Document:

Exhibit 4.3

 

 

PURCHASE WARRANT

Issued to:

Paulson Investment Company, LLC

Exercisable to Purchase

 

147,267 Shares of Common Stock

 

of

Ammo, Inc.

  

Warrant No. C-19

Void after April 20, 2025

THE WARRANT REPRESENTED BY THIS WARRANT CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND THE SECURITIES LAWS OF OTHER JURISDICTIONS, AND, IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.

This is to certify that, for value received and subject to the terms and conditions set forth below, the Warrantholder is entitled to purchase, and the Company promises and agrees to sell and issue to the Warrantholder, at any time on or after the Initial Exercise Date and on or before the Expiration Date, up to 147,267 shares of Common Stock at the per share Exercise Price.

This Warrant Certificate is issued by the Company pursuant to Section 2(b) of the Placement Agent Agreement, subject to the following terms and conditions:

1. Definitions of Certain Terms. Except as may be otherwise clearly required by the context, the following terms have the following meanings:

(a) "Cashless Exercise" means an exercise of a Warrant in which, in lieu of payment of the Exercise Price in cash, the Warrantholder elects to receive a lesser number of Securities in payment of the Exercise Price, as determined in accordance with Section 2(b).

(b) "Closing Date" means April 20, 2018, the date on which the closing under the Offering occurred.

(c) "Commission" means the Securities and Exchange Commission.

(d) "Common Stock" means the common stock, $0.001 par value, of the Company.

(e) "Company" means Ammo, Inc..

(f) "Exercise Price" means the price at which the Warrantholder may purchase one share of Common Stock or other Securities upon exercise of a Warrant as determined from time to time pursuant to the provisions hereof, multiplied by the number of Securities as to which the Warrant is being exercised.  The Exercise Price is $1.65 per share of Common Stock.

(g) "Expiration Date" has the meaning set forth in Section 2(a).

(h) "Initial Exercise Date" has the meaning set forth in Section 2(a).

(i) "Offering Materials" means the transaction documents and related investment materials described in the Placement Agent Agreement.

(j) "Offering" means the offering of securities made pursuant to the Offering Materials and the Placement Agent Agreement.

(k) "Placement Agent Agreement" means that certain Placement Agent Agreement, dated as of October 27, 2017, as amended and renewed on March 21, 2018, between the Company and Paulson Investment Company, LLC.

(l) "Rules and Regulations" means the rules and regulations of the Commission adopted under the Securities Act.

 

 

(m) "Securities" means the securities obtained or obtainable upon exercise of the Warrant or securities obtained or obtainable upon exercise, exchange, or conversion of such securities.

(n) "Securities Act" means the Securities Act of 1933, as amended.

(o) "Warrant" means the warrant evidenced by this certificate, any similar certificate issued in connection with the Offering, or any certificate obtained upon transfer or partial exercise of the Warrant evidenced by any such certificate.

(p) "Warrant Certificate" means a certificate evidencing the Warrant.

(q) "Warrantholder" means a record holder of the Warrant or Securities.

2. Exercise of Warrant.

(a) All or any part of the Warrant represented by this Warrant Certificate may be exercised commencing on the Closing Date (the "Initial Exercise Date") and ending at 5:00 p.m. Pacific Time on the seven-year anniversary of the Closing Date (the "Expiration Date") by surrendering this Warrant Certificate, together with the Exercise Price and appropriate instructions, duly executed by the Warrantholder or by its duly authorized attorney, at the office of the Company, 6401 E Thomas Road, Suite 106, Scottsdale, AZ 85251; or at such other office or agency as the Company may designate. The date on which such instructions are received by the Company shall be the date of exercise. If the Warrantholder has elected a Cashless Exercise, such instructions shall so state.

(b) If at any time the Warrantholder elects a Cashless Exercise, the Warrantholder may surrender in payment of the Exercise Price, shares of Common Stock equal in value to the Exercise Price by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Warrantholder a number of shares of Common Stock computed using the following formula:

	
X=   

	
Y(A-B)

	
 

	
 

	
A

	
 

	
 

	
 

	
 

 

		Where: 	X = 	The number of shares of Common Stock to be issued to the Warrantholder pursuant to this Cashless Exercise

		Y =	
The number of shares of Common Stock in respect of which the Cashless Exercise election is made

		A =	
The fair market value of one share of Common Stock at the time the Cashless Exercise election is made

		B =	
The Exercise Price (as adjusted to the date of the Cashless Exercise)

For purposes of this Section 2(b), the fair market value of one share of Common Stock as of a particular date shall be determined as follows:  (i) if traded on a securities exchange, the value shall be deemed to be the closing price of the Common Stock on such exchange on the day prior to the Cashless Exercise; (ii) if traded over-the-counter, the value shall be deemed to be the mean of the closing bid and ask price of the Common Stock on the day prior to the Cashless Exercise; and (iii) if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by PIC and the Board of Directors of the Company.

