Exhibit
4.6


 


NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO 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. THIS SECURITY AND
THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES


 


Original
Issue Date: October 17, 2016


Original
Conversion Price (subject to adjustment herein): $5.00


 


$5,700,000.00


 


8%
ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE


DUE
SEPTEMBER 1, 2018


 


THIS
8% ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 8% Original
Issue Discount Senior Secured Convertible Debentures of ToughBuilt Industries, Inc., a Nevada corporation, (the “Company”),
having its principal place of business at 665 N. Central Ave., Suite 1700, Glendale, CA 91203, designated as its 8% Original Issue
Discount Senior Secured Convertible Debenture due September 1, 2018 (this debenture, the “Debenture” and, collectively
with the other debentures of such series, the “Debentures”).


 


FOR
VALUE RECEIVED, the Company promises to pay to Hillair Capital Investments L.P. or its registered assigns (the “Holder”),
the principal sum of $5,700,000 on September 1, 2018 (the “Maturity Date”) or such earlier date as this Debenture
is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and
then outstanding principal amount of this Debenture in accordance with the provisions hereof. This Debenture is subject to the
following additional provisions:


 


Section
1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized
terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall
have the following meanings:


 


“Alternate
Consideration” shall have the meaning set forth in Section 5(e).


 




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“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof
any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary
thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered,
(d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant
Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (g) the Company
or any Significant Subsidiary thereof admits in writing that it is generally unable to pay its debts as they become due, (h) the
Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.


 


“Base
Conversion Price” shall have the meaning set forth in Section 5(b).


 


“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(d).


 


“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.


 


“Buy-In”
shall have the meaning set forth in Section 4(c)(v).


 


“Change
of Control Transaction” means occurrence of any of the following in one or a series of related transactions:


 


(i)
One or more acquisitions after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5
(b)(1) under the Exchange Act), resulting in 40% or more of the voting rights or equity interest in the Company being transferred
to such Persons or their Affiliates;


 


(ii)
A replacement of more than a majority of the members of the Board that is not approved by those individuals who are members of
the Board on the date hereof (or other directors previously approved by such individuals);


 




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(iii)
A merger or consolidation of the Company or any one or more Subsidiaries owning a majority of the consolidated assets of the Company
and all Subsidiaries, or a sale of all or substantially all of the assets of the Company and its consolidated Subsidiaries in
one or a series of related transactions, unless following such transaction or series of transactions, the Holders of the Company’s
securities immediately prior to the first transaction continue to hold at least 60% of the voting rights and equity interest in
the surviving entity or acquirer of such assets;


 


(iv)
A recapitalization, reorganization or other transaction involving the Company or any Subsidiary that constitutes or results in
a transfer of 40% or more of the voting rights or equity interest in the Company to any Persons; or


 


(v)
the execution by the Company or its controlling stockholders of an agreement providing for any of the foregoing
events.


 


“Conversion”
shall have the meaning ascribed to such term in Section 4.


 


“Conversion
Date” shall have the meaning set forth in Section 4(a).


 


“Conversion
Price” shall have the meaning set forth in Section 4(b).


 


“Conversion
Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.


 


“Conversion
Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with
the terms hereof.


 


“Debenture
Register” shall have the meaning set forth in Section 2(c).


 


“Dilutive
Issuance” shall have the meaning set forth in Section 5(b).


 


“Dilutive
Issuance Notice” shall have the meaning set forth in Section 5(b).


 




