EXHIBIT 4.7
ADDENDUM TO CONVERTIBLE DEBENTURE AND
WARRANT TO PURCHASE COMMON STOCK
This Addendum to Convertible Debenture and Warrant to Purchase Common Stock
("Addendum") is entered into as of the 10 day of December 2004 by and between
American Ammunition, Inc., a California corporation ("AAMI"), and La Jolla Cove
Investors, Inc., a California corporation ("LJCI").
WHEREAS, LJCI and AAMI are parties to that certain 8% Convertible Debenture
dated as of October 4, 2002 ("Debenture"); and
WHEREAS, LJCI and AAMI are parties to that certain Warrant to Purchase Common
Stock dated as of October 4, 2002 ("Warrant"); and
WHEREAS, the parties desire to amend the Debenture and Warrant in certain
respects.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, AAMI and LJCI agree as follows:
1. All terms used herein and not otherwise defined herein shall have the
definitions set forth in the Debenture.
2. Within 5 business days of the date hereof, AAMI shall deposit 1,500,000
registered shares of AAMI Common Stock with Donald F. Mintmire ("Escrow
Agent"). Upon receipt of confirmation from the Escrow Agent that the shares
have been delivered to the Escrow Agent, LJCI shall immediately: (a) submit
a $10,000 Debenture conversion to AAMI, and (b) wire AAMI $100,000 as a
prepayment towards the exercise of Warrant Shares under the Warrant. The
Conversion and Exercise Price for such shares shall be 76% of the net sales
proceeds from LJCI's sale of the shares. Once all of the shares have been
sold by LJCI, LJCI shall pay AAMI 76% of the net sales proceeds from the
sale of the shares less $100,000.
3. Within 5 business days of the date hereof, AAMI shall retain the law firm
of Sichenzia Ross Friedman Ference LLP and shall immediately begin the work
necessary to prepare and file a registration statement with the Securities
and Exchange Commission ("SEC") to register a sufficient number of AAMI
Common Shares for the benefit of LJCI. Upon receipt of confirmation that:
(a) the registration statement containing Common Shares for LJCI has been
declared effective by the SEC, and (b) sufficient registered shares of AAMI
Common Stock have been delivered to the Escrow Agent, LJCI shall
immediately: (i) submit a $10,000 Debenture conversion to AAMI, and shall
submit three additional $10,000 Debenture conversions to AAMI every ten
business days thereafter, and (ii) wire $400,000 to AAMI as a prepayment
towards the exercise of Warrant Shares under the Warrant. The Conversion
Price for such shares shall be the lesser of $1.00 or 76% of the average of
the Volume Weighted Average Prices for the 5 Trading Days immediately prior
to the conversion notice. The number of shares of AAMI
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Common Stock to be delivered to the Escrow Agent under this section shall
be equal to $440,000 divided by 76% of the Volume Weighted Average Price of
AAMI Common Stock on the day the registration statement is declared
effective by the SEC, multiplied by 150%.
4. Immediately upon AAMI depositing the required AAMI Common Stock with the
Escrow Agent under section 2 above and retaining the law firm of Sichenzia
Ross Friedman Ference LLP to begin work on the registration statement as
set forth in section 3 above, LJCI shall dismiss, without prejudice, the
lawsuit entitled "La Jolla Cove Investors, Inc. vs. American Ammunition,
Inc." filed in San Diego Superior Court as case number GIC836693.
5. A. Immediately after LJCI has sold all of the AAMI Common Stock received
from the Debenture conversions and Warrant exercise prepayment set forth in
section 3 above, and on the first business day of each of the following
months (after LJCI has sold all of the AAMI Common Stock received for the
previous months conversion) until the Debenture is paid off, AAMI shall
deposit with the Escrow Agent an amount of AAMI Common Stock equal to
$275,000 divided by 76% of the Volume Weighted Average Price ("VWAP") of
AAMI Common Stock for the prior Trading Day, multiplied by 150%. Upon
receipt of confirmation from the Escrow Agent that the shares have been
delivered to the Escrow Agent, LJCI shall immediately wire AAMI $250,000 as
a prepayment towards the exercise of Warrant Shares under the Warrant for
the month.
B. On the first business day of each of the first four weeks of the month,
LJCI shall submit a $6,250 Debenture conversion and the Escrow Agent shall
immediately deliver to LJCI an amount of AAMI Common Stock equal to $68,750
divided by 76% of the average of the AAMI Common Stock VWAPs for the 5
prior Trading Days.
C. Any excess AAMI Common Stock remaining with the Escrow Agent at the end
of the month shall be held by the Escrow Agent and credited towards the
number of shares that AAMI is to deliver for the following month. If, at
any time, there is a shortage of AAMI Common Stock with the Escrow Agent to
maintain the appropriate margin, AAMI shall immediately deliver the
appropriate number of shares of AAMI Common Stock to the Escrow Agent. Any
remaining shares at maturity will be returned to AAMI.
D. The provisions of this section 4 shall be deemed to satisfy the
requirement for minimum Debenture conversions and Warrant exercises by LJCI
contained in the letter agreement between the parties dated October 4,
2002. The mechanism set forth in this section 4 shall continue until the
Debenture principal balance has been reduced to zero.
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5. Within five business days of the date hereof, AAMI shall deliver 47,290
registered shares of AAMI Common Stock to LJCI, which represents the
shortfall in the delivery of shares by AAMI for prior Debenture conversions
and Warrant exercises submitted by LJCI.
6. LJCI hereby waives all unpaid interest that has accrued on the Debenture to
the date hereof and all penalties that accrue for the Registration
Statement not being effective to the date that the next Registration
Statement is declared effective, provided that the terms of this Addendum
are complied with.
7. LJCI shall account for no more than 15% of the daily volume of AAMI's
Common Stock in its sale of AAMI Common Stock, unless it receives written
approval from AAMI to sell more.
8. The Maturity Date of the Debenture and the Expiration Date of the Warrant
is hereby extended to June 31, 2006.
9. Except as specifically amended herein, all other terms and conditions of
the Debenture and Warrant shall remain in full force and effect.
IN WINESS WHEREOF, AAMI and LJCI have caused this Addendum to be signed by its
duly authorized officers on the date first set forth above.
American Ammunition, Inc. La Jolla Cove Investors, Inc.
By: /s/ Andres F. Fernandez By: /s/ Travis W. Huff
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Name:Andres F. Fernandez Name: Travis W. Huff
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Title: President Title: Vice President
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I agree to act as escrow agent hereunder, in accordance with the terms hereof.
/z/Donald F. Mintmire
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Donald F. Mintmire
Dated: December 10 2004
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