Agreement with ASOF in relation to the issue of theASOF...

Agreement with ASOF in relation to the issue of the
ASOF convertible security
Brisbane, Australia – 28 December 2011: Metal Storm Limited.
As announced to ASX on 12 December 2011, Metal Storm received correspondence from
The Lind Partners, LLC, as manager of the Australian Special Opportunity Fund LP (ASOF)
under which ASOF alleged that the Company breached the Convertible Security Agreement
it has with it and ASOF reserved its rights in relation to the alleged breach.
Under the Convertible Security Agreement:
• ASOF provided loans to the Company in various tranches totalling A$700,000 (ASOF
Loan); and
• subject to obtaining Shareholder approval and the satisfaction or waiver of various other
conditions, ASOF agreed to have the ASOF Loan, together with a further payment of
A$200,000 cash (i.e. a total of A$900,000), applied as consideration for the issue of a new
type of convertible security to ASOF (ASOF Security).
Metal Storm and ASOF have been in negotiations and have now reached an agreement to
resolve the matter.
The key details of the agreement are as follows:
1. The further payment of A$200,000 cash by ASOF under the Convertible Security
Agreement is no longer required.
2. The Company will make early repayment of A$230,000 of the ASOF Loan.
3. The residual ASOF Loan will be exchanged for the ASOF Security, which will have a face
value of A$700,000 (all other terms of the ASOF Security remain the same).
4. ASOF waives Metal Storm’s breaches of the Convertible Security Agreement and the
impact of those breaches on any related agreements with ASOF (including the Deed of
Debt Forgiveness under which ASOF has agreed to forgive approximately A$1.53 million
of the face value of Secured Notes it has agreed to purchase, subject to various
conditions being satisfied or waived).
5. The Company will pay ASOF’s reasonable legal expenses in relation to this matter.
Through its holding of shares and the ASOF Security, as well as its proposed acquisition of
Secured Notes with a face value of approximately A$13 million, ASOF continues to have a
vested interest in the Company’s future. Note holders and shareholders will have an
opportunity to vote on the proposed changes to the terms of the Company’s Secured Notes
and Interest Bearing Notes at their respective meetings scheduled on 12 January 2012.
Shareholder and note holder approval of the proposed changes are key conditions on the
acquisition of the Secured Notes by ASOF.
After implementation of the agreement with ASOF, Metal Storm will have approximately
$750,000 in cash reserves. The Company continues to actively seek to complete private
placements for the Rights Issue shortfall and is working to acquire a larger scale investment