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“Equity
Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have
paid all liquidated damages and other amounts owing to the Holder in respect of this Debenture, (c) all of the Conversion Shares
issuable pursuant to the Transaction Documents (and shares issuable in lieu of cash payments of interest) may be resold pursuant
to Rule 144 without volume or manner-of-sale restrictions or current public information requirements as determined by the counsel
to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the
Holder, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents
are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock
on a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Transaction
Documents, (f) there is no existing Event of Default and no existing event which, with the passage of time or the giving of notice,
would constitute an Event of Default, (g) the issuance of the shares in question (or, in the case of an Optional Redemption or
Quarterly Redemption, the shares issuable upon conversion in full of the Optional Redemption Amount or Quarterly Redemption Amount)
to the Holder would not violate the limitations set forth in Section 4(d) herein, (h) there has been no public announcement of
a pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated, (i) the applicable
Holder is not in possession of any information provided by the Company, any of its Subsidiaries, or any of their officers, directors,
employees, agents or Affiliates, that constitutes, or may constitute, material non-public information, (j) for each Trading Day
in a period of 20 consecutive Trading Days prior to the applicable date in question, the VWAP for the Common Stock on the principal
Trading Market exceeds $1.11 per Trading Day, (k) the number of shares of Common Stock proposed to be issued in respect of such
payments at issue, in each case as attributable to all holders of Debentures, is less than 20% of the aggregate number of shares
of Common Stock traded on the principal Trading Market during the 20 Trading Days immediately prior to such payment date and (l)
the Lock-Up Agreement (as defined in the Purchase Agreement) shall not be in effect.


 


“Event
of Default” shall have the meaning set forth in Section 8(a).


 


“Fundamental
Transaction” shall have the meaning set forth in Section 5(e).


 


“Going
Public Event” means (i) the Company’s offering of securities on a registration statement pursuant to the Securities
Act or the Company’s merger, reverse merger, consolidation, transfer, or share exchange transaction pursuant to which the
Company becomes subject to the reporting requirements of the Exchange Act and (ii) the contemporaneous listing or quoting of the
Common Stock on a Trading Market.


 


“Going
Public Event Date” means the date of the effectiveness of the Going Public Event.


 


“Going
Public Redemption Amount” means the sum of (a) 120% of up to 50% of the then outstanding principal amount of the Debenture,
(b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Debenture


 


“Interest
Payment Date” shall have the meaning set forth in Section 2(a).


 


“Late
Fees” shall have the meaning set forth in Section 2(d).


 




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“Mandatory
Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture, plus all
accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (A) demanded
(if demand or notice is required to create an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion
Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in
full, whichever has a higher VWAP, or (ii) 130% of the outstanding principal amount of this Debenture, plus 100% of accrued and
unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.


 


“New
York Courts” shall have the meaning set forth in Section 9(d).


 


“Notice
of Conversion” shall have the meaning set forth in Section 4(a).


 


“Optional
Redemption” shall have the meaning set forth in Section 6(a).


 


“Optional
Redemption Amount” means the sum of (a)(i) 110% of the then outstanding principal amount of the Debenture, in the event
an Optional Redemption occurs prior to the twelve month anniversary of the Original Issue Date or (ii) 120% of the then outstanding
principal amount of the Debenture in the event an Optional Redemption occurs on or after the twelve month anniversary of the Original
Issue Date, (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Debenture.


 


“Optional
Redemption Date” shall have the meaning set forth in Section 6(a).


 


“Optional
Redemption Notice” shall have the meaning set forth in Section 6(a).


 


“Optional
Redemption Notice Date” shall have the meaning set forth in Section 6(a).


 


“Optional
Redemption Period” shall have the meaning set forth in Section 6(a).


 


“Original
Issue Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such Debentures.


 


“Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b) the Indebtedness existing on the Original
Issue Date and set forth on Schedule 3.1(aa) attached to the Purchase Agreement, (c) a revolving credit facility or line
of credit provided to the Company by one or more licensed commercial lending institutions in the maximum aggregate amount of $3,000,000,
that may be secured by up to 60% of the Company’s accounts receivables and (d) indebtedness that (i) is expressly subordinate
to the Debentures pursuant to a written subordination agreement with the Purchasers that is acceptable to each Purchaser in its
sole and absolute discretion and (ii) matures at a date later than the 91st day following the Maturity Date.


 




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“Permitted
Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental
charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company)
have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s
business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business
of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien,
(c) Liens incurred in connection with Permitted Indebtedness under clauses (a) and (b) thereunder.


 


“Pre-Redemption
Conversion Shares” shall have the meaning set forth in Section 6(b)(i) hereof.


 


“Purchase
Agreement” means the Securities Purchase Agreement, dated as of October 17, 2016 among the Company and the original
Holders, as amended, modified or supplemented from time to time in accordance with its terms.


 


“Quarterly
Conversion Period” shall have the meaning set forth in Section 6(b) hereof.


