedule A
hereto 

               
With a copy by facsimile only to: 

Grushko & Mittman, P.C. 
551
Fifth Avenue, Suite 1601 
New York, New York 10176 
Fax: 212-697-3575 

(c)          
If to the Escrow Agent, to: 

Grushko & Mittman, P.C. 
551
Fifth Avenue, Suite 1601 
New York, New York 10176 
Fax: 212-697-3575 

or to such other address as any of them shall give to the
others by notice made pursuant to this Section 5.2. 

         
5.3.     Interest. The Escrowed Payment shall not be
held in an interest bearing account nor will interest be payable in connection
therewith. In the event the Escrowed Payment is deposited in an interest bearing
account, each Subscriber shall be entitled to receive its pro rata
portion of any accrued interest thereon, but only if the Escrow Agent receives
from such Subscriber the Subscriber’s United States taxpayer identification
number and other requested information and forms. 

         
5.4.     Assignment; Binding Agreement. Neither this
Agreement nor any right or obligation hereunder shall be assignable by any party
without the prior written consent of the other parties hereto. This Agreement
shall enure to the benefit of and be binding upon the parties hereto and their
respective legal representatives, successors and assigns. 

7

         
5.5.     Invalidity. In the event that any one or
more of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal, or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions contained herein shall not be in
any way impaired thereby, it being intended that all of the rights and
privileges of the parties hereto shall be enforceable to the fullest extent
permitted by law. 

         
5.6.     Counterparts/Execution. This Agreement may
be executed in any number of counterparts and by different signatories hereto on
separate counterparts, each of which, when so 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 transmission and
delivered by facsimile transmission. 

8

         
5.7.     Agreement. Each of the undersigned states
that he has read the foregoing Funds Escrow Agreement and understands and agrees
to it. 

LIBERTY STAR URANIUM & METALS
CORP.
 the “Company” 

By:/s/ James
Briscoe                                                                  

“SUBSCRIBERS”

	/sl Konrad Ackerman	 	/s/ Navigator Management Ltd. 
	ALPHA CAPITAL ANSTALT 	 	HARBORVIEW MASTER FUND L.P. 
	  	 	  
	  	 	  
	  	 	  
	/s/ Mark
      Nordlicht	 	/s/
      Eric S. Swartz 
	PLATINUM PARTNERS LONG TERM 	 	BRIDGEPOINTE MASTER FUND, LTD. 
	GROWTH VI 	 	  
	  	 	  
	  	 	  
	  	 	  
	/s/ Shaye
      Hirsch	 	/s/
      Joshua Silverman
	BRIO CAPITAL LP 	 	IROQUOIS MASTER FUND LTD. 
	  	 	  
	  	 	  
	  	 	  
	/s/ Brendan
      O’Neil	 	     
	ENABLE GROWTH PARTNERS LP 	 	ENABLE OPPORTUNITY PARTNERS LP 
	  	 	  
	  	 	  
	  	 	ESCROW AGENT 
	  	 	  
	  	 	  
	  	 	/s/
      Eliezer Drew
	  	 	GRUSHKO & MITTMAN, P.C.

9

SCHEDULE A TO FUNDS ESCROW AGREEMENT

	SUBSCRIBERS 
	ESCROWED PAYMENT 
(PURCHASE
      PRICE) 
	ALPHA CAPITAL ANSTALT 
Pradafant 7 
9490 Furstentums
      
Vaduz, Lichtenstein 
Fax: 011-42-32323196 	$90,830.15 

	HARBORVIEW MASTER FUND L.P. 
Harbor House, 2nd
      Floor 
Waterfront Drive, Road Town 
Tortola, BVI 
Fax:
      (284) 494-4771 	$50,055.88 

	PLATINUM PARTNERS LONG TERM GROWTH VI 
152 West
      57th Street 
New York, NY 10019 
Attn: Mark Nordlicht
      
Fax: (212) 	$61,472.12 

	BRIDGEPOINTE MASTER FUND, LTD. 
1120 Sanctuary
      Parkway-Suite 325 
Alpharetta, GA 30004 
Fax: (770) 777-5844 	$75,874.18 

	BRIO CAPITAL LP 
401 E. 34th St.-Suite South
      33C 
New York, NY 10016 
Fax: (646) 390-2158 	$18,487.31 

	IROQUOIS MASTER FUND LTD. 
c/o Iroquois Capital
      Management, LLC 
641 Lexington Avenue, 26th Floor 
New
      York, NY 10022 
Fax: (212) 207-3452 	$25,027.94 

	ENABLE GROWTH PARTNERS LP 
One Ferry Building, Suite 255
      
San Francisco, CA 94111 
Fax: (415) 677-1580 	$78,571.18 

	ENABLE OPPORTUNITY PARTNERS LP 
One Ferry Building,
      Suite 255 
San Francisco, CA 94111 
Fax: (415) 677-1580 	$13,865.52 

	TOTAL 	$414,184.29 

10

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