Exhibit 10.3

 

AMMO, INC.

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR
ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE
UNDER THE SECURITIES ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW
OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS UNDER THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER
APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION
SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

 

Original Issue Date: [DATE]

Expiration Date: [DATE], 2025

 

FOR VALUE RECEIVED, AMMO, Inc., a company incorporated under the laws of
Delaware (the “Company”), hereby certifies that [NAME], or its registered
assigns (the “Holder”) is entitled to purchase from the Company a number of duly
authorized, validly issued, fully paid and nonassessable Warrant Shares subject
to the terms, conditions and adjustments set forth below in this Warrant.
Certain capitalized terms used herein are defined in Section 1 hereof.

 

This Warrant is one of a series of Warrants issued by the Company pursuant to
the Company’s private offering described in the Executive Summary of the Company
dated January 2, 2020 (as amended and supplemented from time to time and
including the annexes thereto, the “Executive Summary”) and the related
Subscription Agreements (each a “Subscription Agreement” and collectively, the
“Subscription Agreements”).

 

1. Definitions. As used in this Warrant, the following terms have the respective
meanings set forth below:

 

“Aggregate Exercise Price” means an amount equal to the product of (a) the
number of Warrant Shares in respect of which this Warrant is then being
exercised pursuant to Section 3 hereof, multiplied by (b) the Exercise Price in
effect as of the Exercise Date in accordance with the terms of this Warrant.

 

“Board” means the board of directors of the Company.

 

“Business Day” means any day, except a Saturday, Sunday or legal holiday, on
which banking institutions in the city of New York, New York are authorized or
obligated by law or executive order to close.

 

“Commission” means the U. S. Securities and Exchange Commission or any other
applicable federal agency at the time administering the Securities Act.

 

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“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.

 

“Conversion Price of the Note” shall mean the conversion price of the Notes as
defined therein.

 

“Convertible Securities” means any securities (directly or indirectly)
convertible into or exchangeable for Common Stock, but excluding Options.

 

“Excluded Issuances” means any issuance or sale (or deemed issuance or sale) by
the Company after the Original Issue Date of: (a) Common Stock issued upon the
exercise of this Warrant; (b) Common Stock (as such number of shares is
equitably adjusted for subsequent share splits, share combinations, share
dividends and recapitalizations) issued directly or upon the exercise of Options
to directors, officers, employees, or consultants of the Company in connection
with their service as directors of the Company, their employment by the Company
or their retention as consultants by the Company, in each case authorized by the
Board and issued pursuant to the approved ESOP (including all such Common Stock
and Options outstanding prior to the Original Issue Date); (c) Common Stock
issued to consultants pursuant to consulting agreements; (d) Common Stock issued
upon the conversion or exercise of Options (other than Options covered by clause
(b) above) or Convertible Securities issued prior to the Original Issue Date
(including the 8% Convertible Promissory Note offered as part of the same unit
as this Warrant), provided, that such securities are not amended after the date
hereof to increase the number of Common Stock issuable thereunder or to lower
the exercise or conversion price thereof; (e) Common Stock, Options or
Convertible Securities issued (i) to persons in connection with a joint venture,
strategic alliance or other commercial relationship with such person (including
persons that are customers, suppliers and strategic partners of the Company)
relating to the operation of the Company’s business and not for the primary
purpose of raising equity capital, (ii) in connection with a transaction in
which the Company, directly or indirectly, acquires another business or its
tangible or intangible assets, or (iii) to lenders as equity kickers in
connection with debt financings of the Company, in each case where such
transactions have been approved by the Board; (f) Common Stock in an offering
for cash for the account of the Company that is underwritten on a firm
commitment basis and is registered with the Securities and Exchange Commission
under the Securities Act of 1933, as amended; or (g) shares of Common Stock,
Options or Convertible Securities issued to the lessor or vendor in any office
lease or equipment lease or similar equipment financing transaction in which the
Company obtains the use of such office space or equipment for its business.

 

“Exercise Date” means, for any given exercise of this Warrant, the date on which
the conditions to such exercise as set forth in Section 3 shall have been
satisfied at or prior to 5:00 p.m., New York, New York time, on a Business Day,
including, without limitation, the receipt by the Company of the Exercise
Agreement, the Warrant and the Aggregate Exercise Price.

 

“Exercise Agreement” has the meaning set forth in Section 3(a)(i).