 


“Quarterly
Conversion Price” shall have the meaning set forth in Section 6(b) hereof.


 


“Quarterly
Redemption” means the redemption of this Debenture pursuant to Section 6(b) hereof.


 


“Quarterly
Redemption Amount” means, (i) $1,140,000 as to a Quarterly Redemption occurring on March 1, 2018 and June 1, 2018, and
(ii) $2,280,000 as to a Quarterly Redemption occurring on September 1, 2018, plus accrued but unpaid interest, liquidated damages
and any other amounts then owing to the Holder in respect of this Debenture.


 


“Quarterly
Redemption Date” means each of March 1, 2018, June 1, 2018, and September 1, 2018.


 




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“Quarterly
Redemption Notice” shall have the meaning set forth in Section 6(b) hereof.


 


“Registration
Statement” means a registration statement filed with the Commission registering the resale of the Underlying Shares
by each Holder.


 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


 


“Share
Delivery Date” shall have the meaning set forth in Section 4(c)(ii).


 


“Successor
Entity” shall have the meaning set forth in Section 5(e).


 


“Trading
Day” means a day on which the principal Trading Market is open for trading.


 


“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange, the OTCQB or OTCQX (or any successors to any of the foregoing).


 


“VWAP”
means, for 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 Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market 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 OTCQB or OTCQX is a Trading Market,
the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in the “Pink Sheets” published by OTC Markets, 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 Purchasers
of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.


 


Section
2. Interest.


 


a)
Payment of Interest in Cash. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture at the rate of 8% per annum, payable quarterly on September 1, December 1, March 1 and June
1, beginning on September 1, 2017, on each Quarterly Redemption Date (as to that principal amount then being redeemed), on each
Conversion Date (as to that principal amount then being converted), on each Optional Redemption Date (as to that principal amount
then being redeemed) and on the Maturity Date (each such date, an “Interest Payment Date”) (if any Interest
Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash.


 




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b)
[RESERVED].


 


c)
Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day
periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together
with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest
shall cease to accrue with respect to any principal amount converted, provided that, the Company actually delivers the Conversion
Shares within the time period required by Section 4(c)(ii) herein. Interest hereunder will be paid to the Person in whose name
this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture
Register”).


 


d)
Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal
to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall
accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.


 


e)
Prepayment. Except as otherwise set forth in this Debenture, the Company may not prepay any portion of the principal amount
of this Debenture without the prior written consent of the Holder.


 


Section
3.  Registration of Transfers and Exchanges.


 


a)
Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration
of transfer or exchange.


 


b)
Investment Representations. This Debenture has been issued subject to certain investment representations of the original
Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable federal and state securities laws and regulations.


 


c)
Reliance on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and
any agent of the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture
is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.


 




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Section
4.  Conversion.


 


a)
Voluntary Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture
shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time
to time (subject to the conversion limitations set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering
to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected
(such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall
be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be
required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company
unless the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted in which
case the Holder shall surrender this Debenture as promptly as is reasonably practicable after such conversion without delaying
the Company’s obligation to deliver the shares on the Share Delivery Date. Conversions hereunder shall have the effect of
lowering the outstanding principal amount of this Debenture in an amount equal to the applicable conversion. The Holder and the
Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s). The Company may deliver
an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion. In the event of
any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.
The Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture
may be less than the amount stated on the face hereof.


 


b)
Conversion Price. The conversion price in effect on any Conversion Date shall be equal to $5.00, subject to adjustment
herein (the “Conversion Price”). In addition, on the Going Public Event Date, the Conversion Price shall be
adjusted to 120% of the effective per share price of Common Stock issued in the Going Public Event, subject to adjustment hereunder.
The Company shall notify each Holder of the applicable adjustment to the Conversion Price as of such date (a “Going Public
Event Date Adjustment Notice”). For purposes of clarification, whether or not the Company provides a Going Public Event
Date Adjustment Notice pursuant to this Section 4(b), the Holder shall receive a number of Conversion Shares based upon the Conversion
Price as adjusted pursuant to this Section, regardless of whether the Holder accurately refers to such price in any Notice of
Conversion.


 




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c)
Mechanics of Conversion.


 


i.
Conversion Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion
hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be
converted by (y) the Conversion Price.


