Exhibit 10.7

 

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT
OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.

 

CONVERSION LABS, INC.

 

CLASS B WARRANT TO PURCHASE COMMON STOCK

 

Original Issue Date: _________, 2020

 

Conversion Labs, Inc., a Delaware corporation (the “Company”), hereby certifies
that, for value received, [●] , or its permitted registered assigns (the
“Holder”), is entitled to purchase from the Company up to a total of
_____________ shares of common stock, $0.0001 par value per share (the “Common
Stock”), of the Company (the “Warrant Shares”) at an exercise price per share
equal to $________ per share (as adjusted from time to time as provided in
Section 9 herein, the “Exercise Price”), (i) with respect to ___________ shares
of Common Stock (the “Tranche 1 Warrant Shares”) at any time and from time to
time following the date hereof (the “Original Issue Date”) and through and
including 5:30 p.m., New York City time, on ___________, 2025 (the “Expiration
Date”), and (ii) with respect to ______________ shares of Common Stock (the
“Tranche 2 Warrant Shares”), at any time and from time to time following the
date that is six (6) months following the Original Issue Date (the “Tranche 2
Exercisability Date”) and through and including the Expiration Date, subject to
the following terms and conditions, including Section 4(c):

 

This Warrant (this “Warrant”) is being issued pursuant to that certain Warrant
Purchase Agreement, dated August 28, 2020, by and among the Company and the
Holder (the “Purchase Agreement”).

 

1.       Definitions. In addition to the terms defined elsewhere in this
Warrant, capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Purchase Agreement.

 

2.       Registration of Warrants. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose, which may be a
third-party transfer agent (the “Warrant Register”), in the name of the record
Holder (which shall include the initial Holder or, as the case may be, any
registered assignee to which this Warrant is permissibly assigned hereunder)
from time to time. The Company may deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, absent actual notice
to the contrary.

 

3.       Registration of Transfers. Subject to compliance with all applicable
securities laws, the Company shall register the transfer of all or any portion
of this Warrant in the Warrant Register, upon surrender of this Warrant, with
the Form of Assignment attached as Schedule 2 hereto duly completed and signed,
to the Company’s transfer agent or to the Company at its address specified in
the Purchase Agreement and (x) delivery, at the request of the Company, of an
opinion of counsel reasonably satisfactory to the Company to the effect that the
transfer of such portion of this Warrant may be made pursuant to an available
exemption from the registration requirements of the Securities Act and all
applicable state securities or blue sky laws (other than in connection with any
transfer (i) pursuant to an effective registration statement, (ii) to the
Company, (iii) pursuant to Rule 144 (provided that such Holder provides the
Company with reasonable assurances (in the form of seller and, if applicable,
broker representation letters) that the securities may be sold pursuant to such
rule), and (y) delivery by the transferee of a written statement to the Company
certifying that the transferee is an “accredited investor” as defined in Rule
501(a) under the Securities Act and making the representations and
certifications set forth in Sections 4(c) 4(d) and 4(e) of the Purchase
Agreement, to the Company at its address specified in the Purchase Agreement.
Upon any such registration or transfer, a new warrant to purchase Common Stock
in substantially the form of this Warrant (any such new warrant, a “New
Warrant”) evidencing the portion of this Warrant so transferred shall be issued
to the transferee, and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations in respect of
the New Warrant that the Holder has in respect of this Warrant. The Company
shall prepare, issue and deliver at its own expense any New Warrant under this
Section 3.

 

 

 

 

4.       Exercise and Duration of Warrant; Repurchase.

 

(a)       All or any part of the Tranche 1 Warrant Shares shall be exercisable
by the registered Holder in any manner permitted by Section 10 of this Warrant
at any time and from time to time on or after the Original Issue Date and
through and including 5:30 p.m. New York City time, on the Expiration Date. All
or any part of the Tranche 2 Warrant Shares shall be exercisable by the
registered Holder in any manner permitted by Section 10 of this Warrant at any
time and from time to time on or after the Tranche 2 Exercisability Date and
through and including 5:30 p.m. New York City time, on the Expiration Date. At
5:30 p.m., New York City time, on the Expiration Date, the portion (or all) of
this Warrant not exercised prior thereto shall be and become void and of no
value and this Warrant shall be automatically terminated and no longer
outstanding, provided, however, that if the last reported Closing Sale Price
immediately prior to the Expiration Date was greater than the Exercise Price,
then this Warrant shall be automatically deemed exercised on a cashless basis as
of 4:01 p.m. (ET) on the Expiration Date.

