Liberty Star Sued by Warrant Holders
TUCSON, Ariz., Sep 02, 2010 (BUSINESS WIRE) --
Liberty Star Uranium & Metals Corp. (OTCBB:LBSR) announces that on August 26, 2010, Platinum Long Term Growth VI LLC and Alpha Capital Anstalt, two former lenders of the Company (the "Plaintiffs"), filed lawsuit in the United States District Court, Southern District of New York, against the Company and James Briscoe, (President and CEO). The Plaintiffs are seeking to require the Company to honor outstanding warrants held by the Plaintiffs at an exercise price of $0.002 (two tenths of one cent) per share and to issue to the Plaintiffs ten times the number of warrants that the Company has on record, or in the alternative money damages. The claim is based on a provision in the warrant agreements that would permit a "ratchet down" of price and a multiplication of number of warrants in the event of certain share issuances by Liberty Star Uranium & Metals Corp.
The Plaintiffs are claiming that Platinum is entitled to 201,053,015 warrants and that Alpha is entitled to 240,919,010 warrants all exercisable at $0.002 per share. If the Plaintiffs are successful in their lawsuit, a total of 589,177,000 warrants would be outstanding at an exercise price of $0.002 to all warrant holders who are former lenders to our company. These warrants all contain a cashless exercise feature, permitting issuance of shares without payment of any cash to the company. The Plaintiffs are also claiming money damages for non-compliance with what they claim are the terms of the warrants, costs and attorney fees incurred in the action.
Currently, there are 434,784,657 common shares of Liberty Star outstanding. If the warrant holders are successful in their lawsuit, they and other warrant holders could exercise warrants for over 55% of the company"s equity at a price of $0.002 per share. However, there are contractual limits on the percentage of the company"s outstanding common shares which any warrant holder can hold at the time of exercise (i.e., not more than 9.99% of the company"s outstanding shares), so individually none of them could control the company through the exercise of warrants.
We are vigorously defending against the lawsuit and have through our attorney made an appearance in court. Our defense is, in part, that no "ratchet down" provision is in effect. If we are successful on that defense alone that would leave all former lender warrant holders with 58,917,700 warrants exercisable at $0.02 (two cents) per share.
Declares James Briscoe, "This lawsuit makes no sense to me. Until this matter is settled or decided by a court, we won"t allow the exercise of any Plaintiffs" warrants. If the Plaintiffs eventually win, the dilutive effect on the company will likely seriously harm our share value, drastically reducing the value of the Plaintiffs" warrants. We intend to use every defense possible to defeat these claims."
For the board of directors,
"James A. Briscoe"
James
A. Briscoe, P. Geo.
President & CEO
Liberty Star Uranium & Metals Corp.
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