 


ii.
Delivery of Conversion Shares Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) the Conversion Shares which,
on or after Going Public Event Date, shall be free of restrictive legends and trading restrictions (other than those which may
then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of
this Debenture and(B) a bank check in the amount of accrued and unpaid interest (if the Company has elected or is required to
pay accrued interest in cash). On or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the
Effective Date, the Company shall deliver any Conversion Shares required to be delivered by the Company under this Section 4(c)
electronically through the Depository Trust Company or another established clearing corporation performing similar functions.


 


iii.
Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered
to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice
to the Company at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the
Company shall promptly return to the Holder any original Debenture delivered to the Company and the Holder shall promptly return
to the Company the Conversion Shares issued to such Holder pursuant to the rescinded Conversion Notice.


 




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iv.
Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares
upon conversion of this Debenture in accordance with the terms hereof are, subject to Section 4(d) hereof, 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
or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares;
provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company
may have against the Holder. In the event the Holder of this Debenture shall elect to convert any or all of the outstanding principal
amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with
the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on
notice to Holder, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained,
and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of
this Debenture, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation
of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence
of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If
the Company fails for any reason to deliver to the Holder such Conversion Shares pursuant to Section 4(c)(ii) by the Share Delivery
Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount
being converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth (5th) Trading Day after such liquidated
damages begin to accrue) for each Trading Day after such Share Delivery Date until such Conversion Shares are delivered or Holder
rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default
pursuant to Section 8 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and
the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from
seeking to enforce damages pursuant to any other Section hereof or under applicable law.


 




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v.
Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. Following the Going Public Event
Date, in addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such
Conversion Shares by the Share Delivery Date pursuant to Section 4(c)(ii), and if after such Share Delivery Date the Holder is
required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm
otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which
the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then
the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the
amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock
so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive
from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation
was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Debenture
in a principal amount equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed
rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely
complied with its delivery requirements under Section 4(c)(ii). For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture with respect to which the
actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a
total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000.
The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and,
upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a 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 Conversion Shares upon conversion of this
Debenture as required pursuant to the terms hereof.


 


vi.
Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Debenture and
payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder (and the other holders of the Debentures), not less than such aggregate number of shares
of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into
account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Debenture
and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly authorized, validly issued, fully paid and nonassessable.


 


vii.
Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of
this Debenture. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the
Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole share.


 




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viii.
Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Debenture shall be made without charge
to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such
Conversion Shares, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holder of
this Debenture so converted and the Company shall not be required to issue or deliver such Conversion Shares unless or until the
Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation
performing similar functions) required for same-day electronic delivery of the Conversion Shares.


 


d)
Holder’s Conversion Limitations. Following the Going Public Event Date, the Company shall not effect any conversion
of this Debenture, and a Holder shall not have the right to convert any portion of this Debenture, to the extent that after giving
effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates,
and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution
Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution
Parties shall include the number of shares of Common Stock issuable upon conversion of this Debenture with respect to which such
determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of
the remaining, unconverted principal amount of this Debenture beneficially owned by the Holder or any of its Affiliates or Attribution
Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject
to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other
Debentures or shares of Class B Preferred Stock) beneficially owned by the Holder or any of its Affiliates or Attribution Parties.
Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the
limitation contained in this Section 4(d) applies, the determination of whether this Debenture is convertible (in relation to
other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which principal amount of this
Debenture is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be
deemed to be the Holder’s determination of whether this Debenture may be converted (in relation to other securities owned
by the Holder together with any Affiliates or Attribution Parties) and which principal amount of this Debenture is convertible,
in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed
to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions
set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4(d), in determining the
number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated
in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission,
as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company
or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days confirm orally and in writing 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, including this Debenture, by the Holder or its Affiliates since
the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation”
shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares
of Common Stock issuable upon conversion of this Debenture held by the Holder. The Holder, upon notice to the Company, may increase
or decrease the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation
in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock upon conversion of this Debenture held by the Holder and the Beneficial Ownership Limitation provisions
of this Section 4(d) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until
the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this
paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d)
to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership
Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder of this Debenture.


 




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Section
5. Certain Adjustments.


 


a)
Stock Dividends and Stock Splits. If the Company, at any time while this Debenture is outstanding: (i) pays a stock dividend
or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock
Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion
of, or payment of interest on, the Debentures), (ii) subdivides outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares
or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company,
then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock
(excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.


 


b) Subsequent
Equity Sales. If, at any time while this Debenture is outstanding, the Company or any Subsidiary, as applicable, sells or
grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any
sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any
Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such
lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive
Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares
of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to
have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be
reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an
Exempt Issuance and in no event shall the Conversion Price be reduced pursuant to this Section 5 (b) to less than $1.00,
subject to adjustment for reverse and forward stock splits and the like. If the Company enters into a Variable Rate
Transaction, despite the prohibition set forth in the Purchase Agreement, the Company shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or
exercised. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common
Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or
applicable reset price, exchange price, conversion price and other pricing terms (such notice, the
“Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to
receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance,
regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.


 




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c)
Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company
grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could
have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Debenture
(without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) 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 shares of Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result
in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase
Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent)
and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto
would not result in the Holder exceeding the Beneficial Ownership Limitation).


 


d)
Pro Rata Distributions. During such time as this Debenture is outstanding, if the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders of shares 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, scheme of arrangement or other similar transaction)
(a “Distribution”), at any time after the issuance of this Debenture, then, in each such case, the Holder shall
be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder
had held the number of shares of Common Stock acquirable upon complete conversion of this Debenture (without regard to any limitations
on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which
a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of
Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that
the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership
of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held
in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding
the Beneficial Ownership Limitation).


 




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e)
Fundamental Transaction. If, at any time while this Debenture is outstanding, (i) the Company, directly or indirectly,
in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization 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, (v) the Company, directly or indirectly, in one
or more related transactions consummates a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person
or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent
conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable
upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in
Section 4(d) on the conversion of this Debenture), the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Debenture
is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion
of this Debenture). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of
Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the
Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following
such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is
not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under
this Debenture and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of
this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the
Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Debenture,
deliver to the Holder in exchange for this Debenture a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Debenture which is convertible for a corresponding number of shares of capital stock of
such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion
of this Debenture (without regard to any limitations on the conversion of this Debenture) prior to such Fundamental Transaction,
and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account
the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital
stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value
of this Debenture immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory
in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Debenture
and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the obligations of the Company under this Debenture and
the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.


 




    	 	16	 



    	 



    

 


f)
Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share,
as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as
of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued
and outstanding.


 


g)
Notice to the Holder.


 


i.
Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5,
the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.


 


ii.
Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall
be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed
at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder
at its last address as it shall appear upon the Debenture Register, at least twenty (20) calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders
of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or contains, material, non-public information regarding the Company, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled
to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event
triggering such notice except as may otherwise be expressly set forth herein.


 




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Section
6. Redemption.


 


a)
Optional Redemption at Election of Company. Subject to the provisions of this Section 6(a), at any time after the Original
Issue Date, the Company may deliver a notice to the Holder (an “Optional Redemption Notice” and the date such
notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to
redeem some or all of the then outstanding principal amount of this Debenture for cash in an amount equal to the Optional Redemption
Amount on the 10th Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption
Date”, such 10 Trading Day period, the “Optional Redemption Period” and such redemption, the “Optional
Redemption”). The Optional Redemption Amount is payable in full on the Optional Redemption Date. The Company may only
effect an Optional Redemption if each of the Equity Conditions shall have been met (unless waived in writing by the Holder) on
each Trading Day during the period commencing on the Optional Redemption Notice Date through to the Optional Redemption Date and
through and including the date payment of the Optional Redemption Amount is actually made in full. If any of the Equity Conditions
shall cease to be satisfied at any time during the Optional Redemption Period, then the Holder may elect to nullify the Optional
Redemption Notice by notice to the Company within 3 Trading Days after the first day on which any such Equity Condition has not
been met (provided that if, by a provision of the Transaction Documents, the Company is obligated to notify the Holder of the
non-existence of an Equity Condition, such notice period shall be extended to the third Trading Day after proper notice from the
Company) in which case the Optional Redemption Notice shall be null and void, ab initio. The Company covenants and agrees
that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through the
date all amounts owing thereon are due and paid in full. The Company’s determination to pay an Optional Redemption in cash
shall be applied ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s)
initial purchases of Debentures pursuant to the Purchase Agreement. In the event of a Change of Control Transaction, the Company
shall redeem the Debentures in full, in accordance with this Section 6(a).