 

(b)       The Holder may exercise this Warrant by delivering to the Company (i)
an exercise notice, in the form attached as Schedule 1 hereto (the “Exercise
Notice”), completed and duly signed, and (ii) payment of the Exercise Price for
the number of Warrant Shares as to which this Warrant is being exercised (which
may take the form of a “cashless exercise” if so indicated in the Exercise
Notice and if a “cashless exercise” may occur at such time pursuant to Section
10 below), and the date on which Exercise Notice is delivered to the Company (as
determined in accordance with the notice provisions hereof) is an “Exercise
Date.” The delivery by (or on behalf of) the Holder of the Exercise Notice and
the applicable Exercise Price as provided above shall constitute the Holder’s
certification to the Company that its representations contained in Sections 4(c)
4(d) and 4(e) of the Purchase Agreement are true and correct as of the Exercise
Date and the date on which Holder pays the Company the Exercise Price as if
remade in their entirety (or, in the case of any transferee Holder that is not a
party to the Purchase Agreement, such transferee Holder’s certification to the
Company that such representations are true and correct as to such assignee
Holder as of the Exercise Date). The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder, but if it is not so
delivered then such exercise shall constitute an agreement by the Holder to
deliver the original Warrant to the Company as soon as practicable thereafter.
Execution and delivery of the Exercise Notice shall have the same effect as
cancellation of the original Warrant and issuance of a New Warrant evidencing
the right to purchase the remaining number of Warrant Shares.

 

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(c)       At any time after the Original Issue Date and prior to the Tranche 2
Exercisability Date, the Company shall have the right, but not the obligation,
to elect in good faith to repurchase this Warrant solely with respect to all,
but not less than all, of the Tranche 2 Warrant Shares (the “Repurchase”), for
an aggregate purchase price of $___________ (the “Repurchase Price”), by
delivering written notice of such election (the “Repurchase Notice”) to the
Holder. The Repurchase Notice shall state the date on which such Repurchase
shall occur, which date shall be the fifth (5th) business day following the date
such Repurchase Notice is deemed given pursuant to Section 13 (or, if such date
falls on a day other than a business day, the next day that is a business day)
(the “Repurchase Date”). On the Repurchase Date, the Company shall pay to the
Holder the Repurchase Price, at its election, by (i) wire transfer of
immediately available funds to a bank account designated in writing by the
Holder no later than two (2) days prior to the Repurchase Date, or (ii) issuing
the Holder a secured promissory note in form and substance to be mutually agreed
upon by the Holder and the Company, which promissory note shall accrue interest
at the applicable federal rate as published in the Wall Street Journal and
become due and payable upon the earlier to occur of: (x) the one (1) year
anniversary of the Repurchase Date and (y) a Fundamental Transaction. Promptly
following a Repurchase, a new warrant to purchase Common Stock, in substantially
the form of this Warrant, evidencing the portion of this Warrant not subject to
the Repurchase, if any, shall be issued to the Holder.