 

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“Exercise Period” has the meaning set forth in Section 2.

 

“Exercise Price” means: (a) if a Qualified Financing has occurred on or before
the Maturity Date, the per share or per unit purchase price of the Qualified
Financing or (b) if a Qualified Financing has not occurred on or before the
maturity date of the Notes, the VWAP in the ten consecutive trading days
immediately preceding the Maturity Date, all as subject to adjustment on the
terms contained herein.

 

“Fair Market Value” means, as of any particular date: (a) the volume weighted
average of the closing sales prices of the Common Stock for such day on all
domestic securities exchanges on which the Common Stock may at the time be
listed; (b) if there have been no sales of the Common Stock on any such exchange
on any such day, the average of the highest bid and lowest asked prices for the
Common Stock on all such exchanges at the end of such day; (c) if on any such
day the Common Stock is not listed on a domestic securities exchange, the
closing sales price of the Common Stock as quoted on the OTC Markets or similar
quotation system or association for such day; or (d) if there have been no sales
of the Common Stock on such a quotation system or association on such day, the
average of the highest bid and lowest asked prices for the Common Stock quoted
on the OTC Markets or similar quotation system or association for such day; in
each case, averaged over ten (10) consecutive Business Days ending on the
Business Day immediately prior to the day as of which “Fair Market Value” is
being determined. If at any time the Common Stock is not listed on any domestic
securities exchange or quoted on the OTC Markets or similar quotation system or
association, the “Fair Market Value” of the Common Stock shall be the fair
market value per share as determined jointly by the Board and a majority of the
holders that hold notes of the series of notes issued on the Original Issue Date
of like tenor as this Note; provided, that if the Board and the Holder are
unable to agree on the fair market value per share of the Common Stock within a
reasonable period of time (not to exceed thirty (30) days from the Company’s
receipt of the Exercise Agreement), such fair market value shall be determined
by a nationally recognized investment banking, accounting or valuation firm
engaged by the Company. The determination of such firm shall be final and
conclusive, and the fees and expenses of such valuation firm shall be borne
equally by the Company and the Holder.

 

“Holder” has the meaning set forth in the preamble.

 

“Maturity Date” means _____, 20201

 

“Nasdaq” means The Nasdaq Stock Market LLC.

 

“Notes” mean the 8% Convertible Promissory Notes of the Company that are being
offered and sold pursuant to the Executive Summary and related Subscription
Agreements.

 

“Options” means any warrants or other rights or options to subscribe for or
purchase Common Stock or Convertible Securities.

 

 

1 Insert the maturity date of the Notes

 

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“Original Issue Date” means __________.

 

“OTC Markets” means the OTC Markets Group Inc. electronic interdealer quotation
system, including the OTCQX, OTCQB and OTC Pink Marketplaces.

 

“Qualified Financing” means the closing of a firm commitment underwritten public
offering of Common Stock or Units consisting of Common Stock and warrants to
purchase Common Stock which results in gross proceeds of not less than $7.5
million and the Common Stock being traded on a national securities exchange.

 

“Person” means any individual, sole proprietorship, partnership, limited
liability company, corporation, joint venture, trust, incorporated organization
or government or department or agency thereof

 

“Rule 144” means Rule 144 promulgated by the Commission under the Securities
Act.

 

“Securities Act” means the Securities Act of 1933, as amended, or any similar
federal statute promulgated in replacement thereof, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.

 

“Warrant” means this Warrant and all warrants issued upon division or
combination of, or in substitution for, this Warrant.

 

“Warrant Shares” means the shares of Common Stock or other capital stock of the
Company then issuable or purchasable upon exercise of this Warrant in accordance
with the terms of this Warrant. Specifically, the number of Warrant Shares
issuable upon exercise of this Warrant shall equal to the quotient obtained by
dividing (i) $___________ [50% of the Principal Amount of Note purchased by the
Holder] by (ii) the Conversion Price of the Notes which Conversion Price shall
not be known until the Maturity Date. All of the foregoing is subject to
adjustment on the terms contained herein.

 

2. Term of Warrant. Subject to the terms and conditions hereof, at any time or
from time to time after the Original Issue Date and prior to 5:00 p.m., New
York, New York time, on [DATE], 2025 or, if such day is not a Business Day, on
the next preceding Business Day (the “Exercise Period”), the Holder of this
Warrant may exercise this Warrant for all or any part of the Warrant Shares
purchasable hereunder (subject to adjustment as provided herein).

 

3. Exercise of Warrant.

 

(a) Exercise Procedure. This Warrant may be exercised from time to time on any
Business Day during the Exercise Period, for all or any part of the unexercised
Warrant Shares, upon:

 

(i) surrender of this Warrant to the Company at its then principal executive
offices (or an indemnification undertaking with respect to this Warrant in the
case of its loss, theft or destruction), together with an Exercise Agreement in
the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly
completed (including specifying the number of Warrant Shares to be purchased)
and executed; and

 

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(ii) payment to the Company of the Aggregate Exercise Price in accordance with
Section 3(b).

 

(b) Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise
Price shall be made, at the option of the Holder as expressed in the Exercise
Agreement, by the following methods:

 

(i) by delivery to the Company of a certified or official bank check payable to
the order of the Company or by wire transfer of immediately available funds to
an account designated in writing by the Company, in the amount of such Aggregate
Exercise Price; or

 

(ii) only in the event that a Registration Statement covering the resale of the
Warrant Shares by Holder is not effective with the Commission as of a date that
is within six (6) months after the Original Issue Date, a Holder may instruct
the Company to issue Warrant Shares then issuable upon exercise of all or any
part of this Warrant on a net basis such that, without payment of any cash
consideration or other immediately available funds, the Holder shall surrender
this Warrant in exchange for the number of Warrant Shares as is computed using
the following formula:

 

Where:

 

X = the number of Warrant Shares to be issued to the Holder.

 

Y = the total number of Warrant Shares for which the Holder has elected to
exercise this Warrant pursuant to Section 3(a).

 

A = the Fair Market Value of one Warrant Share as of the applicable Exercise
Date.

 

B = the Exercise Price in effect under this Warrant as of the applicable
Exercise Date.

 

X = Y(A - B) ± A

 

(iii) by surrendering to the Company (x) Warrant Shares previously acquired by
the Holder with an aggregate Fair Market Value as of the Exercise Date equal to
such Aggregate Exercise Price and/or (y) other securities of the Company having
a value as of the Exercise Date equal to the Aggregate Exercise Price (which
value in the case of debt securities shall be the principal amount thereof plus
accrued and unpaid interest, in the case of preferred shares shall be the
liquidation value thereof plus accumulated and unpaid dividends and in the case
of shares of Common Stock shall be the Fair Market Value thereof); or

 

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(iv) any combination of the foregoing.

 

In the event of any withholding of Warrant Shares or surrender of other equity
securities pursuant to clause (ii), (iii) or (iv) above where the number of
shares whose value is equal to the Aggregate Exercise Price is not a whole
number, the number of shares withheld by or surrendered to the Company shall be
rounded up to the nearest whole share and the Company shall make a cash payment
to the Holder (by delivery of a certified or official bank check or by wire
transfer of immediately available funds) based on the incremental fraction of a
share being so withheld by or surrendered to the Company in an amount equal to
the product of (x) such incremental fraction of a share being so withheld or
surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value
per Warrant Share as of the Exercise Date, and, in all other cases, the value
thereof as of the Exercise Date determined in accordance with clause (iii)(y)
above.

 

(c) Delivery of Share Certificates. Upon receipt by the Company of the Exercise
Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price
(in accordance with Section 3 hereof), the Company shall, as promptly as
practicable, and in any event within ten (10) Business Days thereafter, execute
(or cause to be executed) and deliver (or cause to be delivered) to the Holder a
certificate or certificates representing the Warrant Shares issuable upon such
exercise. The share certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the exercising Holder
shall reasonably request in the Exercise Agreement and shall be registered in
the name of the Holder or, subject to compliance with Section 5 below, such
other Person’s name as shall be designated in the Exercise Agreement. This
Warrant shall be deemed to have been exercised and such certificate or
certificates of Warrant Shares shall be deemed to have been issued, and the
Holder or any other Person so designated to be named therein shall be deemed to
have become a holder of record of such Warrant Shares for all purposes, as of
the Exercise Date.

 

(d) Fractional Shares. The Company shall not be required to issue a fractional
Warrant Share upon exercise of any Warrant. As to any fraction of a share which
the Holder would otherwise be entitled to purchase upon such exercise, the
Company shall round up to the next whole share.

 

(e) Delivery of New Warrant. Unless the purchase rights represented by this
Warrant shall have expired or shall have been fully exercised, the Company
shall, at the time of delivery of the certificate or certificates representing
the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver
to the Holder a new Warrant evidencing the rights of the Holder to purchase the
unexpired and unexercised Warrant Shares called for by this Warrant. Such new
Warrant shall in all other respects be identical to this Warrant.

 

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect
to the exercise of this Warrant, the Company hereby represents, covenants and
agrees:

 

(i) This Warrant is, and any Warrant issued in substitution for or replacement
of this Warrant shall be, upon issuance, duly authorized and validly issued.

 

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(ii) All Warrant Shares issuable upon the exercise of this Warrant pursuant to
the terms hereof shall be, upon issuance, and the Company shall take all such
actions as may be necessary or appropriate in order that such Warrant Shares
are, validly issued, fully paid and non-assessable, issued without violation of
any preemptive or similar rights of any shareholder of the Company and free and
clear of all taxes, liens and charges.

 

(iii) The Company shall take all such actions as may be necessary to ensure that
all such Warrant Shares are issued without violation by the Company of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which Common Stock or other securities constituting
Warrant Shares may be listed at the time of such exercise (except for official
notice of issuance which shall be immediately delivered by the Company upon each
such issuance).

 

(iv) The Company shall use its best efforts to cause the Warrant Shares,
immediately upon such exercise, to be listed on any domestic securities exchange
upon which Common Stock or other securities constituting Warrant Shares are
listed at the time of such exercise.

 

(v) The Company shall pay all expenses in connection with, and all taxes and
other governmental charges that may be imposed with respect to, the issuance or
delivery of Warrant Shares upon exercise of this Warrant; provided, that the
Company shall not be required to pay any tax or governmental charge that may be
imposed with respect to any applicable withholding or the issuance or delivery
of the Warrant Shares to any Person other than the Holder, and no such issuance
or delivery shall be made unless and until the Person requesting such issuance
has paid to the Company the amount of any such tax, or has established to the
satisfaction of the Company that such tax has been paid.

 

(g) Conditional Exercise. Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in connection with a
public offering or a sale of the Company (pursuant to a merger, sale of shares,
or otherwise), such exercise may at the election of the Holder be conditioned
upon the consummation of such transaction, in which case such exercise shall not
be deemed to be effective until immediately prior to the consummation of such
transaction.

 

(h) Reservation of Shares. During the Exercise Period, the Company shall at all
times reserve and keep available out of its authorized but unissued Common Stock
or other securities constituting Warrant Shares, solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant.

 

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4. Adjustment to Exercise Price and Number of Warrant Shares.

 

(a) Price Protection. Except as provided in (x) Section 4(c) and (y) in the case
of an event described in either Section 4(d) or Section 4(e), if the Company
shall, at any time during a portion of the Exercise Period in which any or all
Warrant Shares may not be resold without restriction pursuant to Rule 144, issue
or sell, or in accordance with Section 4(d) is deemed to have issued or sold,
any Common Stock without consideration or for consideration per share less than
the Exercise Price in effect immediately prior to such issuance or sale (or
deemed issuance or sale), then immediately upon such issuance or sale (or deemed
issuance or sale), the Exercise Price in effect immediately prior to such
issuance or sale (or deemed issuance or sale) shall be reduced (and in no event
increased) to an Exercise Price equal to the lowest price per share at which any
such share of Common Stock has been issued or sold (or is deemed to have been
issued or sold); provided, that if such issuance or sale (or deemed issuance or
sale) was without consideration, then the Company shall be deemed to have
received an aggregate of $0.001 of consideration for all such shares so issued
or deemed to be issued.

 

(b) Reserved.

 

(c) Exceptions To Adjustment Upon Issuance of Common Stock. Anything herein to
the contrary notwithstanding, there shall be no adjustment to the Exercise Price
with respect to any Excluded Issuance.

 

(d) Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision
or Combination of Common Stock. If the Company shall, at any time or from time
to time after the Original Issue Date, (i) pay a dividend or make any other
distribution upon the Common Stock or any other capital stock of the Company
payable in Common Stock or in Options or Convertible Securities, or (ii)
subdivide (by any stock split, recapitalization or otherwise) its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to any such dividend, distribution or subdivision shall
be proportionately reduced and the number of Common Stock issuable upon exercise
of this Warrant shall be proportionately increased. If the Company at any time
combines (by combination, reverse stock split or otherwise) its outstanding
Common Stock into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased and the
number of Warrant Shares issuable upon exercise of this Warrant shall be
proportionately decreased. Any adjustment under this Section 4(a) shall become
effective at the close of business on the date the dividend, subdivision or
combination becomes effective.