 


b)
Optional Redemption at Election of the Company in the Event of a Going Public Event. Within 1 Trading Day following the
consummation of a Going Public Event that is a bona fide firm commitment underwritten public offering of the Common Stock for
gross proceeds of at least $10 million, in the aggregate, with a contemporaneous listing of the Common Stock on a Trading Market
and with an investment bank acting as the lead book-runner, the Company may deliver a notice to the Holder (an “Going
Public Redemption Notice” and the date such notice is deemed delivered hereunder, the “Going Public Redemption
Notice Date”) of its irrevocable election to redeem some or all of the then outstanding principal amount of this Debenture
for cash in an amount equal to the Going Public Redemption Amount on the 3rd Trading Day following the Going Public
Redemption Notice Date (such date, the “Going Public Redemption Date”, such 3 Trading Day period, the “Going
Public Redemption Period” and such redemption, the “Going Public Redemption”). The Going Public Redemption
Amount is payable in full on the Going Public Redemption Date. The Holder covenants and agrees that it will not tender any Notices
of Conversion for the Going Public Redemption Amount being redeemed from the time of delivery of the Going Public Redemption Notice
through the Going Public Redemption Date; provided, however, in the event that the Company has not paid all amounts
owing thereon in full on or before the Going Public Redemption Date, then the Holder shall have the right to convert the principal
amount of this Debenture being redeemed. The Company’s determination to pay an Optional Redemption in cash shall be applied
ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s) initial purchases
of Debentures pursuant to the Purchase Agreement


 




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c)
Quarterly Redemption.


 





	 	i.	On
    each Quarterly Redemption Date, the Company shall redeem the Quarterly Redemption Amount (the “Quarterly Redemption”).
    The Quarterly Redemption Amount payable on each Quarterly Redemption Date shall be paid in cash; provided, however, as to
    any Quarterly Redemption and upon 20 Trading Days’ prior written irrevocable notice (the “Quarterly Redemption
    Notice”), in lieu of a cash redemption payment the Company may elect to pay all or part of a Quarterly Redemption Amount
    in Conversion Shares based on a conversion price equal to the lesser of (i) the then Conversion Price less $0.01 and (ii)
    90% of the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to
    the applicable Quarterly Redemption Date (subject to adjustment for any stock dividend, stock split, stock combination or
    other similar event affecting the Common Stock during such 10 Trading Day period) (the price calculated during the 20 Trading
    Day period immediately prior to the Quarterly Redemption Date, the “Quarterly Conversion Price” and such 10 Trading
    Day period, the “Quarterly Conversion Period”); provided, further, that the Company may not pay the Quarterly
    Redemption Amount in Conversion Shares unless (y) from the date the Holder receives the duly delivered Quarterly Redemption
    Notice through and until the date such Quarterly Redemption is paid in full, the Equity Conditions have been satisfied, unless
    waived in writing by the Holder, and (z) as to such Quarterly Redemption, prior to such Quarterly Conversion Period (but not
    more than 5 Trading Days prior to the commencement of the Quarterly Conversion Period), the Company shall have delivered to
    the Holder’s account with The Depository Trust Company a number of shares of Common Stock to be applied against such
    Quarterly Redemption Amount equal to the quotient of (x) the applicable Quarterly Redemption Amount divided by (y) the lesser
    of (A) the Conversion Price and (B) 90% of the average of the 10 VWAPs during the period ending on the 3rd Trading
    Day immediately prior to the date of the Quarterly Redemption Notice (the “Pre-Redemption Conversion Shares”).
    The Holder may convert, pursuant to Section 4(a), any principal amount of this Debenture subject to a Quarterly Redemption
    at any time prior to the date that the Quarterly Redemption Amount, plus accrued but unpaid interest, liquidated damages and
    any other amounts then owing to the Holder are due and paid in full. Unless otherwise indicated by the Holder in the applicable
    Notice of Conversion, any principal amount of this Debenture converted during the applicable Quarterly Conversion Period until
    the date the Quarterly Redemption Amount is paid in full shall be first applied to the principal amount subject to the Quarterly
    Redemption Amount payable in cash and then to the Quarterly Redemption Amount payable in Conversion Shares. Any principal
    amount of this Debenture converted during the applicable Quarterly Conversion Period in excess of the Quarterly Redemption
    Amount shall be applied against the last principal amount of this Debenture scheduled to be redeemed hereunder, in reverse
    time order from the Maturity Date; provided, however, if any such conversion is applied against such Quarterly Redemption
    Amount, the Pre-Redemption Conversion Shares, if any were issued in connection with such Quarterly Redemption or were not
    already applied to such conversions, shall be first applied against such conversion. The Company covenants and agrees that
    it will honor all Notices of Conversion tendered up until such amounts are paid in full. The Company’s determination
    to pay a Quarterly Redemption in cash, shares of Common Stock or a combination thereof shall be applied ratably to all of
    the holders of the then outstanding Debentures based on their (or their predecessor’s) initial purchases of Debentures
    pursuant to the Purchase Agreement. At any time the Company delivers a notice to the Holder of its election to pay the Quarterly
    Redemption Amount in shares of Common Stock, the Company shall file a prospectus supplement pursuant to Rule 424 disclosing
    such election.







 




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	 	ii. 	Additional Shares
    Issuable for certain Quarterly Redemption(s). In addition to the amounts and shares issuable pursuant to Section 6(b)(i)
    above, in the event that (x) Company elects or is required to pay the Quarterly Redemption Amount in cash and (y) the average
    of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable Quarterly
    Redemption Date (the “Average Market Price”) is greater than the then effective Conversion Price, then
    on the applicable Quarterly Redemption Date, the Company will deliver to the Holder a number of shares (the “Additional
    Redemption Shares”) derived from the following formula: A/B, where A equals the Average Market Price minus the then
    effective Conversion Price multiplied by the applicable Quarterly Redemption Amount divided by the then effective Conversion
    Price and B equals the then effective Conversion Price. By way of an example, if the Quarterly Redemption Amount is $100,
    the Average Market Price is $1.00 and the then effective Conversion Price is $0.50, then, in addition to the amounts issued
    pursuant to Section 6(b)(i), the Company would issue the Holder 200 shares of Common Stock. In implementation of the foregoing,
    to the extent that an issuance of Additional Redemption Shares pursuant to this Section 6(b)(ii) would result in a Holder
    exceeding the Beneficial Ownership Limitation, then the Company shall initially issue only such number of shares up to the
    Beneficial Ownership Limitation with the remaining Additional Redemption Shares only being issued from time to time on the
    Trading Day that the Holder makes a representation to the Company that such issuance would not exceed the Beneficial Ownership
    Limitation.







 




    	 	20	 



    	 



    

 


d)
Redemption Procedure. The payment of cash or issuance of Common Stock, as applicable, pursuant to an Optional Redemption,
Going Public Redemption Date or a Quarterly Redemption shall be payable on the Optional Redemption Date, Going Public Redemption
Date or Quarterly Redemption Date, as applicable. If any portion of the payment pursuant to an Optional Redemption, Going Public
Redemption or Quarterly Redemption shall not be paid by the Company by the applicable due date, interest shall accrue thereon
at an interest rate equal to the lesser of 15% per annum or the maximum rate permitted by applicable law until such amount is
paid in full. Notwithstanding anything herein contained to the contrary, if any portion of the Optional Redemption Amount, Going
Public Redemption Amount or Quarterly Redemption Amount remains unpaid after such date, the Holder may elect, by written notice
to the Company given at any time thereafter, to invalidate such Optional Redemption, Going Public Redemption or Quarterly Redemption,
ab initio, and, with respect to the Company’s failure to honor the Optional Redemption, the Company shall have no
further right to exercise such Optional Redemption. Notwithstanding anything to the contrary in this Section 6, the Company’s
determination to redeem in cash or its elections under Section 6(b) shall be applied ratably among the Holders of Debentures.
Subject to the limitation set forth in this Section 6, the Holder may elect to convert the outstanding principal amount of the
Debenture pursuant to Section 4 prior to actual payment in cash for any redemption under this Section 6 by the delivery of a Notice
of Conversion to the Company.