 

5.       Delivery of Warrant Shares.

 

(a)       Upon exercise of this Warrant and delivery of the Exercise Price, the
Company shall promptly (but in no event later than two Trading Days after the
later of the Exercise Date and delivery of the Exercise Price) issue or cause to
be issued and cause to be delivered to or upon the written order of the Holder
and in such name or names as the Holder may designate, (i) a certificate for the
Warrant Shares issuable upon such exercise, free of restrictive legends, or (ii)
an electronic delivery of the Warrant Shares to the Holder’s account at the
Depository Trust Company (“DTC”) or a similar organization, unless in the case
of clause (i) and (ii) a registration statement covering the resale of the
Warrant Shares and naming the Holder as a selling stockholder thereunder is not
then effective or the Warrant Shares are not freely transferable without
restriction under Rule 144 by Holders who are not affiliates of the Company, in
which case such Holder shall receive a certificate for the Warrant Shares
issuable upon such exercise with appropriate restrictive legends. The Holder, or
any Person permissibly so designated by the Holder to receive Warrant Shares,
shall be deemed to have become the holder of record of such Warrant Shares as of
the Exercise Date. Notwithstanding anything contained herein to the contrary, if
the Holder fails to deliver the documents required to register a transferee as
set forth in Section 3 above or to provide the documents required under this
Section 5(a) to issue a certificate or electronic delivery of the Warrant Shares
to any Person(s) other than the Holder, then determination of the two Trading
Days shall be tolled until such documents have been delivered to the Company. If
the Warrant Shares are to be issued free of all restrictive legends, the Company
shall, upon the written request of the Holder, use its reasonable best efforts
to deliver, or cause to be delivered, Warrant Shares hereunder electronically
through DTC or another established clearing corporation performing similar
functions, if available; provided that, the Company may, but will not be
required to, change its transfer agent if its current transfer agent cannot
deliver Warrant Shares electronically through such a clearing corporation.

 

(b)       If by the close of the second Trading Day after delivery of a properly
completed Exercise Notice and the payment of the aggregate Exercise Price in any
manner permitted by Section 10 of this Warrant, the Company fails to deliver to
the Holder a certificate representing the required number of Warrant Shares in
the manner required pursuant to Section 5(a), and if after such second Trading
Day and prior to the receipt of such Warrant Shares, the Holder is required to
purchase (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares which the
Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company
shall, in its sole discretion, within two Trading Days after the Holder’s
request for payment, either (1) pay in cash to the Holder an amount equal to the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased, at which point the number of Warrant Shares
underlying this Warrant equal to the number of shares of Common Stock so
purchased shall be forfeited and the Company’s obligation to deliver such
certificate (and to issue such Warrant Shares) shall terminate or (2) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such Warrant Shares and pay cash to the Holder in an amount equal
to the excess (if any) of Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased in the Buy-In
over the product of (A) the number of shares of Common Stock purchased in the
Buy-In, multiplied by (B) the closing bid price of a share of Common Stock on
the Exercise Date. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by the
Company.

 

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(c)       To the extent permitted by law, the Company’s obligations to issue and
deliver Warrant Shares in accordance with and subject to the terms hereof
(including the limitations set forth in Section 11 below) are absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision hereof, the
recovery of any judgment against any Person or any action to enforce the same,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company (other than breaches related to this Warrant or the Purchase
Agreement) or any violation or alleged violation of law by the Holder or any
other Person, and irrespective of any other circumstance that might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of Warrant Shares. Nothing herein shall limit the Holder’s right to
pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

 

6.       Charges, Taxes and Expenses. Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, transfer agent fee or other
incidental tax or expense in respect of the issuance of such certificates, all
of which taxes and expenses shall be paid by the Company; provided, however,
that the Company shall not be required to pay any tax that may be payable in
respect of any transfer involved in the registration of any certificates for
Warrant Shares or the Warrants in a name other than that of the Holder or an
Affiliate thereof. The Holder shall be responsible for all other tax liability
that may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.

 

7.       Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and, in each
case, a customary and reasonable indemnity and surety bond, if requested by the
Company. Applicants for a New Warrant under such circumstances shall also comply
with such other reasonable regulations and procedures and pay such other
reasonable third-party costs as the Company may prescribe. If a New Warrant is
requested as a result of a mutilation of this Warrant, then the Holder shall
deliver such mutilated Warrant to the Company as a condition precedent to the
Company’s obligation to issue the New Warrant.

 

8.       Reservation of Warrant Shares. The Company covenants that as soon as
practical after the date hereof, but no later than December 31, 2020, the
Company will cause a sufficient number of shares of Common Stock to be available
to effect the exercise of this Warrant. Thereafter, the Company will at all
times during the period this Warrant is outstanding reserve and keep available
out of the aggregate of its authorized but unissued and otherwise unreserved
Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of Warrant Shares that
are initially issuable and deliverable upon the exercise of this entire Warrant,
free from preemptive rights or any other contingent purchase rights of persons
other than the Holder (taking into account the adjustments and restrictions of
Section 9). The Company covenants that all Warrant Shares so issuable and
deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable and free from all taxes, liens and
charges created by the Company in respect of the original issuance thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue). The Company further covenants that its issuance of this Warrant
shall constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
the Warrant Shares upon the exercise of the purchase rights under this Warrant.
The Company represents and warrants that the Warrant Shares, when issued and
paid for in accordance with the terms of the Offering Documents and the
Warrants, will be issued free and clear of all security interests, claims, liens
and other encumbrances other than restrictions imposed by applicable securities
laws. The Company will take all such action as may be reasonably necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of any
securities exchange or automated quotation system upon which the Common Stock
may be listed.

 

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9.       Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.

 

(a)       Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock
into a larger number of shares, (iii) combines (by combination, reverse stock
split or otherwise) its outstanding shares of Common Stock into a smaller number
of shares or (iv) issues by reclassification of shares of Common Stock any
shares of capital stock of the Company, then in each such case the Exercise
Price shall be adjusted to a price determined by multiplying the Exercise Price
in effect immediately prior to the effective date of such event by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
on such effective date immediately before giving effect to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after giving effect to such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii), (iii) or (iv) of this
paragraph shall become effective immediately after the effective date of such
subdivision, combination or reclassification.

 

(b)       Pro Rata Distributions. If the Company, at any time while this Warrant
is outstanding, distributes to all holders of Common Stock for no consideration
(i) evidences of its indebtedness, (ii) any security (other than a distribution
of Common Stock covered by the preceding paragraph) or (iii) rights or warrants
to subscribe for or purchase any security, or (iv) any other asset, including
cash (in each case, “Distributed Property”), except, for any distributions
pursuant to a shareholders’ rights plan or similar takeover defense agreement or
plan adopted by the Company, then, upon any exercise of this Warrant that occurs
after the record date fixed for determination of stockholders entitled to
receive such distribution, the Holder shall be entitled to receive, in addition
to the Warrant Shares otherwise issuable upon such exercise (if applicable), the
Distributed Property that such Holder would have been entitled to receive in
respect of such number of Warrant Shares had the Holder been the record holder
of such Warrant Shares immediately prior to such record date.

 

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(c)       Fundamental Transactions. If, at any time while this Warrant is
outstanding (i) the Company effects (A) any merger of the Company with (but not
into) another Person, in which stockholders of the Company immediately prior to
such transaction own less than a majority of the outstanding stock of the
surviving entity, or (B) any merger or consolidation of the Company into another
Person, (ii) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (iii) any tender offer or
exchange offer approved or authorized by the Company’s Board of Directors is
completed pursuant to which holders of at least a majority of the outstanding
Common Stock tender or exchange their shares for other securities, cash or
property, or (iv) the Company effects any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(other than as a result of a subdivision or combination of shares of Common
Stock covered by Section 9(a) above or as a result of a transaction, the primary
purpose of which is to change the jurisdiction of incorporation of the Company)
(in any such case, a “Fundamental Transaction”), then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant without regard to any
limitations on exercise contained herein (the “Alternate Consideration”), and
the Holder shall no longer have the right to receive Warrant Shares upon
exercise of this Warrant. The Company shall not effect any such Fundamental
Transaction unless prior to or simultaneously with the consummation thereof, any
successor to the Company, surviving entity or the corporation purchasing or
otherwise acquiring such assets or other appropriate corporation or Person shall
assume the obligation to deliver to the Holder, such Alternate Consideration as,
in accordance with the foregoing provisions, the Holder may be entitled to
receive, and the other obligations under this Warrant. The provisions of this
Section 9(c) shall similarly apply to subsequent transactions of an analogous
type to any Fundamental Transaction. Notwithstanding anything to the contrary,
in the event of a Fundamental Transaction, the Company or any successor to the
Company, surviving entity or the corporation purchasing or otherwise acquiring
such assets or other appropriate corporation or Person shall, at the Holder’s
option, exercisable at any time concurrently with, or within 30 days after, the
consummation of the Fundamental Transaction, purchase this Warrant from the
Holder by paying to the Holder an amount of cash equal to the Black Scholes
Value of the remaining unexercised portion of this Warrant on the date of the
consummation of such Fundamental Transaction. As used herein, “Black Scholes
Value” means the value of this Warrant based on the Black and Scholes Option
Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”)
determined as of the day of consummation of the applicable Fundamental
Transaction for pricing purposes and reflecting (A) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the time between
the date of the public announcement of the applicable Fundamental Transaction
and the Expiration Date, (B) an expected volatility equal to the greater of 100%
and the 100 day volatility obtained from the HVT function on Bloomberg as of the
Trading Day immediately following the public announcement of the applicable
Fundamental Transaction, (C) the underlying price per share used in such
calculation shall be the sum of the price per share being offered in cash, if
any, plus the value of any non-cash consideration, if any, being offered in such
Fundamental Transaction, and (D) a remaining option time equal to the time
between the date of the public announcement of the applicable Fundamental
Transaction and the Expiration Date.

 

(d)       Number of Warrant Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to Section 9(a), the number of Warrant Shares that may
be purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the increased or decreased number of Warrant Shares shall
be the same as the aggregate Exercise Price in effect immediately prior to such
adjustment.

 

(e)       Calculations. All calculations under this Section 9 shall be made to
the nearest cent or the nearest share, as applicable.

 

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(f)       Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 9, the Company at its expense will promptly compute such
adjustment, in good faith, in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment, including a statement of
the adjusted Exercise Price and adjusted number or type of Warrant Shares or
other securities issuable upon exercise of this Warrant (as applicable),
describing the transactions giving rise to such adjustments and showing in
reasonable detail the facts upon which such adjustment is based. Upon written
request, the Company will promptly deliver a copy of each such certificate to
the Holder and to the Company’s transfer agent.

 

(g)       Notice of Corporate Events. If, while this Warrant is outstanding, the
Company (i) declares a dividend or any other distribution of cash, securities or
other property in respect of its Common Stock, including, without limitation,
any granting of rights or warrants to subscribe for or purchase any capital
stock of the Company, (ii) authorizes or approves, enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction
or (iii) authorizes the voluntary dissolution, liquidation or winding up of the
affairs of the Company, then, except if such notice and the contents thereof
shall be deemed to constitute material non-public information, the Company shall
deliver to the Holder a notice of such transaction at least five (5) Trading
Days prior to the applicable record or effective date on which a Person would
need to hold Common Stock in order to participate in or vote with respect to
such transaction; provided, however, that the failure to deliver such notice or
any defect therein shall not affect the validity of the corporate action
required to be described in such notice.

 

10.       Payment of Exercise Price. The Holder shall either pay the Exercise
Price in immediately available funds or by way of a “cashless exercise”, in
which event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:

 

X = Y [(A-B)/A]

 

where:

 

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

 

Y = the total number of Warrant Shares with respect to which this Warrant is
being exercised.

 

A = the average of the Closing Sale Prices of the shares of Common Stock for the
five consecutive Trading Days ending on the date immediately preceding the
Exercise Date.

 

B = the Exercise Price then in effect for the applicable Warrant Shares at the
time of such exercise.

 

For purposes of this Warrant, “Closing Sale Price” means, for any security as of
any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a National
Securities Exchange, the last trade price of the Common Stock for such date (or
the nearest preceding date) on a National Securities Exchange on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b) if the Common Stock is not then listed or quoted on a National
Securities Exchange, the last closing price of a share of Common Stock for such
date (or the nearest preceding date) on the OTCQB or the OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on the OTCQB or
the OTCQX and if prices for the Common Stock are then reported in the “Pink
Sheets” published by OTC Markets Group, Inc. (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported, or (d) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the Company.

 

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For purposes of Rule 144, it is intended, understood and acknowledged that the
provisions above permitting “cashless exercise” are intended, in part, to ensure
that a full or partial exchange of this Warrant pursuant to such provisions will
qualify as a conversion, within the meaning of paragraph (d)(3)(ii) of Rule 144,
and the holding period for the Warrant Shares shall be deemed to have commenced
as to such original Holder, on the Original Issue Date.

 

11.       Limitations on Exercise. The Company shall not effect the exercise of
this Warrant, and the Holder shall not have the right to exercise this Warrant,
to the extent that after giving effect to such exercise, the Holder (together
with the Holder’s Affiliates) would beneficially own in excess of 4.99% (the
“Beneficial Ownership Limitation”) of the shares of Common Stock outstanding
immediately after giving effect to such exercise. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by
the Holder and its Affiliates shall include the number of shares of Common Stock
issuable upon the exercise of this Warrant, but shall exclude shares of Common
Stock which would be issuable upon exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially owned by
the Holder and its affiliates (including, without limitation, any convertible
notes or convertible preferred stock or warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein. Except as
set forth in the preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act of 1934, as amended. For purposes of this Warrant, in determining the number
of outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in the most recent of (1) the
Company’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other
public filing with the Securities and Exchange Commission, as the case may be,
(2) a more recent public announcement by the Company or (3) any other notice by
the Company or its transfer agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written or oral request
of the Holder, the Company shall within two days confirm to the Holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company by the Holder thereof
and its Affiliates since the date as of which such number of outstanding shares
of Common Stock was reported. By written notice to the Company, the Holder may
from time to time increase or decrease the Beneficial Ownership Limitation to
any other percentage specified in such notice; provided that (i) any such
increase will not be effective until the sixty-first (61st) day after such
notice is delivered to the Company, and (ii) any such increase or decrease will
apply only to the Holder. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms
of this Section 11 to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation.

 

12.       Piggyback Registration. If the Company proposes to register
(including, for this purpose, a registration effected by the Company for
stockholders other than the Holder) any of its securities under the Securities
Act in connection with the public offering of such securities solely for cash
(other than a registration on Form S-4 or Form S-8), the Company shall, at such
time, promptly give the Holder notice of such registration. Upon the request of
the Holder given within twenty (20) days after such notice is given by the
Company, the Company shall cause to be registered all of the Registrable
Securities that the Holder has requested to be included in such registration.
The Company shall have the right to terminate or withdraw any registration
initiated by it under this Section 12 before the effective date of such
registration, whether or not the Holder has elected to include Registrable
Securities in such registration. All expenses (other than Selling Expenses)
incurred in connection with registrations, filings, or qualifications pursuant
to this Section 12, including all registration, filing, and qualification fees;
printers’ and accounting fees; and fees and disbursements of counsel for the
Company, shall be borne and paid by the Company. As used herein, “Registrable
Securities” means the Common Stock issuable or issued upon exercise of this
Warrant. As used herein, “Selling Expenses” means all underwriting discounts,
selling commissions, and stock transfer taxes applicable to the sale of
Registrable Securities.

 

8

 

 

13.       No Fractional Shares. No fractional Warrant Shares will be issued in
connection with any exercise of this Warrant. In lieu of any fractional shares
that would otherwise be issuable, the number of Warrant Shares to be issued
shall be rounded down to the next whole number and the Company shall pay the
Holder in cash the fair market value (based on the Closing Sale Price) for any
such fractional shares.

 

14.       Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given and
effective on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via electronic mail to the e-mail address specified
in this Section 13 prior to 5:00 p.m., New York City time, on a Trading Day, (b)
the next Trading Day after the date of transmission, if such notice or
communication is delivered via electronic mail to the e-mail address specified
in this Section 13 on a day that is not a Trading Day or later than 5:00 p.m.,
New York City time, on any Trading Day, (c) the Trading Day following the date
of mailing, if sent by U.S. nationally recognized overnight courier service with
next day delivery specified, or (d) upon actual receipt by the party to whom
such notice is required to be given. The address for such notices and
communications shall be as follows:

 

If to the Company, to:

 

Conversion Labs, Inc.

800 Third Avenue, Suite 2800

New York, NY 10022

Attention: Justin Schreiber, CEO,

justin@conversionlabs.com

 

With a copy (which shall not constitute notice to the Company) to:

 

If to the Holder, to the address set forth on the signature page hereto.

 

15.       Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon 15 days’ notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last
address as shown on the Warrant Register.

 

9

 

 

16.       Miscellaneous.

 

(a)       No Rights as a Stockholder. The Holder, solely in such Person’s
capacity as a holder of this Warrant, shall not be entitled to vote or receive
dividends or be deemed the holder of share capital of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the Holder, solely in such Person’s capacity as the Holder of this Warrant,
any of the rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue of
stock, reclassification of stock, consolidation, merger, amalgamation,
conveyance or otherwise), receive notice of meetings, receive dividends or
subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this Warrant shall
be construed as imposing any liabilities on the Holder to purchase any
securities, whether such liabilities are asserted by the Company or by creditors
of the Company.

 

(b)       Authorized Shares.

 

(i)       The Company will take all such reasonable action as may be necessary
to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation or of any requirements of the
National Securities Exchange upon which the Common Stock may be listed.

 

(ii)       Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (A) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (B) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (C) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.

 

(iii)       Before taking any action which would result in an adjustment in the
number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.

 

(c)       Successors and Assigns. Subject to the restrictions on transfer set
forth in this Warrant and compliance with applicable securities laws, this
Warrant may be assigned by the Holder. This Warrant may not be assigned by the
Company without the written consent of the Holder except to a successor in the
event of a Fundamental Transaction. This Warrant shall be binding on and inure
to the benefit of the Company and the Holder and their respective successors and
assigns. Subject to the preceding sentence, nothing in this Warrant shall be
construed to give to any Person other than the Company and the Holder any legal
or equitable right, remedy or cause of action under this Warrant.

 

(d)       Amendment and Waiver. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Holders of
Warrants representing no less than a majority of the Warrant Shares obtainable
upon exercise of the Warrants then outstanding.

 

10

 

 

(e)       Acceptance. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.

 

(f)       Governing Law; Jurisdiction; Waiver of Jury Trial. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAW THEREOF. EACH OF THE PARTIES (A) IRREVOCABLY AND UNCONDITIONALLY AGREES THAT
ANY PROCEEDINGS, AT LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY SHALL BE HEARD AND
DETERMINED BY THE FEDERAL OR STATE COURTS LOCATED IN NEW YORK COUNTY IN THE
STATE OF NEW YORK; (B) IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS IN
ANY SUCH PROCEEDING; (C) CONSENTS THAT ANY SUCH PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVES ANY OBJECTION THAT SUCH PARTY MAY NOW OR HEREAFTER HAVE
TO THE VENUE OR JURISDICTION OF SUCH COURTS OR THAT SUCH PROCEEDING WAS BROUGHT
IN AN INCONVENIENT FORUM; AND (D) AGREES THAT SERVICE OF PROCESS IN ANY SUCH
PROCEEDING MAY BE EFFECTED BY PROVIDING A COPY THEREOF BY ANY OF THE METHODS OF
DELIVERY PERMITTED BY SECTION 13 TO SUCH PARTY AT ITS ADDRESS AS PROVIDED IN
SECTION 13 (PROVIDED THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW). EACH OF THE PARTIES
HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER
THEORY). EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS, AS APPLICABLE,
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
15.

 

(g)       Headings. The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.

 

(h)       Severability. In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby, and the Company and the Holder will
attempt in good faith to agree upon a valid and enforceable provision which as
closely as possible reflects the intent of the parties hereto, and upon so
agreeing, shall incorporate such substitute provision in this Warrant.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

 

11

 

 

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

 

  CONVERSION LABS, INC.       By:                                           
Name: Justin Schreiber   Title: President and Chief Executive Officer        
Accepted and acknowledged:       By:     Name:   Title: Authorized Person      
Address:       With a copy (which shall not constitute notice) to:

 

[Signature Page to Class B Warrant]

 

 

 

 

SCHEDULE 1

 

CONVERSION LABS, INC.

 

FORM OF EXERCISE NOTICE

 

[To be executed by the Holder to purchase shares of Common Stock under the
Warrant]

 

Ladies and Gentlemen:

 

(1)       The undersigned is the Holder of Warrant No. __________ (the
“Warrant”) issued by Conversion Labs, Inc., a Delaware corporation (the
“Company”). Capitalized terms used herein and not otherwise defined herein have
the respective meanings set forth in the Warrant.

 

(2)       The undersigned hereby exercises its right to purchase __________
Warrant Shares pursuant to the Warrant.

 

(3)       The Holder intends that payment of the Exercise Price shall be made as
(check one):

 

[  ]      Cash Exercise

 

[  ]      “Cashless Exercise” under Section 10 of the Warrant

 

(4)       If the Holder has elected a Cash Exercise, the Holder shall pay the
sum of $_______ in immediately available funds to the Company in accordance with
the terms of the Warrant.

 

(5)       Pursuant to this Exercise Notice, the Company shall deliver to the
Holder Warrant Shares determined in accordance with the terms of the Warrant.
Please issue (check applicable box):

 

[  ]      A certificate of certificates representing the Warrant Shares in the
name of the undersigned or in such other name as is specified below:

 

                                                                                                                              

 

[  ]      The Warrant Shares in electronic form to the following account:

 

Name and Contact for Broker:
                                                                        

 

Broker no:
                                                                                                          

 

Account no:
                                                                                                      

 

Account holder:
                                                                                                

 

(6)       By its delivery of this Exercise Notice, the undersigned represents
and warrants to the Company that in giving effect to the exercise evidenced
hereby the Holder will not beneficially own in excess of the number of shares of
Common Stock (as determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended) permitted to be owned under Section 11 of the
Warrant to which this notice relates.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

Dated:                                       ,               

 

Name of Holder:                                                 

 

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

Name:

Title:

 

[Signature Page to Warrant Exercise Notice]

 

 

 

 

SCHEDULE 2

 

Conversion labs, INC.

 

FORM OF ASSIGNMENT

 

[To be completed and executed by the Holder only upon transfer of the Warrant]

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
_______________ (the “Transferee”) the right represented by the within Warrant
to purchase __________ shares of Common Stock of Conversion Labs, Inc., a
Delaware corporation (the “Company”) to which the within Warrant relates and
appoints _________________ attorney to transfer said right on the books of the
Company with full power of substitution in the premises. In connection
therewith, the undersigned represents, warrants, covenants and agrees to and
with the Company that:

 

(a)the offer and sale of the Warrant contemplated hereby is being made in
compliance with Section 4(1) of the United States Securities Act of 1933, as
amended (the “Securities Act”), or another valid exemption from the registration
requirements of Section 5 of the Securities Act and in compliance with all
applicable securities laws of the states of the United States;

 

(b)the undersigned has not offered to sell the Warrant by any form of general
solicitation or general advertising, including, but not limited to, any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising;

 

(c)the undersigned has read the Transferee’s investment letter included
herewith, and to its actual knowledge, the statements made therein are true and
correct; and

 

(d)the undersigned understands that the Company may condition the transfer of
the Warrant contemplated hereby upon the delivery to the Company by the
undersigned or the Transferee, as the case may be, of a written opinion of
counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that such transfer
may be made without registration under the Securities Act and under applicable
securities laws of the states of the United States.

 

Dated:                                              
                                         (Signature must conform in all respects
to name of
holder as specified on the face of the Warrant)                       Address of
Transferee In the presence of: