Exhibit 10.2
 
 

WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE
INTO HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE.  THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND
ACCORDINGLY, MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OR PURSUANT TO AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, THE AVAILABILITY OF WHICH IS CONFIRMED BY AN
OPINION OF COUNSEL IN GENERALLY ACCEPTABLE FORM AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS..
CLS HOLDINGS USA, INC.
Warrant To Purchase Common Stock
Warrant No.: CLSH-1-2
Number of Shares:          1,250,000
Warrant Exercise Price:          $0.60
 
Expiration Date:          May 14, 2023

 
Date of Issuance: July 20, 2018

CLS Holdings USA, Inc., a Nevada corporation (the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, YA II PN, Ltd. (the “Holder”), the registered holder
hereof or its permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company upon surrender of this Warrant, at any time
or times on or after the date hereof, but not after 11:59 P.M. Eastern Time on
the Expiration Date (as defined herein) up to 1,250,000 fully paid and
nonassessable shares of Common Stock (as defined herein) of the Company (the
“Warrant Shares”) at the exercise price per share provided in Section 1(b) below
or as subsequently adjusted; provided, however, that in no event shall the
holder be entitled to exercise this Warrant for a number of Warrant Shares in
excess of that number of Warrant Shares which, upon giving effect to such
exercise, would cause the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such exercise, except within 60
days of the Expiration Date (however, such restriction may be waived by Holder
(but only as to itself and not to any other holder) upon not less than 65 days
prior notice to the Company).  For purposes of the foregoing proviso, 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
exercise of this Warrant with respect to which the determination of such proviso
is being made, but shall exclude shares of Common Stock which would be issuable
upon (i) exercise of the remaining, unexercised Warrants beneficially owned by
the holder and its affiliates and

--------------------------------------------------------------------------------

(ii) 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 preferred
stock) 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 Securities Exchange Act of 1934, as
amended.  For purposes of this Warrant, in determining the number of outstanding
shares of Common Stock a holder may rely on the number of outstanding shares of
Common Stock as reflected in (1) the Company’s most recent Form 10-Q or Form
10-K, 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.  Upon the written request of any
holder, the Company shall promptly, but in no event later than 1 Business Day
following the receipt of such notice, confirm in writing to any such 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 exercise of Warrants (as defined below) by such holder and its affiliates
since the date as of which such number of outstanding shares of Common Stock was
reported.
Section 1.          

(a)          This Warrant is issued pursuant to the Securities Purchase
Agreement (“Securities Purchase Agreement”) dated May 11, 2018 between the
Company and the Holder or issued in exchange or substitution thereafter or
replacement thereof.  Each Capitalized term used, and not otherwise defined
herein, shall have the meaning ascribed thereto in the Securities Purchase
Agreement.
(b)          Definitions.  The following words and terms as used in this Warrant
shall have the following meanings:
(i)          “Approved Stock Plan” means a stock plan, award or arrangement
pursuant to which the Company’s securities may be issued to any employee,
officer, or director or third party service providers in the normal course of
business, for services provided to the Company or to a new hire in connection
with future employment by the Company, provided that (i) such plan, award or
arrangement and any issuance made pursuant thereto has been approved by the
Board of Directors of the Company, and (ii) the issuance of any such shares are
not subject to any registration statement or contain any registration rights.
(ii)           “Business Day” means any day other than Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law to remain closed.
(iii)          “Convertible Debentures” means the convertible debentures issued
pursuant to the Securities Purchase Agreement.
(iv)          “Convertible Securities” means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Stock.
2

--------------------------------------------------------------------------------

(v)          “Closing Bid Price” means the closing bid price (or closing trade
if there is no closing bid price) of Common Stock as quoted on the Principal
Market (as reported by Bloomberg, LP (“Bloomberg”) through its “Volume at Price”
function).
(vi)          “Common Stock” means (i) the Company’s common stock, par value
$0.0001 per share, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(vii)          “Event of Default” means an event of default under the Securities
Purchase Agreement or the Convertible Debentures issued in connection therewith.
(viii)          “Excluded Securities” means any Common Stock issued or issuable:
(i) in connection with any Approved Stock Plan, (ii) upon conversion of any of
the Convertible Debentures issued pursuant to the Securities Purchase Agreement,
or exercise of any of the Warrants, or (iii) upon conversion or exercise of any
Options or Convertible Securities which are outstanding on the day immediately
preceding the date of the Securities Purchase Agreement, provided that the
conversion or exercise price of such Options or Convertible Securities is not
amended, modified or changed on or after the date of the Securities Purchase
Agreement.
(ix)          “Expiration Date” means the date set forth on the first page of
this Warrant.
(x)          “Issuance Date” means the date hereof.
(xi)          “Options” means any rights, warrants or options to subscribe for
or purchase Common Stock or Convertible Securities.
(xii)           “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(xiii)          “Primary Market” means the OTC Markets Group’s OTCQB Venture
Market.
(xiv)          “Securities Act” means the Securities Act of 1933, as amended.
(xv)          “Warrant” means this Warrant and all Warrants issued in exchange,
transfer or replacement thereof.
(xvi)          “Warrant Exercise Price” shall be $0.60 or as subsequently
adjusted as provided in Section 8 hereof.
(c)          Other Definitional Provisions.
(i)          Except as otherwise specified herein, all references herein (A) to
the Company shall be deemed to include the Company’s successors and (B) to any
applicable law defined or referred to herein shall be deemed references to such
applicable law as the same may have been or may be amended or supplemented from
time to time.
3

--------------------------------------------------------------------------------

(ii)          When used in this Warrant, the words “herein”, “hereof”, and
“hereunder” and words of similar import, shall refer to this Warrant as a whole
and not to any provision of this Warrant, and the words “Section”, “Schedule”,
and “Exhibit” shall refer to Sections of, and Schedules and Exhibits to, this
Warrant unless otherwise specified.
(iii)          Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
Section 2.                    Exercise of Warrant.
(a)          Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, pro
rata as hereinafter provided, at any time on any Business Day on or after the
opening of business on such Business Day, commencing with the first day after
the date hereof, and prior to 5:00 P.M. Eastern Time on the Expiration Date (i)
by delivery of a written notice, in the form of the subscription notice attached
as Exhibit A hereto (the “Exercise Notice”), of such holder’s election to
exercise this Warrant, which notice shall specify the number of Warrant Shares
to be purchased, payment to the Company of an amount equal to the Warrant
Exercise Price(s) applicable to the Warrant Shares being purchased, multiplied
by the number of Warrant Shares (at the applicable Warrant Exercise Price) as to
which this Warrant is being exercised (plus any applicable issue or transfer
taxes) (the “Aggregate Exercise Price”) in cash or wire transfer of immediately
available funds and the surrender of this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) to a common carrier for overnight delivery to the Company or (ii)
if at the time of exercise, the Warrant Shares are not subject to an effective
registration statement or if an Event of Default has occurred and is continuing,
by delivering an Exercise Notice and in lieu of making payment of the Aggregate
Exercise Price in cash or wire transfer, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (the “Cashless Exercise”):
Net Number = (A x B) – (A x C)
                                      B

For purposes of the foregoing formula:

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

B = the Closing Bid Price of the Common Stock on the date of exercise of the
Warrant.

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

In the event of any exercise of the rights represented by this Warrant in
compliance with this Section 2, the Company shall on or before the 3rd  Business
Day following the date of receipt of the Exercise Notice, the Aggregate Exercise
Price and this Warrant (or an indemnification undertaking with respect to this
Warrant in the case of its loss, theft or destruction) and the receipt
4

--------------------------------------------------------------------------------

of the representations of the holder specified in Section 6 hereof, if requested
by the Company (the “Exercise Delivery Documents”), and if the Warrant Shares
are subject to an effective and current Registration Statement and the Common
Stock is DTC eligible, credit such aggregate number of shares of Common Stock to
which the holder shall be entitled to the holder’s or its designee’s balance
account with The Depository Trust Company; provided, however, if the holder who
submitted the Exercise Notice requested physical delivery of any or all of the
Warrant Shares, or, if the Warrant Shares are not subject to an effective and
current Registration Statement and the Common Stock is not DTC eligible  then
the Company shall, on or before the 3rd  Business Day following receipt of the
Exercise Delivery Documents, issue and surrender to a common carrier for
overnight delivery to the address specified in the Exercise Notice, a
certificate, registered in the name of the holder, for the number of shares of
Common Stock to which the holder shall be entitled pursuant to such request. 
The Warrant Shares shall be issued with a legend unless they are subject to an
effective and current Registration Statement or they are being transferred
pursuant to an exemption from such registration requirements, the availability
of which is confirmed in an opinion of counsel acceptable to the Company’s
Transfer Agent. Upon delivery of the Exercise Notice pursuant to the notice
delivery provisions in Section 11 herein and Aggregate Exercise Price referred
to in clause (i) or (ii) above the holder of this Warrant shall be deemed for
all corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised.  In the case of a dispute
as to the determination of the Warrant Exercise Price, the Closing Bid Price or
the arithmetic calculation of the Warrant Shares, the Company shall promptly
issue to the holder the number of Warrant Shares that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via
facsimile within 1 Business Day of receipt of the holder’s Exercise Notice.
(b)          If the holder and the Company are unable to agree upon the
determination of the Warrant Exercise Price or arithmetic calculation of the
Warrant Shares within 1 day of such disputed determination or arithmetic
calculation being submitted to the holder, then the Company shall immediately
submit via electronic mail (i) the disputed determination of the Warrant
Exercise Price or the Closing Bid Price to an independent, reputable investment
banking firm or (ii) the disputed arithmetic calculation of the Warrant Shares
to its independent, outside accountant.  The Company shall cause the investment
banking firm or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the holder of the
results no later than 72 hours from the time it receives the disputed
determinations or calculations.  Such investment banking firm’s or accountant’s
determination or calculation, as the case may be, shall be deemed conclusive
absent manifest error.
(c)          Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable and
in no event later than 5 Business Days after any exercise and at its own
expense, issue a new Warrant identical in all respects to this Warrant exercised
except it shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant exercised,
less the number of Warrant Shares with respect to which such Warrant is
exercised.
(d)          No fractional Warrant Shares are to be issued upon any pro rata
exercise of this Warrant, but rather the number of Warrant Shares issued upon
such exercise of this Warrant shall be rounded up or down to the nearest whole
number.
5

--------------------------------------------------------------------------------

(e)          If the Company or its Transfer Agent shall fail for any reason or
for no reason to issue to the holder within 5 days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which the
holder is entitled or to credit the holder’s balance account with The Depository
Trust Company for such number of Warrant Shares to which the holder is entitled
upon the holder’s exercise of this Warrant, unless such failure results from a
failure of the Company’s Transfer Agent to issue such shares as a result of an
act of terrorism, war, natural disaster, act of god or other force majure event,
the Company shall, in addition to any other remedies under this Warrant or
otherwise available to such holder, pay as additional damages in cash to such
holder on each day the issuance of such certificate for Warrant Shares is not
timely effected an amount equal to 0.025% of the product of (A) the sum of the
number of Warrant Shares not issued to the holder on a timely basis and to which
the holder is entitled, and (B) the Closing Bid Price of the Common Stock for
the trading day immediately preceding the last possible date which the Company
could have issued such Common Stock to the holder without violating this
Section 2.
(f)          If within 5 days after the Company’s receipt of the Exercise
Delivery Documents and the written request of the Holder that a new Warrant be
issued, the Company fails to deliver a new Warrant to the holder for the number
of Warrant Shares to which such holder is entitled pursuant to Section 2 hereof,
then, in addition to any other available remedies under this Warrant, or
otherwise available to such holder, the holder shall be entitled to exercise or
transfer its rights under such new warrant as if it had received such new
Warrant and the Company shall be obligated to honor such exercises or transfers
as if the holder had submitted the new Warrant without violating this Section 2.
Section 3.                    Covenants as to Common Stock.  The Company hereby
covenants and agrees as follows:
(a)          This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.
(b)          All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof.
(c)          During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved at least 100% of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price.  If at any time the Company does not have a sufficient
number of shares of Common Stock authorized and available, then the Company
shall call and hold a special meeting of its stockholders within 60 days of that
time for the sole purpose of increasing the number of authorized shares of
Common Stock.
(d)          If at any time after the date hereof the Company shall file a
Registration Statement, the Company shall include the Warrant Shares issuable to
the holder, pursuant to the terms of this Warrant and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all Warrant
Shares from time to time issuable upon the exercise of this
6

--------------------------------------------------------------------------------

Warrant on the Primary Market or such national securities exchange or automated
quotation system on which the Common Stock of the Company is listed; and the
Company shall so list on the Primary Market or such national securities exchange
or automated quotation system on which the Common Stock of the Company is
listed, as the case may be, and shall maintain such listing of, any other shares
of capital stock of the Company issuable upon the exercise of this Warrant
Shares if and so long as any shares of the same class shall be listed on the
Primary Market or such national securities exchange or automated quotation
system on which the Common Stock of the Company is listed.
(e)          The Company will not, by amendment of its Articles 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 to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant.  The Company will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Warrant
Exercise Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.
(f)          This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company’s assets.
Section 4.                    Taxes.  The Company shall pay any and all taxes,
except any applicable withholding, which may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this Warrant.
Section 5.                    Warrant Holder Not Deemed a Stockholder.  Except
as otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of shares
of capital stock of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, 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, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she 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 such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company.  Notwithstanding this Section 5, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6.                    Representations of Holder.  The holder of this
Warrant, by the acceptance hereof, represents that it is acquiring this Warrant
and the Warrant Shares for its own account for
7

--------------------------------------------------------------------------------

investment only and not with a view towards, or for resale in connection with,
the public sale or distribution of this Warrant or the Warrant Shares, except
pursuant to sales registered or exempted under the Securities Act; provided,
however, that by making the representations herein, the holder does not agree to
hold this Warrant or any of the Warrant Shares for any minimum or other specific
term and reserves the right to dispose of this Warrant and the Warrant Shares at
any time in accordance with or pursuant to a registration statement or an
exemption under the Securities Act.  The holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such holder is an
“accredited investor” as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an “Accredited Investor”).  Upon exercise of this Warrant  the holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so purchased are being acquired solely for the
holder’s own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale and that such holder is an
Accredited Investor.  If such holder cannot make such representations because
they would be factually incorrect, it shall be a condition to such holder’s
exercise of this Warrant that the Company receive such other representations as
the Company considers reasonably necessary to assure the Company that the
issuance of its securities upon exercise of this Warrant shall not violate any
United States or state securities laws.
Section 7.                    Ownership and Transfer.
(a)          The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee.  The Company may treat the
person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary, but
in all events recognizing any transfers made in accordance with the terms of
this Warrant.
Section 8.                    Adjustment of Warrant Exercise Price.  The Warrant
Exercise Price of this Warrant shall be adjusted from time to time as follows:
(a)          Adjustment of Warrant Exercise Price.  If and whenever on or after
the Issuance Date of this Warrant, the Company issues or sells, or is deemed to
have issued or sold, any shares of Common Stock (other than Excluded Securities)
for a consideration per share (the “New Issuance Price”) less than the Fixed
Conversion Price of the Convertible Debentures in effect immediately prior to
such issuance or sale (the “Applicable Price”), then immediately after such
issue or sale the Warrant Exercise Price then in effect shall be reduced to an
amount equal to such New Issuance Price.
(b)          Effect on Warrant Exercise Price of Certain Events.  For purposes
of determining the adjusted Warrant Exercise Price under Section 8(a) above, the
following shall be applicable:
(i)          Issuance of Options.  If after the date hereof, the Company in any
manner grants any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon conversion
or exchange of any
8

--------------------------------------------------------------------------------

Convertible Securities issuable upon exercise of any such Option is less than
the Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share.  For purposes of this
Section 8(b)(i), the lowest price per share for which one share of Common Stock
is issuable upon exercise of such Options or upon conversion or exchange of such
Convertible Securities shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock upon the granting or sale of the Option, upon exercise
of the Option or upon conversion or exchange of any convertible security
issuable upon exercise of such Option.  No further adjustment of the Warrant
Exercise Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.
(ii)          Issuance of Convertible Securities.  If the Company in any manner
issues or sells any Convertible Securities and the lowest price per share for
which 1 share of Common Stock is issuable upon the conversion or exchange
thereof is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share.  For the purposes of this Section 8(b)(ii), the lowest price per
share for which one share of Common Stock is issuable upon such conversion or
exchange shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to one share of Common
Stock upon the issuance or sale of the convertible security and upon conversion
or exchange of such convertible security.  No further adjustment of the Warrant
Exercise Price shall be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustment of the Warrant Exercise Price had been or are to be made
pursuant to other provisions of this Section 8(b), no further adjustment of the
Warrant Exercise Price shall be made by reason of such issue or sale.
(iii)          Change in Option Price or Rate of Conversion.  If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion or exchange of any Convertible Securities, or the
rate at which any Convertible Securities are convertible into or exchangeable
for Common Stock changes at any time, the Warrant Exercise Price in effect at
the time of such change shall be adjusted to the Warrant Exercise Price which
would have been in effect at such time had such Options or Convertible
Securities provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time initially granted,
issued or sold.  For purposes of this Section 8(b)(iii), if the terms of any
Option or convertible security that was outstanding as of the Issuance Date of
this Warrant are changed in the manner described in the immediately preceding
sentence, then such Option or convertible security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change.  No adjustment pursuant to this
Section 8(b) shall be made if such adjustment would result in an increase of the
Warrant Exercise Price then in effect.
(iv)          Calculation of Consideration Received.  If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefore will be deemed to
be the gross amount received by the
9

--------------------------------------------------------------------------------

Company therefore; provided that any deductions made from the gross amount are
commercially reasonable commissions and expenses in connection with such capital
raise.  If any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of such consideration
received by the Company will be the fair value of such consideration, except
where such consideration consists of marketable securities, in which case the
amount of consideration received by the Company will be the market price of such
securities on the date of receipt of such securities.  If any Common Stock,
Options or Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefore will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Options or Convertible Securities, as
the case may be.  The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the holders of Warrants
representing at least two-thirds (b) of the Warrant Shares issuable upon
exercise of the Warrants then outstanding.  If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation Event”), the fair value of such consideration will be
determined within five (5) Business Days after the tenth (10th) day following
the Valuation Event by an independent, reputable appraiser jointly selected by
the Company and the holders of Warrants representing at least two-thirds (b) of
the Warrant Shares issuable upon exercise of the Warrants then outstanding.  The
determination of such appraiser shall be final and binding upon all parties and
the fees and expenses of such appraiser shall be borne jointly by the Company
and the holders of Warrants.
(v)          Integrated Transactions.  In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for a consideration of $.01.
(vi)          Treasury Shares.  The number of shares of Common Stock outstanding
at any given time does not include shares owned or held by or for the account of
the Company, and the disposition of any shares so owned or held will be
considered an issue or sale of Common Stock.
(vii)          Record Date.  If the Company takes a record of the holders of
Common Stock for the purpose of entitling them (1) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (2) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(c)          Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock.  If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, any Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased.  If the Company at any time after the date of
issuance of this Warrant combines (by
10

--------------------------------------------------------------------------------

combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, any Warrant
Exercise Price in effect immediately prior to such combination will be
proportionately increased and the number of Warrant Shares issuable upon
exercise of this Warrant will be proportionately decreased.  Any adjustment
under this Section 8(c) shall become effective at the close of business on the
date the subdivision or combination becomes effective.
(d)          Distribution of Assets.  If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) (a “Distribution”), at any time
after the issuance of this Warrant, then, in each such case:
(i)          any Warrant Exercise Price in effect immediately prior to the close
of business on the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution shall be reduced, effective as of the
close of business on such record date, to a price determined by multiplying such
Warrant Exercise Price by a fraction of which (A) the numerator shall be the
Closing Sale Price of the Common Stock on the trading day immediately preceding
such record date minus the value of the Distribution (as determined in good
faith by the Company’s Board of Directors) applicable to one share of Common
Stock, and (B) the denominator shall be the Closing Sale Price of the Common
Stock on the trading day immediately preceding such record date; and
(ii)          either (A) the number of Warrant Shares obtainable upon exercise
of this Warrant shall be increased to a number of shares equal to the number of
shares of Common Stock obtainable immediately prior to the close of business on
the record date fixed for the determination of holders of Common Stock entitled
to receive the Distribution multiplied by the reciprocal of the fraction set
forth in the immediately preceding clause (i), or (B) in the event that the
Distribution is of common stock of a company whose common stock is traded on a
national securities exchange or a national automated quotation system, then the
holder of this Warrant shall receive an additional warrant to purchase Common
Stock, the terms of which shall be identical to those of this Warrant, except
that such warrant shall be exercisable into the amount of the assets that would
have been payable to the holder of this Warrant pursuant to the Distribution had
the holder exercised this Warrant immediately prior to such record date and with
an exercise price equal to the amount by which the exercise price of this
Warrant was decreased with respect to the Distribution pursuant to the terms of
the immediately preceding clause (i).
(e)          Certain Events.  If any event occurs of the type contemplated by
the provisions of this Section 8 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company’s Board of Directors will make an appropriate adjustment in the Warrant
Exercise Price and the number of shares of Common Stock obtainable upon exercise
of this Warrant so as to protect the rights of the holders of the Warrants;
provided, except as set forth in section 8(c),that no such adjustment pursuant
to this Section 8(e) will increase the Warrant Exercise Price or decrease the
number of shares of Common Stock obtainable as otherwise determined pursuant to
this Section 8.
11

--------------------------------------------------------------------------------

(f)          Voluntary Adjustments By Company.  The Company may at any time
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
(g)          Notices.
(i)          Immediately upon any adjustment of the Warrant Exercise Price, the
Company will give written notice thereof to the holder of this Warrant, setting
forth in reasonable detail, and certifying, the calculation of such adjustment.
(ii)          The Company will give written notice to the holder of this Warrant
at least ten (10) days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock or (C) for determining rights to vote with respect to any Organic
Change (as defined below), dissolution or liquidation, provided that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such holder.
(iii)          The Company will also give written notice to the holder of this
Warrant at least 10 days prior to the date on which any Organic Change,
dissolution or liquidation will take place, provided that such information shall
be made known to the public prior to or in conjunction with such notice being
provided to such holder.
Section 9.                    Purchase Rights; Reorganization, Reclassification,
Consolidation, Merger or Sale.
(a)          In addition to any adjustments pursuant to Section 8 above, if at
any time the Company grants, issues or sells any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property pro rata to
the record holders of any class of Common Stock (the “Purchase Rights”), then
the holder of this Warrant will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights.
(b)          Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company’s assets
to another Person or other transaction in each case which is effected in such a
way that holders of Common Stock are entitled to receive (either directly or
upon subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an “Organic Change.”  Prior
to the consummation of any (i) sale of all or substantially all of the Company’s
assets to an acquiring Person or (ii) other Organic Change following which the
Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the successor resulting from such Organic Change (in
each case, the “Acquiring Entity”) a written agreement to deliver to each holder
of Warrants in exchange for such Warrants, a security of the Acquiring Entity
evidenced
12

--------------------------------------------------------------------------------

by a written instrument substantially similar in form and substance to this
Warrant (including an adjusted warrant exercise price equal to the value for the
Common Stock reflected by the terms of such consolidation, merger or sale, and
exercisable for a corresponding number of shares of Common Stock acquirable and
receivable upon exercise of the Warrants without regard to any limitations on
exercise, if the value so reflected is less than any Applicable Warrant Exercise
Price immediately prior to such consolidation, merger or sale).  Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision to insure that each of the holders of the Warrants will thereafter
have the right to acquire and receive in lieu of or in addition to (as the case
may be) the Warrant Shares immediately theretofore issuable and receivable upon
the exercise of such holder’s Warrants (without regard to any limitations on
exercise), such shares of stock, securities or assets that would have been
issued or payable in such Organic Change with respect to or in exchange for the
number of Warrant Shares which would have been issuable and receivable upon the
exercise of such holder’s Warrant as of the date of such Organic Change (without
taking into account any limitations or restrictions on the exercisability of
this Warrant).
Section 10.                    Lost, Stolen, Mutilated or Destroyed Warrant.  If
this Warrant is lost, stolen, mutilated or destroyed, the Company shall
promptly, on receipt of an indemnification undertaking (or, in the case of a
mutilated Warrant, the Warrant), issue a new Warrant of like denomination and
tenor as this Warrant so lost, stolen, mutilated or destroyed.
Section 11.                    Notice.  Any  notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered upon: 
(i) receipt, when delivered personally, (ii) 1 Business Day after deposit with
an overnight courier service with next day delivery specified, in each case,
properly addressed to the party to receive the same, or  (iii) receipt, when
sent by electronic mail (provided that the electronic mail transmission is not
returned in error or the sender is not otherwise notified of any error in
transmission. The addresses and e-mail addresses for such communications shall
be:

If to Holder:
YA II PN, Ltd.
c/o Yorkville Advisors Global, LP
 
1012 Springfield Avenue
 
Mountainside, NJ 07092
 
Attention:   Mark A. Angelo
 
Telephone:  (201) 536-5114
 
Email:    mangelo@yorkvilleadvisors.com
   
With Copy to:
David Gonzalez, Esq.
 
1012 Springfield Avenue
 
Mountainside, NJ 07092
 
Telephone:  (201) 536-5109
 
Email:    dgonzalez@yorkvilleadvisors.com and
              Legal@yorkvilleadvisors.com
   

 
13

--------------------------------------------------------------------------------

   
If to the Company, to:
CLS Holdings USA, Inc.
 
11767 South Dixie Highway – Suite 115
 
Miami, FL 33156
 
Attention:   Jeffrey I. Binder
Telephone: (305) 992-2500
Email:    jeff@clslabs.com
              jeff@jbinder.net
           
With a copy to:
Broad and Cassel LLP
One North Clematis Street – Suite 500
West Palm Beach, FL 33401
Attention:   Kathleen L. Deutsch, Esq.
Telephone:  (561)832-3300
Email:    kdeutsch@broadandcassel.com
              kathydash@aol.com
   

or at such other address and/or electronic email address and/or to the attention
of such other person as the recipient party has specified by written notice
given to each other party 3 Business Days prior to the effectiveness of such
change.  Written confirmation of receipt (i) given by the recipient of such
notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender’s computer containing the time, date,
recipient’s electronic mail address and the text of such electronic mail or
(iii) provided by a nationally recognized overnight delivery service, shall be
rebuttable evidence of personal service, receipt by electronic mail or receipt
from a nationally recognized overnight delivery service in accordance with
clause (i), (ii) or (iii) above, respectively.
Section 12.                    Date.  The date of this Warrant is set forth on
page 1 hereof.  This Warrant, in all events, shall be wholly void and of no
effect after the close of business on the Expiration Date, except that
notwithstanding any other provisions hereof, the provisions of Section 3(d)
shall continue in full force and effect after such date as to any Warrant Shares
or other securities issued upon the exercise of this Warrant.
Section 13.                    Amendment and Waiver.  Except as otherwise
provided herein, the provisions of the Warrant 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 at least 2/3rds of the Warrant
Shares issuable upon exercise of the Warrants then outstanding; provided that,
except for Section 8(c), no such action may increase the Warrant Exercise Price
or decrease the number of shares or class of stock obtainable upon exercise of
any Warrant without the written consent of the holder of such Warrant.
Section 14.                    Assignment.  This Warrant may be assigned by the
Holder only if such assignment is made in compliance with all applicable laws,
including federal and state securities laws.  In connection with any permitted
transfer, the transferee shall make such representation and warranties to the
Company, consistent with Section 6 hereof, s the Company may reasonably request.
14

--------------------------------------------------------------------------------

Section 15.                   Descriptive Headings; Governing Law.  The
descriptive headings of the several sections and paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant.  The
corporate laws of the State of New Jersey shall govern all issues concerning the
relative rights of the Company and its stockholders.  All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New Jersey or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
Jersey.  Each party hereby irrevocably submits to the exclusive jurisdiction of
the Superior Court of the state courts sitting in Union County New Jersey and
the Federal District Court for the District of New Jersey sitting in Newark, New
Jersey, for the adjudication of any dispute hereunder or in connection herewith
or therewith, or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Section 16.                    Remedies, Other Obligations, Breaches and
Injunctive Relief.   The remedies provided in this Warrant shall be cumulative
and in addition to all other remedies available under this Warrant, in any other
agreement between the Company and the Holder, at law or in equity (including a
decree of specific performance and/or other injunctive relief), and nothing
herein shall limit the right of the Holder to pursue actual damages for any
failure by the Company to comply with the terms of this Warrant.  The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate.  The Company therefore agrees that, in the event of any such
breach or threatened breach, the holder of this Warrant shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.

Section 17.                    Waiver of Jury Trial.  AS A MATERIAL INDUCEMENT
FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE PARTIES HERETO HEREBY
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO
THIS WARRANT AND/OR ANY AND ALL OF THE TRANSACTION  DOCUMENTS ASSOCIATED WITH
THIS TRANSACTION.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
15

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed as of the
date first set forth above.

 
CLS HOLDINGS USA, INC.
 
     
By:  /s/ Jeffrey I. Binder          
 
Name:           Jeffrey I. Binder
 
Title:          Chairman and CEO

16

--------------------------------------------------------------------------------

EXHIBIT A TO WARRANT
EXERCISE NOTICE
TO BE EXECUTED
BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
CLS HOLDINGS USA, INC.
The undersigned holder hereby exercises the right to purchase ______________ of
the shares of Common Stock (“Warrant Shares”) of CLS Holdings USA, Inc. (the
“Company”), evidenced by the attached Warrant (the “Warrant”).  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.
Specify Method of exercise by check mark:
1.  ___          Cash Exercise
(a) Payment of Warrant Exercise Price. The holder shall pay the Aggregate
Exercise Price of $______________ to the Company in accordance with the terms of
the Warrant.
(b) Delivery of Warrant Shares.  The Company shall deliver to the holder
_________ Warrant Shares in accordance with the terms of the Warrant.

2.  ___          Cashless Exercise
(a) Payment of Warrant Exercise Price.  In lieu of making payment of the
Aggregate Exercise Price, if permitted by the terms of the Warrant, the holder
elects to receive upon such exercise the Net Number of shares of Common Stock
determined in accordance with the terms of the Warrant.
(b) Delivery of Warrant Shares.  The Company shall deliver to the holder
_________ Warrant Shares in accordance with the terms of the Warrant.

Date: _______________ __, ______

Name of Registered Holder

By:                                                             
Name:                                                              
Title:                                                                  

Address:
Taxpayer ID No.:

--------------------------------------------------------------------------------

EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of CLS Holdings USA, Inc. represented
by warrant certificate no. _____, standing in the name of the undersigned on the
books of said corporation.  The undersigned does hereby irrevocably constitute
and appoint ______________, attorney to transfer the warrant of said
corporation, with full power of substitution in the premises.
Dated:                                                                                              
       
           
By:          
   
Name:          
   
Title: