SECURITY AGREEMENT
1.
Identification .
This
Security Agreement (the "Agreement"), dated as of August 27, 2008,
is entered into by and between Liberty Star Uranium & Metals
Corp., a Nevada corporation ("Parent"), Big Chunk Corp., an Alaska
corporation ("Guarantor" and together with Parent, each a "Debtor"
and collectively the "Debtors"), and Collateral Agents, LLC, as
collateral agent acting in the manner and to the extent described
in the Collateral Agent Agreement defined below (the "Collateral
Agent"), for the benefit of the parties identified on Schedule
A hereto (collectively, the "Lenders").
Schedule A may be amended by the inclusion of additional Lenders
who participate in the Offering pursuant to the Subscription
Agreement (defined below).
2.
Recitals .
2.1 At
or about the date hereof, the Lenders are making loans to Parent
("New Notes"). On May 11, 2007, Parent issued Convertible
Promissory Notes to Lenders ("May Notes"). Collectively, the loans
made on May 11, 2007, and at or about the date hereof are referred
to as the "Loans". It is beneficial to each Debtor that the Loans
were made and are being made. Guarantor has or will deliver a
"Guaranty" of Parents obligations to Lenders.
2.2 The
Loans were, are and will be evidenced by certain promissory notes
(each a "Note") issued by Parent on May 11, 2007 and on or about
the date of this Agreement pursuant to subscription agreements
(each a "Subscription Agreement") to which Parent and Lenders are
parties. The Notes are further identified on Schedule A hereto and
were and will be executed by Parent as "Borrower" or "Debtor" for
the benefit of each Lender as the "Holder" or "Lender" thereof.
2.3
In consideration of the Loans made and to be made by Lenders to
Parent and for other good and valuable consideration, and as
security for the performance by Parent of its obligations under the
Notes, by Guarantor of its obligations under the Guaranty, and as
security for the repayment of the Loans and all other sums due from
Debtors to Lenders arising under the Transaction Documents (as
defined in the Subscription Agreement) and any other agreement
between or among them (collectively, the "Obligations"), each
Debtor, for good and valuable consideration, receipt of which is
acknowledged, has agreed to grant to the Collateral Agent, for the
benefit of the Lenders, a security interest in the Collateral (as
such term is hereinafter defined), on the terms and conditions
hereinafter set forth. Obligations include all future advances by
Lenders to Debtor made pursuant to the Subscription Agreement.
2.4 The
Lenders have appointed the Collateral Agent pursuant to that
certain Collateral Agent Agreement dated at or about the date of
this Agreement ("Collateral Agent Agreement"), among the Lenders
and Collateral Agent.
2.5
The following defined terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date
hereof are used herein as so defined: Accounts, Chattel Paper,
Documents, Equipment, General Intangibles, Instruments, Inventory
and Proceeds. Other capitalized terms employed herein shall have
the meanings attributed to them in the Subscription Agreement.
3. Grant
of General Security Interest in Collateral .
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3.1 As
security for the Obligations of Debtors, each Debtor hereby grants
the Collateral Agent, for the benefit of the Lenders, a security
interest in the Collateral.
3.2 "Collateral"
shall mean all of the following property of Debtors:
(A) All
now owned and hereafter acquired right, title and interest of
Debtors in, to and in respect of all Accounts, Goods, real or
personal property, all present and future books and records
relating to the foregoing and all products and Proceeds of the
foregoing, and as set forth below:
(i) All
now owned and hereafter acquired right, title and interest of
Debtors in, to and in respect of all: Accounts, interests in goods
represented by Accounts, returned, reclaimed or repossessed goods
with respect thereto and rights as an unpaid vendor; contract
rights; Chattel Paper; investment property; General Intangibles
(including but not limited to, tax and duty claims and refunds,
registered and unregistered patents, trademarks, service marks,
certificates, copyrights trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or
licensee, choses in action and other claims, and existing and
future leasehold interests and claims in and to equipment, real
estate and fixtures); Documents; Instruments; letters of credit,
bankers’ acceptances or guaranties; cash moneys, deposits;
securities, bank accounts, deposit accounts, credits and other
property now or hereafter owned or held in any capacity by Debtors,
as well as agreements or property securing or relating to any of
the items referred to above;
(ii)
Goods: All now owned and hereafter acquired right, title and
interest of Debtors in, to and in respect of goods, including, but
not limited to:
(a) All
Inventory, wherever located, whether now owned or hereafter
acquired, of whatever kind, nature or description, including all
raw materials, work-in-process, finished goods, and materials to be
used or consumed in Debtors’ business; finished goods, timber
cut or to be cut, oil, gas, hydrocarbons, and minerals extracted or
to be extracted, and all names or marks affixed to or to be affixed
thereto for purposes of selling same by the seller, manufacturer,
lessor or licensor thereof and all Inventory which may be returned
to any Debtor by its customers or repossessed by any Debtor and all
of Debtors’ right, title and interest in and to the foregoing
(including all of a Debtor’s rights as a seller of
goods);
(b) All
Equipment and fixtures, wherever located, whether now owned or
hereafter acquired, including, without limitation, all machinery,
furniture and fixtures, and any and all additions, substitutions,
replacements (including spare parts), and accessions thereof and
thereto (including, but not limited to Debtors’ rights to
acquire any of the foregoing, whether by exercise of a purchase
option or otherwise);
(iii)
Property: All now owned and hereafter acquired right, title
and interests of Debtors in, to and in respect of any other
personal property in or upon which a Debtor has or may hereafter
have a security interest, lien or right of setoff;
(iv) Books and Records:
All present and future books and records relating to any of the
above including, without limitation, all computer programs, printed
output and computer readable data in the possession or control of
the Debtors, any computer service bureau or other third party;
and
(v) Products and
Proceeds: All products and Proceeds of the foregoing in
whatever form and wherever located, including, without limitation,
all insurance proceeds and all claims against third parties for
loss or destruction of or damage to any of the foregoing.
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(B) All
now owned and hereafter acquired right, title and interest of
Debtors in, to and in respect of the following:
(i) the
shares of stock of the Guarantor, which the Debtor represents equal
100% of the equity ownership interest in the Guarantor, the
certificates representing such shares together with an executed
stock power, and other rights, contractual or otherwise, in respect
thereof and all dividends, distributions, cash, instruments,
investment property and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange
for any or all of such shares;
(ii) all
additional shares of stock, partnership interests, member interests
or other equity interests from time to time acquired by Debtor, in
any Subsidiary (as defined in the Subscription Agreement) not a
Subsidiary of the Debtor on the date hereof ("Future
Subsidiaries"), the certificates representing such additional
shares, and other rights, contractual or otherwise, in respect
thereof and all dividends, distributions, cash, instruments,
investment property and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange
for any or all of such additional shares, interests or equity;
and
(iii)
all security entitlements of Debtor in, and all Proceeds of any and
all of the foregoing in each case, whether now owned or hereafter
acquired by Debtor and howsoever its interest therein may arise or
appear (whether by ownership, security interest, lien, claim or
otherwise).
3.3
The Collateral Agent is hereby specifically authorized, after the
Maturity Date (defined in the Notes) accelerated, or after the
occurrence of an Event of Default (as defined herein) and the
expiration of any applicable cure period, to transfer any
Collateral into the name of the Collateral Agent and to take any
and all action deemed advisable to the Collateral Agent to remove
any transfer restrictions affecting the Collateral.
4. Perfection
of Security Interest .
4.1 Each
Debtor shall prepare, execute and deliver to the Collateral Agent
UCC-1 Financing Statements. The Collateral Agent is instructed to
prepare and file at each Debtor’s cost and expense, financing
statements in such jurisdictions deemed advisable to the Collateral
Agent, including but not limited to the States of Delaware and
California. The Financing Statements are deemed to have been filed
for the benefit of the Collateral Agent and Lenders identified on
Schedule A hereto.
4.2 Upon
the execution of this Agreement, Parent shall deliver to Collateral
Agent stock certificates representing all of the shares of
outstanding capital stock of the Guarantor (the "Securities"). All
such certificates shall be held by or on behalf of Collateral Agent
pursuant hereto and shall be delivered in suitable form for
transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment or undated stock powers
executed in blank, all in form and substance satisfactory to
Collateral Agent.
4.3 All
other certificates and instruments constituting Collateral from
time to time required to be pledged to Collateral Agent pursuant to
the terms hereof (the "Additional Collateral") shall be delivered
to Collateral Agent promptly upon receipt thereof by or on behalf
of Debtors. All such certificates and instruments shall be held by
or on behalf of Collateral Agent pursuant hereto and shall be
delivered in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment
or undated stock powers executed in blank, all in form and
substance satisfactory to Collateral Agent. If any Collateral
consists of uncertificated securities, unless the immediately
following sentence is
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applicable thereto, Debtors shall cause
Collateral Agent (or its custodian, nominee or other designee) to
become the registered holder thereof, or cause each issuer of such
securities to agree that it will comply with instructions
originated by Collateral Agent with respect to such securities
without further consent by Debtors. If any Collateral consists of
security entitlements, Debtors shall transfer such security
entitlements to Collateral Agent (or its custodian, nominee or
other designee) or cause the applicable securities intermediary to
agree that it will comply with entitlement orders by Collateral
Agent without further consent by Debtors.
4.4 Within
five (5) business days after the receipt by a Debtor of any
Additional Collateral, a Pledge Amendment, duly executed by such
Debtor, in substantially the form of Annex I hereto (a "Pledge
Amendment"), shall be delivered to Collateral Agent in respect of
the Additional Collateral to be pledged pursuant to this Agreement.
Each Debtor hereby authorizes Collateral Agent to attach each
Pledge Amendment to this Agreement and agrees that all certificates
or instruments listed on any Pledge Amendment delivered to
Collateral Agent shall for all purposes hereunder constitute
Collateral.
4.5
If Debtor shall receive, by virtue of Debtor being or having been
an owner of any Collateral, any (i) stock certificate (including,
without limitation, any certificate representing a stock dividend
or distribution in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets,
combination of shares, stock split, spin-off or split-off),
promissory note or other instrument, (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any
Collateral, or otherwise, (iii) dividends payable in cash (except
such dividends permitted to be retained by Debtor pursuant to
Section 5.2 hereof) or in securities or other property or (iv)
dividends or other distributions in connection with a partial or
total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in surplus, Debtor shall
receive such stock certificate, promissory note, instrument,
option, right, payment or distribution in trust for the benefit of
Collateral Agent, shall segregate it from Debtor’s other
property and shall deliver it forthwith to Collateral Agent, in the
exact form received, with any necessary endorsement and/or
appropriate stock powers duly executed in blank, to be held by
Collateral Agent as Collateral and as further collateral security
for the Obligations.
5.
Distribution .
5.1
So long as an Event of Default does not exist, Debtors shall be
entitled to exercise all voting power pertaining to any of the
Collateral, provided such exercise is not contrary to the interests
of the Lenders and does not materially impair the Collateral.
5.2. At
any time an Event of Default exists or has occurred and is
continuing, all rights of Debtors, upon notice given by Collateral
Agent, to exercise the voting power and receive payments, which it
would otherwise be entitled to pursuant to Section 5.1, shall cease
and all such rights shall thereupon become vested in Collateral
Agent, which shall thereupon have the sole right to exercise such
voting power and receive such payments.
5.3 All
dividends, distributions, interest and other payments which are
received by Debtors contrary to the provisions of Section 5.2 shall
be received in trust for the benefit of Collateral Agent as
security and Collateral for payment of the Obligations shall be
segregated from other funds of Debtors, and shall be forthwith paid
over to Collateral Agent as Collateral in the exact form received
with any necessary endorsement and/or appropriate stock powers duly
executed in blank, to be held by Collateral Agent as Collateral and
as further collateral security for the Obligations.
6. Further
Action By Debtors; Covenants and Warranties .
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6.1 Collateral
Agent at all times shall have a perfected security interest in the
Collateral. Each Debtor represents that, other than the security
interests described on Schedule 6.1, it has and will
continue to have full title to the Collateral free from any liens,
leases, encumbrances, judgments or other claims. The Collateral
Agent’s security interest in the Collateral constitutes and
will continue to constitute a first, prior and indefeasible
security interest in favor of Collateral Agent, subject only to the
security interests described on Schedule 6.1 . Each Debtor
will do all acts and things, and will execute and file all
instruments (including, but not limited to, security agreements,
financing statements, continuation statements, etc.) reasonably
requested by Collateral Agent to establish, maintain and continue
the perfected security interest of Collateral Agent in the
perfected Collateral, and will promptly on demand, pay all costs
and expenses of filing and recording, including the costs of any
searches reasonably deemed necessary by Collateral Agent from time
to time to establish and determine the validity and the continuing
priority of the security interest of Collateral Agent, and also pay
all other claims and charges that, in the opinion of Collateral
Agent, exercised in good faith, are reasonably likely to materially
prejudice, imperil or otherwise affect the Collateral or Collateral
Agent’s or Lenders’ security interests therein.
6.2 Except
in connection with sales of Collateral, in the ordinary course of
business, for fair value and in cash, and except for Collateral
which is substituted by assets of identical or greater value
(subject to the consent of the Collateral Agent) or which is
inconsequential in value, each Debtor will not sell, transfer,
assign or pledge those items of Collateral (or allow any such items
to be sold, transferred, assigned or pledged), without the prior
written consent of Collateral Agent other than a transfer of the
Collateral to a wholly-owned United States formed and located
subsidiary or to another Debtor on prior notice to Collateral
Agent, and provided the Collateral remains subject to the security
interest herein described. Although Proceeds of Collateral are
covered by this Agreement, this shall not be construed to mean that
Collateral Agent consents to any sale of the Collateral, except as
provided herein. Sales of Collateral in the ordinary course of
business shall be free of the security interest of Lenders and
Collateral Agent and Lenders and Collateral Agent shall promptly
execute such documents (including without limitation releases and
termination statements) as may be required by Debtors to evidence
or effectuate the same.
6.3
Each Debtor will, at all reasonable times during regular business
hours and upon reasonable notice, allow Collateral Agent or its
representatives free and complete access to the Collateral and all
of such Debtor’s records which in any way relate to the
Collateral, for such inspection and examination as Collateral Agent
reasonably deems necessary.
6.4 Each
Debtor, at its sole cost and expense, will protect and defend this
Security Agreement, all of the rights of Collateral Agent and
Lenders hereunder, and the Collateral against the claims and
demands of all other persons.
6.5 Debtors
will promptly notify Collateral Agent of any levy, distraint or
other seizure by legal process or otherwise of any par
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