 

 

(c) Subject to the provisions below, upon receipt of notice of exercise, the Company shall promptly prepare or cause the preparation of certificates for the Securities to be received by the Warrantholder upon completion of the Warrant exercise. After such certificates are prepared, the Company shall notify the Warrantholder and, upon payment in full by the Warrantholder, in lawful money of the United States, of the Exercise Price payable with respect to the Securities being purchased, or, in the case of a Cashless Exercise, upon deemed surrender of Securities equal in value to the Exercise Price, deliver such certificates to the Warrantholder, or as per the Warrantholder's instructions, promptly after such funds are available, if applicable, and otherwise promptly thereafter.  The Securities to be obtained on exercise of the Warrant will be deemed to have been issued, and any person exercising the Warrant will be deemed to have become a holder of record of those Securities, as of the date of receipt by the Company of (a) available funds in cash in payment of the Exercise Price, or (b) notice of Cashless Exercise.

(d) If fewer than all the Securities purchasable under the Warrant are purchased, the Company will, upon such partial exercise, execute and deliver to the Warrantholder a new Warrant Certificate (dated the date hereof), in form and tenor similar to this Warrant Certificate, evidencing that portion of the Warrant not exercised.

(e) Notwithstanding the foregoing, in no event shall such Securities be issued, and the Company is authorized to refuse to honor the exercise of the Warrant, if such exercise would result in the opinion of the Company's Board of Directors, upon advice of counsel, in the violation of any law.

3. Adjustments in Certain Events. The number, class, and price of Securities for which this Warrant Certificate may be exercised are subject to adjustment from time to time upon the happening of certain events as follows:

(a) If the outstanding shares of the Company's Common Stock are divided into a greater number of shares or a dividend in stock is paid on the Common Stock, the number of shares of Common Stock for which the Warrant is then exercisable will be proportionately increased and the Exercise Price will be proportionately reduced; and, conversely, if the outstanding shares of Common Stock are combined into a smaller number of shares of Common Stock, the number of shares of Common Stock for which the Warrant is then exercisable will be proportionately reduced and the Exercise Price will be proportionately increased. The increases and reductions provided for in this Section 3(a) will be made with the intent and, as nearly as practicable, the effect that neither the percentage of the total equity of the Company obtainable on exercise of the Warrants nor the price payable for such percentage upon such exercise will be affected by any event described in this Section 3(a).

(b) In case of any change in the Common Stock through merger, consolidation, reclassification, reorganization, partial or complete liquidation, purchase of substantially all the assets of the Company, or other change in the capital structure of the Company, then, as a condition of such change, lawful and adequate provision will be made so that the Warrantholder will have the right thereafter to receive upon the exercise of the Warrant the kind and amount of shares of stock or other securities or property to which the Warrantholder would have been entitled if, immediately prior to such event, the Warrantholder had held the number of shares of Common Stock obtainable upon the exercise of the Warrant. In any such case, appropriate adjustment will be made in the application of the provisions set forth herein with respect to the rights and interest thereafter of the Warrantholder, to the end that the provisions set forth herein will thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other securities or property thereafter deliverable upon the exercise of the Warrant. The Company will not permit any change in its capital structure to occur unless the issuer of the shares of stock or other securities to be received by the holder of this Warrant Certificate, if not the Company, agrees to be bound by and comply with the provisions of this Warrant Certificate.

 

(c) When any adjustment is required to be made in the number of shares of Common Stock, other securities, or the property purchasable upon exercise of the Warrant, the Company will promptly determine the new number of such shares or other securities or property purchasable upon exercise of the Warrant and (i) prepare and retain on file a statement describing in reasonable detail the method used in arriving at the new number of such shares or other securities or property purchasable upon exercise of the Warrant and (ii) cause a copy of such statement to be mailed to the Warrantholder within thirty (30) days after the date of the event giving rise to the adjustment.

(d) No fractional shares of Common Stock or other Securities will be issued in connection with the exercise of the Warrant, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole number.

(e) If securities of the Company or securities of any subsidiary of the Company are distributed pro rata to holders of Common Stock, such number of securities will be distributed to the Warrantholder or its assignee upon exercise of its rights hereunder as such Warrantholder or assignee would have been entitled to if this Warrant had been exercised prior to the record date for such distribution. The provisions with respect to adjustment of the Common Stock provided in this Section 3 will also apply to the securities to which the Warrantholder or its assignee is entitled under this Section 3(e).

(f) Notwithstanding anything herein to the contrary, there will be no adjustment made hereunder on account of the sale by the Company of the Common Stock or any other Securities purchasable upon exercise of the Warrant.

4. Reservation of Securities. The Company agrees that the number of shares of Common Stock or other Securities sufficient to provide for the exercise of the Warrant upon the basis set forth above will, at all times during the term of the Warrant, be reserved for issuance.

5. Validity of Securities. All Securities delivered upon the exercise of the Warrant will be duly and validly issued in accordance with their terms and, upon payment of the Exercise Price, will be fully paid and non-assessable.  The Company will pay all documentary and transfer taxes, if any, in respect of the original issuance thereof upon exercise of the Warrant.

6. Transferability.

(a) Subject to compliance with any applicable securities laws, the Warrant may be transferred to individuals who are members, a partner, officer or other representative or stakeholder of Paulson Investment Company, LLC.  The Warrant may be divided or combined, upon request to the Company by the Warrantholder, into additional Warrants evidencing the same aggregate number of Warrants.  Any such transfer shall be effected upon surrender of this Warrant Certificate at the principal office of the Company or its designated agent, together with a written assignment of the Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant Certificate or Warrant Certificates in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant Certificate evidencing the portion of the Warrant not so assigned, and this Warrant Certificate shall promptly be cancelled.

 

 

7. Securities Act Compliance.  The Warrantholder hereby represents: (a) that this Warrant and any Securities will be acquired for investment for the Warrantholder's own account and not with a view to the resale or distribution of any part thereof, and (b) that the Warrantholder is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.  In addition, as a condition of its delivery of certificates for the Common Stock, the Company will require the Warrantholder to deliver to the Company representations regarding the Warrantholder's sophistication, investor status, investment intent, acquisition for its own account and such other matters as are reasonable and customary for purchasers of securities in an unregistered private offering as set forth in the attached Exercise Form.  The Company may place conspicuously upon each certificate representing the Securities a legend substantially in the following form, the terms of which are agreed to by the Warrantholder:

"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND THE SECURITIES LAWS OF OTHER JURISDICTIONS AND, IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS."

8. No Rights as a Shareholder. Except as otherwise provided herein, the Warrantholder will not, by virtue of ownership of the Warrant, be entitled to any rights of a shareholder of the Company but will, upon written request to the Company, be entitled to receive such quarterly or annual reports as the Company distributes to its shareholders.

 

 

9. Notice. Any notices required or permitted to be given hereunder will be in writing and may be served personally or by mail, including by e-mail; and if served will be addressed as follows:

	
If to the Company:

	
Ammo, Inc.

Attn: Ron Shostack

6401 E Thomas Road, Suite 106

Scottsdale, AZ 85251

Email: ron@ammo-inc.com

 

 

	
If to the Warrantholder:

 

	
Paulson Investment Company, LLC

Attn: Alex Winks

2141 W. North Ave., 2nd Floor

Chicago, Illinois  60647

Any notice so given by mail will be deemed effectively given 48 hours after mailing when deposited in the United States mail, registered or certified mail, return receipt requested, postage prepaid and addressed as specified above. Any notice given by e-mail must be accompanied by confirmation of receipt, and will be deemed effectively given upon confirmation of such receipt.  Any party may by written notice to the other specify a different address for notice purposes.

10. Applicable Law. This Warrant Certificate will be governed by and construed in accordance with the laws of the State of New York, without reference to conflict of laws principles thereunder.

[Signature page follows.]

IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be executed by its officer thereunto duly authorized as of the date first above indicated.

Dated as of ________________

	 	Ammo, Inc.	 
	 	 	 	 
	
 

	
By: 

		 
	 	 	Name: Ron Shostack	 
	 	 	Title: Chief Financial Officer	 
	 	 	 	 

 

EXERCISE FORM

(To Be Executed by the Warrantholder

 to Exercise the Warrant)

TO: Ammo, Inc.

	1.	
The undersigned hereby irrevocably elects to exercise the right to purchase _________ shares of Common Stock, represented by Warrant No. C-19 as follows:

		[    ]	
Exercise for Cash.  Pursuant to Section 2(a) of the Warrant, the Holder hereby elects to exercise the Warrant for cash and tenders payment herewith (or has made a wire transfer) to the order of Ammo, Inc.  in the amount of $____________.

		[    ]	
Cashless Exercise.  Pursuant to Section 2(b) of the Warrant, the Holder hereby elects to exercise the Warrant on a cashless basis.

	2.	
The undersigned requests that the applicable number of shares of Common Stock be issued and delivered to the following address:

	
Name:  

	
 

	
 

	
 

	
Address:  

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Email:  

	
 

	
 

	
 

	
SSN:  

	
 

	
 

	
 

 

	3.	
The undersigned understands, agrees and recognizes that:

		(a)	
No federal or state agency has made any finding or determination as to the fairness of the investment or any recommendation or endorsement of the securities.

		(b)	
All certificates evidencing the shares of Common Stock, if any, may bear a legend substantially similar to the legend set forth in [Section 7] of the Warrant Certificate regarding resale restrictions.

Representations of the undersigned.

	5.	
The undersigned acknowledges that the undersigned has received, read and understood the Warrant and agrees to abide by and be bound by its terms and conditions.

	6.	
(i)  The undersigned has such knowledge and experience in business and financial matters that the undersigned is capable of evaluating the Company and the proposed activities thereof, and the risks and merits of this prospective investment.

[    ]   YES     [    ]   NO

 

 

  

(ii) If "No", the undersigned is represented by a "purchaser representative," as that term is defined in Regulation D under the Securities Act of 1933, as amended (the "Securities Act").

[    ]   YES     [    ]   NO

	7.	
(i)  The undersigned is an "accredited investor," as that term is defined in the Securities Act.

[    ]   YES     [    ]   NO

(ii)  If "Yes," the undersigned comes within the following category of that definition (check one):

		[    ]	
The undersigned is a natural person whose present net worth (or whose joint net worth with his or her spouse), excluding the value of the undersigned's primary residence, exceeds $1,000,000. For purposes of calculating the undersigned's present net worth, the undersigned has included the following as liabilities: (i) any indebtedness that is secured by the undersigned's primary residence in excess of the estimated fair market value of the undersigned's primary residence at the time of the sale of the shares, and (ii) any incremental debt secured by the undersigned's primary residence that was incurred in the 60 days before the sale of the shares, other than as a result of the acquisition of the undersigned's primary residence.

		[    ]	
The undersigned is a natural person who had individual income in excess of $200,000 in each of the last two years or joint income with the undersigned's spouse in excess of $300,000 during such two years, and the undersigned reasonably expects to have the same income level in the current year.

		[    ]	
The undersigned is an officer or director of the Company.

		[    ]	
The undersigned is a corporation or partnership not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.

		[    ]	
The undersigned is a trust with total assets in excess of $5,000,000 whose purchase is directed by a person with such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of the prospective investment.

		[    ]	
The undersigned is an entity, all of whose equity owners are accredited investors under one or more of the categories above.

	8.	
The undersigned understands that the shares purchased hereunder have not been registered under the Securities Act, in reliance upon the exemption from the registration requirements under the Securities Act pursuant to Section 4(2) of the Securities Act and Rule 506 promulgated thereunder; and, therefore, that the undersigned must bear the economic risk of the investment for an indefinite period of time since the securities cannot be sold, transferred or assigned to any person or entity without compliance with the provisions of the Securities Act

 

 

  

Dated:  _____________, 20___.

 

	
 

	
By:

	
 

	
 

	
 

	
Name:

	
 

	
 

	
 

	
Print:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Note:  Signature must correspond with the name as written upon the face of the Warrant in all respects, without alteration or enlargement or any change whatsoever.Exhibit 10.1

LICENSING AGREEMENT

This LICERNSING AGREEMENT ("Agreement") is made effective as of this 11th day of October, 2016 ("Effective Date"), by and between AMMO, Inc., a Delaware corporation ("AMMO") with an office at 6402 East Thomas Rd, Scottsdale , AZ 85251, and Jesse James, an individual residing at 12295 Trautwein Rd., Austin Texas 78737 ("JJ"), and, solely for the purposes of Section 7, Jesse James Firearms Unlimited, LLC, a Texas limited liability company having an address of 12295 Trautwein Rd., Austin Texas 78737 ("JJFU").

WHEREAS, JJ is a well know motorcycle and gun designer whose name, endorsements, and services have commercial value to AMMO;

WHEREAS, JJFU sells firearms bearing certain names, endorsement, and likeness of JJ; WHEREAS, JJ is a principal of JJFU; and

WHEREAS, AMMO is desirous to obtain the right to use the name, likeness, and endorsement of JJ in connection with the advertisement and promotion of certain products of AMMO, namely a Jesse James branded line of ammunition, and associated other promotional items related to the line of ammunition.

NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, JJFU (solely for the purposes of Section 7), JJ, and AMMO agree as follows:

1. DEFINITIONS.

 

		a.	
"Confidential Information" means all financial, commercial, technical, proprietary, personal and other information, data, trade secrets and know-how of either party that is not generally known or readily derivable from publicly available information, including the terms of this Agreement.

		b.	
"Image Rights" means the right to use the name, image, photographs, autograph, likeness, characterization, biography, visual and audio representation of JJ.

		c.	
"Intellectual Property Rights" means all patents and patent applications, utility models, rights in industrial designs, trademarks (whether registered or unregistered and including any goodwill in such trade marks), service marks, trade names, business names, internet domain names, rights in designs (whether registered or unregistered), copyrights, moral rights, rights in Confidential Information, rights in inventions (whether patentable or not), and all rights in discoveries, improvements, techniques, processes, tools, models, concepts, and systems, and all other intellectual property rights, whether registered or unregistered, including any form of application for any of the same and all similar or equivalent rights which may exist anywhere in the world.

		d.	
"Jesse James Branded Products" means AMMO's Jesse James branded line of ammunition, and other associated Jesse James branded promotional items related thereto. Such other promotional items include other items commonly promoted and sold by other ammunition manufacturers to promote the branding and recognition of their ammunition, for example, clothing, hats, etc.

		e.	
"Net Profit" means Net Sales minus cost of goods sold, minus operating expenses, minus taxes, minus interest.

		f.	
"Net Sales" means the revenue received from the wholesale sale of Jesse James Branded

 Products, less customary discounts, and allowances, and less any bona fide returns.

		g.	
"Potential Retailers" means retail and e-commerce companies with which JJ already has commercial relationships for other JJ branded products, and which are targets to distribute and sell Jesse James Branded Products.

 

1

 

2.      APPOINTMENT/ENGAGEMENT. AMMO engages JJ, and JJ hereby accepts the engagement, to provide for his endorsement of, and assistance in offering/selling AMMO's Jesse James Branded Products.

 

3. TERM. Unless terminated in accordance with Section 11, the term of this Agreement shall commence as of the Effective Data and shall continue for an initial term of five (5) years ("Initial Term"). The Agreement shall be automatically extended for successive additional one (1) year terms (each a "Renewal Term") unless either party gives ninety (90) days advanced written notice of the desire to terminate. The Initial Term and any Renewal Term(s) are collectively referred to as the Term.

 

4.      GRANT. During the Term, and subject to the limitations herein, JJ grants AMMO exclusive, worldwide rights to E's Image Rights and any and all trademarks associated with JJ in connection with the marketing, promotion, advertising, sale, and commercial exploitation of the Jesse James Branded Products for such purposes as AMMO may reasonably require. Such Image Rights shall include, but not be limited to, the following uses:

 

		a.	
One or more television and/or radio commercials

		b.	
Product packaging, promotion, and advertising

		c.	
Use on the internet, including AMMO's website

		d.	
In AMMO press releases

		e.	
Personal appearances, for example, speaking engagements, trade shows, and exhibitions

		f.	
Throughout all company controlled and operated social media pages and sites

		g.	
Use in/on any advertising medium including magazine, billboard, electronic displays etc

 

5.     SERVICES. In connection with the appointment, JJ agrees to do the following for the Term ("Services"):

 

		a.	
Upon request by AMMO, attend at six (6) photograph session annually for pictures to be used in conjunction with the marketing, promotion, and sale of the Jesse James Branded Products, the date and time to be mutually agreed upon by the parties. The photograph(s) shall be submitted to JJ for approval. In the event JJ does not accept or reject the submitted photograph(s) within seven (7) days, the photograph(s) will be deemed accepted by JJ.

		b.	
Upon request by AMMO, attend at least four (4) production sessions annually to be used for the production of a commercial used in conjunction with the marketing, promotion, and sale of the Jesse James Branded Products, the date and time to be mutually agreed upon by the parties. The commercial(s) shall be submitted to JJ for approval. In the event JJ does not accept or reject the submitted commercial(s) within seven (7) days, the commercial(s) will be deemed accepted by JJ.

		c.	
Promote the Jesse James Branded Products through his own social media outlets, provided that JJ agrees to incorporate any reasonable changes, updates, or clarifications requested AMMO. JJ agrees to do a minimum of 4 posts per month during Term on each social media platform JJ has accounts on. JJ will use both video posts and static image posts to help promote and support Company.

		d.	
Provide proposed designs for the packaging of the Jesse James Branded Products, provided that the ultimate design and packaging shall be at AMMO's absolute discretion.

		e.	
Review and provide input on the Jesse James Branded Products, provided that the ultimate technical specifications, function, and overall design of the Jesse James Branded Products shall be at AMMO's absolute discretion.

		f.	
In coordination with, and subject to AMMO's approval, E shall assist with introductions to, calling upon, and negotiations with Potential Retailers for the sale and distribution of Jesse James Branded Products.

 

2

		g.	
If JJ is involved in any sponsored photography sessions, internet, promotional, or television commercials, JJ shall wear items of clothing and/or accessories that AMMO deems appropriate for the marketing, promotion, advertising and sale of the Jesse James Branded Products.

		h.	
JJ agrees to make a minimum of six (6) appearances annually at trade shows or promotional events as determined by AMMO. At such appearances, JJ agrees to sign autographs for at least four (4) hours per appearance.

		i.	
JJ hereby agrees that he shall not grant right to use the Jessie James Image Rights to any other company, manufacturer or retailer of the same product(s), or similar product(s), to that of the Jesse James Branded Products.

		j.	
JJ agrees not to develop, sponsor, endorse, or promote (i) any other products that are substantially similar in purpose to, or competitive with the Jesse James Branded Products; or (ii) any other company, manufacturer, or retailer which sells products that are similar in purpose to, or competitive with the Jesse James Branded Products. The parties specifically agree that JE s and BED' s promotion and sale of Jesse James Firearms Unlimited firearms is authorized.

		k.	
For all of the Services provided herein, JJ agrees that none of the Services will contain any obscene or defamatory material and will not expose AMMO to criminal or civil proceedings.

		I.	
JJ agrees not to participate in any activities which would prejudice the goodwill and reputation of AMMO and/or the Jesse James Branded Products during the Term of the Agreement, and for a period of twelve (12) months thereafter.

		m.	
JJ agrees not to act or engage in any action or conduct which would impugn his character or reputation or that of his work hereunder.

 

The limitations in Sections 5(j) and (k) shall extend through the Transition Period. AMMO agrees to reimburse JJ for any out-of-pocket, reasonable, preapproved travel expenses, including airfare, ground transportation, hotel accommodations, and meals related to performance of the Services hereunder. For any air travel over four (4) hours, JJ is authorized to purchase if available, and AMMO will reimburse JJ for, first-class tickets or comparable. For all other air travel, AMMO will reimburse JJ for standard coach ticket air fare. Reimbursement shall be subject to production of receipts or other appropriate evidence of payment.

 

		6.	
CONFIDENTIALITY. Each party agrees that it will not disclose to any third party or use any Confidential Information disclosed to it by the other party except as expressly permitted in this Agreement; and that it will take all reasonable measures to maintain the confidentiality of all Confidential Information of the other party in its possession or control, which will in no event be less than the measures it uses to maintain the confidentiality of its own information of similar importance. The foregoing restrictions do not apply to (a) any use or disclosures authorized by the disclosing party; (b) any use or disclosure required by law or by court, provided that the receiving party provides the disclosing party as much notice of the disclosure, or potential disclosure, as possible; and (c) any information which is already in, or comes into, the public domain other than through the receiving party's unauthorized disclosure.

		7.	
TRADEMARKS. The parties acknowledge and agree that AMMO may adopt, use, and/or seek trademark registration for, one or more trademarks relating to the Jesse James Branded Products, including but not limited to JESSE JAMES AMMUNITION. The parties agree that AMMO shall own all rights to such trademarks, and all use of such trademarks shall inure to the benefit of AMMO, provided that AMMO shall cease using JESSE JAMES as part of any such trademark(s) upon termination of this Agreement and expiration of the Transition Period. JJ and JJFU agree to cooperate with AMMO in seeking federal registration of any such trademark by AMMO.

 

3

Without limiting the foregoing, JJ agrees to execute any necessary consent required by the United States Patent and Trademark Office ("USPTO") for use of the Jesse James name, and JJFU agrees, to the extent necessary, to execute any necessary consent and/or co-existence agreements required by the USPTO.

		8.	
OWNERSHIP OF INTELLECTUAL PROPERTY. Subject to the limitations herein, and in consideration of the Royalty paid to JJ, JJ agrees to assign, and does hereby assign, all present and future Intellectual Property Rights related to the Services, including but not limited to in all media and advertising related to the Jesse James Branded Products, and any other material created for the purpose of this Agreement, including but not limited to the trademarks, and any packaging designs of JJ. AMMO shall be entitled to use, exploit or license any of the material produced or created as a result of the Services provided by JJ. JJ shall give AMMO immediate written notice of any actual, threatened, or suspected infringement of AMMO's Intellectual Property Rights. JJ represents and warrants that any intellectual property contributed by JJ (including the use of JESSE JAMES as part of the JESSE JAMES AMMUNITION trademark), will not infringe the Intellectual Property Rights of any third party.

		9.	
COMPENSATION. In exchange for JJ's performance of the Services, AMMO agrees to pay JJ a royalty, calculated by method of: (a) for Tier 1 ammunition Jesse James Branded Products, JJ will be paid five percent (5%) of the Net Sales for which payment has been received from the applicable customer ("Ammunition Royaltyl"); (b) for Tier 2 ammunition Jesse James Branded Products, JJ will be paid three percent (4%) of the Net Sales for which payment has been received from the applicable customer ("Ammunition Royalty2" ; and (c)for non-ammunition Jesse James Branded Products (e.g., t-shirts, hats, and other promotional items), JJ will be paid twenty-five percent (50%) of the Net Profit for which payment has been received from the applicable customer ("Promotional Item Royalty"). The Ammunition Royaltyl&2 and Promotional Item Royalty are collectively referred to as "Royalty". Royalty payments to be paid quarterly. AMMO will make this payment to JJ within 45 days of the close of each fiscal quarter. Along with the payment of the Royalties, AMMO shall provide a royalty statement showing the Net Sales or Net Profit (as applicable) of the Jesse James Branded Products, and the amount of Royalties due to JJ. Upon reasonable request by JJ, but not more than annually, AMMO shall make its applicable books and records available for review by JJ to confirm payment of the applicable Royalties.

		10.	
STOCK COMPENSATION. JJ will receive a onetime signing bonus of 100,000 shares of AMMO stock

Performance Bonus are as follows:

Gross sales of JJ Products reach $2,500,000-$5,000,000 - 10,000 shares

Gross sales of JJ Products reach $5,000,001-$10,000,000 - 15,000 shares

Gross sales of JJ Products reach $10,000,001-$15,000,000 - 20,000 shares

 Gross sales of JJ Products reach $15,000,001< - 30,000 shares

10.01 RESTRICTIONS ON AMMO, INC. SHARES ISSUED PURSUANT TO THIS AGREEMENT. The common stock shares that may be issued by the Company pursuant to this Agreement will not been registered and are being issued pursuant to a specific exemption under the Securities Act, as well as under certain state securities laws for transactions by an issuer not involving any

 

4

public offering or in reliance on limited federal preemption from such state securities registration laws. The shares to be issued by the Company pursuant to this Agreement must be held and may not be sold, transferred, or otherwise disposed of for value unless such securities are subsequently registered under the Securities Act or an exemption from such registration is available, and that the certificates representing the shares of AMMO, Inc. Common Stock issued pursuant to this Agreement will bear a legend in substantially the following form so restricting the sale of such securities:

 

The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and are "restricted securities" within the meaning of Rule 144 promulgated under the Securities Act. The securities have been acquired for investment and may not be sold or transferred without complying with Rule 144 in the absence of an effective registration or other compliance under the Securities Act.

 

Except as Consultant may be otherwise restricted from selling shares of the common stock of the Company (the "Common Stock") under applicable federal or state securities laws, rules and regulations and Securities and Exchange Commission (the "SEC") interpretations thereof, Consultant may only sell the Common Stock subject to the following conditions:

10.02   Notwithstanding any applicable federal or state securities laws, rules and regulations and Securities and Exchange Commission (the "SEC") interpretations thereof, the Consultant shall not be allowed to sell any shares of Common Stock for twelve (12) months subsequent to the Effective Date of this Agreement (the "Lock-Up Period");

10.03   Notwithstanding any applicable federal or state securities laws, rules and regulations and Securities and Exchange Commission (the "SEC") interpretations thereof and for the twelve (12) months following the Lock-Up Period (the "Leak-Out Period"), the Consultant shall only be permitted to sell shares of the Consultant's Common Stock in accordance with the following terms and conditions:

10.04   If the average trading volume of the Company's stock exceeds $25,000 per day for the 5 trading days prior to the date of any sale of Common Stock by the Consultant during the Leak-Out Period, then the Consultant can sell such Common Stock without restriction.

10.05   If the average trading volume of the Company's stock is less than or equal to $25,000 per day for the 5 trading days prior to the date of any sale of Common Stock by the Consultant during the Leak-Out Period, then the Consultant can only sell that certain number of Common Stock shares equal to 5% of the total issued and outstanding shares of the Company every 30 days during the Leak-Out Period.

10.06   An appropriate legend describing this Agreement shall be imprinted on each stock certificate representing Common Stock covered hereby, and the transfer records of the Company's transfer agent shall reflect such appropriate restrictions.

10.07   The Consultant agrees that she will not engage in any short selling of the Common Stock of the Company.

 

5

		11.	
DISCOUNTS. Notwithstanding the foregoing, the parties recognize that Potential Retailers may seek special discounts for Jesse James Branded Products. In such event, the parties agree to negotiate in good faith appropriate adjustments to the Royalty to ensure the overall decrease in revenue is equitably shared between JJ and AMMO.

		12.	
PRODUCT PURCHASE. JJ may purchase Product to sell across his website(s) at AMMO's lowest pricing offered to wholesale vendors. If requested, JJ will receive 100 rounds of each skew of the Jesse James Branded Products per month during the Term.

		13.	
INDEMNITY. AMMO and JJ mutually agree to defend, indemnify, and hold harmless the other against all third party claims, losses (including attorneys' fees), liabilities, judgement, and settlements arising from or relating to its own breach of this Agreement. In the event of a claim hereunder, JJ and AMMO agree to provide full details in writing to the other party at the earliest opportunity and shall not settle any such matter without first consulting the other party. The indemnifying party will promptly reimburse the indemnified party for all reasonable expenses and cost incurred in defending the indemnified party. The indemnified party will have the right to select its own counsel, subject only to the indemnifying party's reasonable right of approval of any such counsel. This indemnification will survive termination of the Agreement.

		14.	
DEFAULT AND TERMINATION. If either party at any time during the Term shall (a) fail to make a required payment when due; (b) goes into voluntary or involuntary liquidation or is declared insolvent; or (c) fail to observe or perform any of the covenants, agreements or obligations under this Agreement , the non-defaulting party may terminate this Agreement if such default is not cured within thirty (30) days after the defaulting party shall have received written notice of such failure specifying in reasonable detail the nature of such default. The termination rights shall not constitute the exclusive remedy. Upon any termination of this Agreement, AMMO shall be entitled to a transition period of twelve (12) months ("Transition Period") during which it can continue to use the Image Rights to enable it to liquidate all inventory and in-process orders for Jesse James Branded Products.

In addition to the foregoing, in the event JJ engages in any conduct or activity that sheds a negative light or disparaging light on JJ or AMMO, then AMMO may terminate this Agreement for cause on ten (10) days notice, without opportunity to cure on JJ's behalf. AMMO shall continue to pay all applicable Royalties due to JJ during the Transition Period.

		15.	
LIMITED LIABILITY. Notwithstanding anything to the contrary in this Agreement, AMMO's liability to JJ shall not exceed the remuneration, excluding reimbursement of expenses, actually paid by AMMO to JJ over the preceding twenty-four (24) months. In no event will AMMO be liable for any indirect, incidental, reliance, special, consequential, or punitive damages for any claim or cause of action (including negligence) arising out of or related to this Agreement, even if AMMO has been advised of the possibility of such damages.

		16.	
FORCE MAJEURE. If performance of this Agreement or any obligation under this Agreement is prevented, restricted, or interfered with by causes beyond either party's reasonable control ("Force Majeure"), and if the party unable to carry out its obligations gives the other party prompt written notice of such event, then the obligations of the party invoking this provision shall be suspended to the extent necessary by such event. The term Force Majeure shall include, without limitation, acts of God, fire, explosion, vandalism, storm or other similar occurrence, orders or acts of military or civil authority, or by natural emergencies, insurrections, riots, or wars, strikes, lock-outs, work stoppages. The excused party shall use reasonable efforts under the

 

6

circumstances to avoid or remove such causes of non-performance and shall proceed to perform with reasonable dispatch whenever such caused are removed or ceased. An act or omission shall be deemed within the reasonable control of a party if committed, omitted, or caused by such party, or its employees, officers, agents, or affiliates.

		17.	
ARBITRATION. Any controversies or disputes arising out of or relating to this Agreement shall be resolved by binding arbitration in accordance with the then-current Commercial Arbitration Rules of the American Arbitration Association. The parties shall select a mutually acceptable arbitrator knowledgeable about issues relating to the subject matter of this Agreement. In the event the parties are unable to agree to such a selection, AMMO and JJ will select an arbitrator and the two arbitrators in turn shall select a third arbitrator, all three of whom shall preside jointly over the matter. The arbitration shall take place at a location that is reasonably centrally located between the parties, or otherwise mutually agreed upon by the parties. All documents, materials, and information in the possession of each party that are in any way relevant to the dispute shall be made available to the other party for review and copying no later than 30 days after the notice of arbitration is served. The arbitrator(s) shall not have the authority to modify any provision of this Agreement or to award punitive damages. The arbitrator(s) shall have the power to issue mandatory orders and restraint orders in connection with the arbitration. The decision rendered by the arbitrator(s) shall be final and binding on the parties, and judgement may be entered in conformity with the decision in any court having jurisdiction. The agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. During the continuance of any arbitration proceedings, the parties shall continue to perform their respective obligations under this Agreement. The costs of the arbitrators shall be split between the parties appearing before the arbitrators.

		18.	
ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties, and there are no other promises or conditions in any other agreement whether oral or written concerning the subject matter of this Agreement. This Agreement supersedes any prior written or oral agreements between the parties.

		19.	
SEVERABILITY. If any provision of this Agreement will be held invalid or unenforceable for any reason, the remaining provisions will continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision will be deemed to be written, construed, and enforced as so limited.

		20.	
ASSIGNMENT. The rights of each party under this Agreement are personal to that party, and neither this Agreement, nor any of the rights or obligations contained herein, may be assigned (by contract, law, or otherwise) or transferred by any party without the prior, express written consent of the parties hereto. Notwithstanding the foregoing, AMMO may delegate or assign any or all of its rights under this Agreement to any of its subsidiaries or affiliates. Any purported assignment in violation of this section shall be null and void.

		21.	
AMENDMENT. This Agreement may not be modified or amended except by a written document executed by an authorized representative of each party.

		22.	
GOVERNING LAW. This Agreement, any amendments hereto, and any and all issues or controversies arising hereunder, shall be governed by, construed, and enforced in accordance with the laws of the State of Nevada without regard to its choice of law provisions.

 

7

		23.	
NOTICES. Any notice or communication required or permitted under this Agreement shall be sufficiently given if delivered in person or by certified mail, return receipt requested, to the following addresses, or to such other address as one party may have furnished to other in writing: (1) for JJFU, 800 Dripping Springs Ranch Rd., Dripping Springs, Texas 78620; (2) for AMMO, 6401 East Thmoas, Scottsdasle, AZ 85251, Attn: Fred Wagenhals; and (3) for JJ, to the address set forth in the opening paragraph.

		24.	
WAIVER OF CONTACTUAL RIGHT. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement.

		25.	
RELATIONSHIP OF THE PARTIES Nothing contained in this Agreement shall be deemed or construed to place the parties in relationship of partners, joint venturers, principal-agent, or employer-employee, it being understood that the parties hereto are and will remain independent contractors in all respects, and neither party shall have any right to obligate or bind the other in any manner whatsoever. Nothing herein shall be deemed to provide any right or remedy to any third party.

		26.	
CONSTRUCTION OF THE AGREEMENT. The parties acknowledge that they have jointly participated in the negotiation of this Agreement and no provision of the Agreement shall be construed against, or be interpreted in favor of, either party by reason of such party having or deemed to have structured, dictated, or drafted such provision.

		27.	
COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and taken together shall be construed as a single instrument. This Agreement may be executed by electronic submission and signatures on such a copy shall be deemed as an original signature.

		28.	
SIGNATORIES AUTHORITY TO CONTRACT. Each of the parties to this Agreement represent and warrant that it has the full right and power to enter into this Agreement, to perform all designated obligations, and grant all designated rights without violating the legal or equitable rights of any other party, and the execution and performance hereunder will not conflict with or result in breach of or default of any other agreement to which the party is bound.

 

IN WITNESS WHEREOF, this Agreement is effective as of the Effective Date shown above.

	 	 	 	 	 
	
/s/ Fred Wagenhals

	 	Dated: 	
11-14/16

	 
	
Fred Wagenhals

	 	 	
 

	 
	
CEO

	 	 	
 

	 

 

 

	 	 	 	 	 
	
/s/ Jesse James

	 	Dated: 	
11/14/2016

	 
	
Jesse James, Individual

	 	 	
 

	 
	
 

	 	 	
 

	 

 

Jessie James Firearms Unlimited, LLC (solely for the purposes of Section 7)

 

 

	 	 	 	 	 
	
/s/ Jesse James

	 	Dated: 	
11/14/2016

	 
	
Jesse James, Principal

	 	 	
 

	 

 

 

 

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