 

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(e) Adjustment to Exercise Price and Warrant Shares Upon Reorganization,
Reclassification, Consolidation or Merger. In the event of any (i) capital
reorganization of the Company, (ii) reclassification of the shares of the
Company (other than a change in par value or from par value to no par value or
from no par value to par value or as a result of a share dividend or
subdivision, split-up or combination of shares), (iii) consolidation or merger
of the Company with or into another Person, (iv) sale of all or substantially
all of the Company’s assets to another Person, or (v) other similar transaction
(other than any such transaction covered by Section 4(a)), in each case which
entitles the holders of Common Stock to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock, each Warrant shall, immediately after such
reorganization, reclassification, consolidation, merger, sale or similar
transaction, remain outstanding and shall thereafter, in lieu of or in addition
to (as the case may be) the number of Warrant Shares then exercisable under this
Warrant, be exercisable for the kind and number of shares or other securities or
assets of the Company or of the successor Person resulting from such transaction
to which the Holder would have been entitled upon such reorganization,
reclassification, consolidation, merger, sale or similar transaction if the
Holder had exercised this Warrant in full immediately prior to the time of such
reorganization, reclassification, consolidation, merger, sale or similar
transaction and acquired the applicable number of Warrant Shares then issuable
hereunder as a result of such exercise (without taking into account any
limitations or restrictions on the exercisability of this Warrant); and, in such
case, appropriate adjustment (in form and substance satisfactory to the Holder)
shall be made with respect to the Holder’s rights under this Warrant to insure
that the provisions of this Section 4 hereof shall thereafter be applicable, as
nearly as possible, to this Warrant in relation to any shares, securities or
assets thereafter acquirable upon exercise of this Warrant (including, in the
case of any consolidation, merger, sale or similar transaction in which the
successor or purchasing Person is other than the Company, an immediate
adjustment in the Exercise Price to the value per share for the Common Stock
reflected by the terms of such consolidation, merger, sale or similar
transaction, and a corresponding immediate adjustment to the number of Warrant
Shares acquirable upon exercise of this Warrant without regard to any
limitations or restrictions on exercise, if the value so reflected is less than
the Exercise Price in effect immediately prior to such consolidation, merger,
sale or similar transaction). The provisions of this Section 4(e) shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales or similar transactions. The Company shall not
effect any such reorganization, reclassification, consolidation, merger, sale or
similar transaction unless, prior to the consummation thereof, the successor
Person (if other than the Company) resulting from such reorganization,
reclassification, consolidation, merger, sale or similar transaction, shall
assume, by written instrument substantially similar in form and substance to
this Warrant and satisfactory to the Holder, the obligation to deliver to the
Holder such shares, securities or assets which, in accordance with the foregoing
provisions, such Holder shall be entitled to receive upon exercise of this
Warrant.

 

(f) Certificate as to Adjustment.

 

(i) As promptly as reasonably practicable following any adjustment of the
Exercise Price, but in any event not later than ten (10) Business Days
thereafter, the Company shall furnish to the Holder a certificate of an
executive officer setting forth in reasonable detail such adjustment and the
facts upon which it is based and certifying the calculation thereof

 

(ii) As promptly as reasonably practicable following the receipt by the Company
of a written request by the Holder, but in any event not later than ten (10)
Business Days thereafter, the Company shall furnish to the Holder a certificate
of an executive officer certifying the Exercise Price then in effect and the
number of Warrant Shares or the amount, if any, of other shares, securities or
assets then issuable upon exercise of the Warrant.

 

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(g) Notices. In the event:

 

(i) that the Company shall take a record of the holders of its Common Stock (or
other capital stock or securities at the time issuable upon exercise of the
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, to vote at a meeting (or by written consent), to receive
any right to subscribe for or purchase any shares of capital stock of any class
or any other securities, or to receive any other security; or

 

(ii) of any capital reorganization of the Company, any reclassification of the
Common Stock of the Company, any consolidation or merger of the Company with or
into another Person, or sale of all or substantially all of the Company’s assets
to another Person; or

 

(iii) of the voluntary or involuntary dissolution, liquidation or winding- up of
the Company;

 

then, and in each such case, the Company shall send or cause to be sent to the
Holder at least ten (10) days prior to the applicable record date or the
applicable expected effective date, as the case may be, for the event, a written
notice specifying, as the case may be, (A) the record date for such dividend,
distribution, meeting or consent or other right or action, and a description of
such dividend, distribution or other right or action to be taken at such meeting
or by written consent, or (B) the effective date on which such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up is proposed to take place, and the date, if any is to be fixed, as of
which the books of the Company shall close or a record shall be taken with
respect to which the holders of record of Common Stock (or such other capital
stock or securities at the time issuable upon exercise of the Warrant) shall be
entitled to exchange their Common Stock (or such other capital stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, and the amount per share and character of such
exchange applicable to the Warrant and the Warrant Shares.

 

5. Transfer of Warrant. Subject to the transfer conditions referred to in the
legend endorsed hereon and the terms and conditions of the Shareholders
Agreement, this Warrant and all rights hereunder are transferable, in whole or
in part, by the Holder without charge to the Holder, upon surrender of this
Warrant to the Company at its then principal executive offices with a properly
completed and duly executed Assignment in the form attached hereto as Exhibit B,
together with funds sufficient to pay any transfer taxes described in Section
3(f)(v) in connection with the making of such transfer. Upon such compliance,
surrender and delivery and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant, if
any, not so assigned and this Warrant shall promptly be cancelled.

 

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6. Holder Not Deemed a Shareholder; Limitations on Liability. Except as
otherwise specifically provided herein, prior to the issuance to the Holder of
the Warrant Shares to which the Holder is then entitled to receive upon the due
exercise of this Warrant, the Holder shall not be entitled to vote or receive
dividends or be deemed the holder of shares of capital stock of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer
upon the Holder, as such, any of the rights of a shareholder of the Company or
any right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of shares, reclassification of shares, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise. In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a shareholders
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.

 

7. Replacement on Loss; Division and Combination.

 

(a) Replacement of Warrant on Loss. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it
being understood that a written indemnification agreement or affidavit of loss
of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon
surrender of such Warrant for cancellation to the Company, the Company at its
own expense shall execute and deliver to the Holder, in lieu hereof, a new
Warrant of like tenor and exercisable for an equivalent number of Warrant Shares
as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the
case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.

 

(b) Division and Combination of Warrant. Subject to compliance with the
applicable provisions of this Warrant and the Shareholders Agreement as to any
transfer or other assignment which may be involved in such division or
combination, this Warrant may be divided or, following any such division of this
Warrant, subsequently combined with other Warrants, upon the surrender of this
Warrant or Warrants to the Company at its then principal executive offices,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the respective Holders or their agents
or attorneys. Subject to compliance with the applicable provisions of this
Warrant and the Shareholders Agreement as to any transfer or assignment which
may be involved in such division or combination, the Company shall at its own
expense execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants so surrendered in accordance with such notice. Such new
Warrant or Warrants shall be of like tenor to the surrendered Warrant or
Warrants and shall be exercisable in the aggregate for an equivalent number of
Warrant Shares as the Warrant or Warrants so surrendered in accordance with such
notice.

 

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8. Compliance with the Securities Act.

 

(a) Agreement to Comply with the Securities Act; Legend. The Holder, by
acceptance of this Warrant, agrees to comply in all respects with the provisions
of this Section 8 and the restrictive legend requirements set forth on the face
of this Warrant and further agrees that such Holder shall not offer, sell or
otherwise dispose of this Warrant or any Warrant Shares to be issued upon
exercise hereof except under circumstances that will not result in a violation
of the Securities Act of 1933, as amended (the “Securities Act”). This Warrant
and all Warrant Shares issued upon exercise of this Warrant (unless registered
under the Securities Act) shall be stamped or imprinted with a legend in
substantially the following form:

 

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS
(I) A REGISTRATION STATEMENT COVERING SUCH SECURITIES IS EFFECTIVE UNDER THE ACT
AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE
ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW
AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO
SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.”

 

(b) Representations of the Holder. In connection with the issuance of this
Warrant, the Holder specifically represents, as of the date hereof, to the
Company by acceptance of this Warrant as follows:

 

(i) The Holder is an “accredited investor” as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act. The Holder is acquiring this
Warrant and the Warrant Shares to be issued upon exercise hereof for investment
for its own account and not with a view towards, or for resale in connection
with, the public sale or distribution of this Warrant or the Warrant Shares,
except pursuant to sales registered or exempted under the Securities Act.

 

(ii) The Holder understands and acknowledges that this Warrant and the Warrant
Shares to be issued upon exercise hereof are “restricted securities” under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that, under such laws and
applicable regulations, such securities may be resold without registration under
the Securities Act only in certain limited circumstances. In addition, the
Holder represents that it is familiar with Rule 144 under the Securities Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.

 

(iii) The Holder acknowledges that it can bear the economic and financial risk
of its investment for an indefinite period, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Warrant and the Warrant Shares. The
Holder has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Warrant and
the business, properties, prospects and financial condition of the Company.

 

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9. Warrant Register. The Company shall keep and properly maintain at its
principal executive offices books for the registration of the Warrant and any
transfers thereof. The Company may deem and treat the Person in whose name the
Warrant is registered on such register as the Holder thereof for all purposes,
and the Company shall not be affected by any notice to the contrary, except any
assignment, division, combination or other transfer of the Warrant effected in
accordance with the provisions of this Warrant.

 

10. Notices. All notices, requests, consents, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
given: (a) when delivered by hand (with written confirmation of receipt); (b)
when received by the addressee if sent by a nationally recognized overnight
courier (receipt requested); (c) on the date sent by facsimile or e-mail of a
PDF document (with confirmation of transmission) if sent during normal business
hours of the recipient, and on the next Business Day if sent after normal
business hours of the recipient; or (d) on the third day after the date mailed,
by certified or registered mail, return receipt requested, postage prepaid. Such
communications must be sent to the respective parties at the addresses indicated
below (or at such other address for a party as shall be specified in a notice
given in accordance with this Section 10).

 

If to the Company: AMMO, Inc.

7681 E Gray Road

Scottsdale, AZ 85260

E-mail: _______

Attention: ______

 

with a copy to: Lucosky Brookman LLP

101 Wood Avenue South, 5th Floor

Woodbridge, NJ 08830

Facsimile:

E-mail:

Attention: Joseph M. Lucosky, Esq.

 

If to the Holder: At Address set forth in Subscription Agreement

 

11. Cumulative Remedies. Except to the extent expressly provided in Section 6 to
the contrary, the rights and remedies provided in this Warrant are cumulative
and are not exclusive of, and are in addition to and not in substitution for,
any other rights or remedies available at law, in equity or otherwise.

 

12. Equitable Relief. Each of the Company and the Holder acknowledges that a
breach or threatened breach by such party of any of its obligations under this
Warrant would give rise to irreparable harm to the other party hereto for which
monetary damages would not be an adequate remedy and hereby agrees that in the
event of a breach or a threatened breach by such party of any such obligations,
the other party hereto shall, in addition to any and all other rights and
remedies that may be available to it in respect of such breach, be entitled to
equitable relief, including a restraining order, an injunction, specific
performance and any other relief that may be available from a court of competent
jurisdiction.

 

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13. Entire Agreement. This Warrant, together with the Subscription Agreement,
constitutes the sole and entire agreement of the parties to this Warrant with
respect to the subject matter contained herein, and supersedes all prior and
contemporaneous understandings and agreements, both written and oral, with
respect to such subject matter. In the event of any inconsistency between the
statements in the body of this Warrant and the Subscription Agreement, the
statements in the body of this Warrant shall control.

 

14. Successor and Assigns. This Warrant and the rights evidenced hereby shall be
binding upon and shall inure to the benefit of the parties hereto and the
successors of the Company and the successors and permitted assigns of the
Holder. Such successors and/or permitted assigns of the Holder shall be deemed
to be a Holder for all purposes hereunder.

 

15. No Third-Party Beneficiaries. This Warrant is for the sole benefit of the
Company and the Holder and their respective successors and, in the case of the
Holder, permitted assigns and nothing herein, express or implied, is intended to
or shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever, under or by reason of this Warrant.

 

16. Headings. The headings in this Warrant are for reference only and shall not
affect the interpretation of this Warrant.

 

17. Amendment and Modification; Waiver. Except as otherwise provided herein,
this Warrant may only be amended, modified or supplemented by an agreement in
writing signed by each party hereto. No waiver by the Company or the Holder of
any of the provisions hereof shall be effective unless explicitly set forth in
writing and signed by the party so waiving. No waiver by any party shall operate
or be construed as a waiver in respect of any failure, breach or default not
expressly identified by such written waiver, whether of a similar or different
character, and whether occurring before or after that waiver. No failure to
exercise, or delay in exercising, any rights, remedy, power or privilege arising
from this Warrant shall operate or be construed as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.

 

18. Severability. If any term or provision of this Warrant is invalid, illegal
or unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other term or provision of this Warrant or
invalidate or render unenforceable such term or provision in any other
jurisdiction.

 

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19. Governing Law. This Warrant shall be governed by and construed in accordance
with the internal laws of the State of New York without giving effect to any
choice or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of laws of any
jurisdiction other than those of the State of New York.

 

20. Submission to Jurisdiction. Any legal suit, action or proceeding arising out
of or based upon this Warrant or the transactions contemplated hereby may be
instituted in the federal courts of the United States of America or the courts
of the State of New York, and each party irrevocably submits to the exclusive
jurisdiction of such courts in any such suit, action or proceeding. Service of
process, summons, notice or other document by certified or registered mail to
such party’s address set forth herein shall be effective service of process for
any suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or any proceeding in such courts and irrevocably waive and
agree not to plead or claim in any such court that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.

 

21. Waiver of Jury Trial. Each party acknowledges and agrees that any
controversy which may arise under this Warrant is likely to involve complicated
and difficult issues and, therefore, each such party irrevocably and
unconditionally waives any right it may have to a trial by jury in respect of
any legal action arising out of or relating to this Warrant or the transactions
contemplated hereby.

 

22. Counterparts. This Warrant may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall be deemed to be one
and the same agreement. A signed copy of this Warrant delivered by facsimile,
e-mail or other means of electronic transmission shall be deemed to have the
same legal effect as delivery of an original signed copy of this Warrant.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original
Issue Date.

 

  AMMO, INC.         By:          Name:     Title:  

 

[Signature Page to AMMO, Inc. Warrant to Purchase Common Stock]

 

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EXHIBIT A

 

EXERCISE AGREEMENT

 

AMMO, Inc.
7681 E Gray Road

Scottsdale, AZ 85260

Attention: ______

 

1. Exercise Notice. The undersigned holder hereby exercises the right to
purchase __________________ of the shares of Common Stock (“Warrant Shares”) of
AMMO, Inc., a corporation organized under the laws of Delaware (the “Company”),
evidenced by the attached Warrant. Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.

 

2. Form of Exercise Price. The Holder intends that payment of the Exercise Price
shall be made as:

 

[  ] a “Cash Exercise” with respect to __________________ Warrant Shares; and/or

 

[  ] a “Cashless Exercise” with respect to __________________ Warrant Shares.

 

3. Payment of Exercise Price. In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$____________ to the Company in accordance with the terms of the Warrant, which
sum represents payment in full for the purchase price of the Warrant Shares
being purchased, together with all applicable transfer taxes, if any.

 

4. Please issue a certificate or certificates representing said Warrant Shares
in the name of the undersigned or in such other name as is specified below:

 

      (Name)                   (Address)

 

5. Representations and Warranties. The undersigned hereby represents and
warrants that the aforesaid Warrant Shares are being acquired for the account of
the undersigned for investment and not with a view to, or for resale, in
connection with the distribution thereof, and that the undersigned has no
present intention of distributing or reselling such shares and all
representations and warranties of the undersigned set forth in Section 8 of the
attached Warrant are true and correct as of the date hereof.

 

          (Signature)                 (Name)             (Date)    (Title)

 

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EXHIBIT B

 

FORM OF ASSIGNMENT

 

(To be signed only upon transfer of Warrant)

 

AMMO, Inc.
7681 E Gray Road

Scottsdale, AZ 85260

Attention: ______

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
__________________ the right represented by the attached Warrant to purchase
__________________ Common Stock of AMMO, Inc. to which the attached Warrant
relates, and appoints ___________________ Attorney to transfer such right on the
books of AMMO, Inc., with full power of substitution in the premises.

 

Dated: ___________________

 

      (Signature must conform in all respects to name of Holder as specified on
the face of the Warrant)         Address:                          

 

Signed in the presence of:

 _______________________________

 

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