Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. Between May 2013 and September 2013 Henan Armco & Metawise Trading Co. Ltd. , a subsidiary of Armco Metals Holdings, Inc. , borrowed an aggregate of RMB 19,700,000 (approximately $3.26 million ) from four lenders who are not our affiliates, three of whom were non-U.S. persons and the fourth was an accredited investor, under the terms of loan contracts. These loans matured between May 2013 and December 2013 . Our subsidiary used the funds for working capital. On January 13, 2013 we and our subsidiary entered into Note Exchange Agreements with each of these lenders pursuant to which we exchanged the loan contracts for 8% convertible notes in the aggregate amount of RMB 15,100,000 (approximately $2.5 million ) which represented the remaining principal balance due under the loan contracts. The lenders waived any accrued but unpaid interest due prior to this exchange. The convertible notes, which bear interest at the rate of 8% per annum, mature nine months from the date of issuance and, providing the stockholder approval described below has been received, are convertible at any time at the option of the holder into shares of our common stock at a conversion price of $0.317 per share. Interest is payable at maturity or conversion, and we have the right to prepay the notes at any time without penalty to us. Our common stock is listed on the NYSE MKT and, under the rules of the exchange, we are required to obtain the prior consent of our stockholders to the issuance of the shares of our common stock upon the conversion of the notes. Under the terms of the Note Exchange Agreement and convertible notes, we agreed to use our best efforts to hold a special meeting of our stockholders as soon as practicable for the purpose of obtaining the consent of the holders of a majority of our issued and outstanding common stock to the conversion terms and conditions of the convertible notes. Until such time, if ever, that we receive this stockholder consent, the convertible notes are not convertible into our equity. If we should fail to receive the required stockholder consent prior to the maturity date of the notes, those notes will be due and payable in cash in accordance to their terms without penalty to us. The terms and conditions of the Note Exchange Agreement and 8% convertible notes are identical, other than the principal amount of the notes. The foregoing description of the terms and conditions of the Note Exchange Agreement and 8% convertible notes are qualified in their entirety by reference to forms of these documents which are filed as Exhibits 10.34 and 4.6, respectively, to this report. Item 9.01 Financial Statements and Exhibits. (d) Exhibits. 4.6 Form of 8% convertible note 10.34 Form of Note Exchange Agreement 2 --------------------------------------------------------------------------------
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