 


Section
7. Negative Covenants. As long as any portion of this Debenture remains outstanding, the Company shall not, directly
or indirectly:


 


a)
other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed
money of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom;


 


b)
other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to
any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;


 


c)
amend its charter documents, including, without limitation, its articles of incorporation and bylaws, in any manner that materially
and adversely affects any rights of the Holder;


 


d)
repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its
Common Stock or Common Stock Equivalents other than as to (i) the Conversion Shares as permitted or required under the
Transaction Documents and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of
the Company, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors during
the term of this Debenture;


 




    	 	21	 



    	 



    

 


e)
except with respect to the debts as disclosed on Schedule 3.1(aa) of the Purchase Agreement, repay, repurchase or offer to repay,
repurchase or otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata basis, other than regularly scheduled
principal and interest payments as such terms are in effect as of the Original Issue Date, provided that such payments shall not
be permitted if, at such time, or after giving effect to such payment, any Event of Default exist or occur, except for repayments
to the Company’s officers and directors in an amount not to exceed an aggregate of $100,000 for all officers and directors
during the term of this Debenture;


 


f)
pay cash dividends or distributions on any equity securities of the Company;


 


g)
enter into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with
the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested
directors of the Company (even if less than a quorum otherwise required for board approval); or


 


h)
enter into any agreement with respect to any of the foregoing.


 


Section
8. Events of Default.


 


a)
“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event
and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or
order of any court, or any order, rule or regulation of any administrative or governmental body):


 


i.
any default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other
amounts owing to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date
or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other
default under clause (B) above, is not cured within 5 Trading Days;


 


ii.
the Company shall fail to observe or perform any other covenant or agreement contained in the Debentures (other than a breach
by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in
clause (xi) below) or in any Transaction Document, which failure is not cured, if possible to cure, within the earlier to occur
of (A) 5 Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 10 Trading
Days after the Company has become or should have become aware of such failure;


 




    	 	22	 



    	 



    

 


iii.
a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument)
shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which
the Company or any Subsidiary is obligated (and not covered by clause (vi) below);


 


iv.
any representation or warranty made in this Debenture, any other Transaction Documents, any written statement pursuant hereto
or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be
untrue or incorrect in any material respect as of the date when made or deemed made;


 


v.
the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy
Event;


 


vi.
the Company shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness
for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than
$150,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or
being declared due and payable prior to the date on which it would otherwise become due and payable;


 


vii.
after the Going Public Event Date, the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market
and shall not be eligible to resume listing or quotation for trading thereon within five Trading Days;


 


viii.
the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose
of all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would
constitute a Change of Control Transaction);


 


ix.
after the Going Public Event Date, the Company does not meet the current public information requirements under Rule 144;


 


x.
[RESERVED];


 




    	 	23	 



    	 



    

 


xi.
the Company shall fail for any reason to deliver Conversion Shares to a Holder prior to the fifth Trading Day after a Conversion
Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement,
of the Company’s intention to not honor requests for conversions of any Debentures in accordance with the terms hereof;


 


xii.
any Person shall breach any agreement delivered to the initial Holders pursuant to Section 2.2 of the Purchase Agreement;


 


xiii.
after the Going Public Event Date, the electronic transfer by the Company of shares of Common Stock through the Depository Trust
Company or another established clearing corporation is no longer available or is subject to a “chill”;


 


xiv.
any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of 45 calendar days; or


 


xv.
a false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that the Equity Conditions
are satisfied or that there has been no Equity Conditions Failure or as to whether any Event of Default has occurred.


 


b)
Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus
accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall
become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing 5 days
after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on
this Debenture shall accrue at an interest rate equal to the lesser of 15% per annum or the maximum rate permitted under applicable
law. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed
by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives,
any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such
acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights
as a holder of the Debenture until such time, if any, as the Holder receives full payment pursuant to this Section 8(b). No such
rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. In the event of an
Event of Default specified in Section 8(a)(i), the principal amount of this Debenture shall automatically be increased by 0.5%
upon the occurrence of each Event of Default specified in Section 8(a)(i).


 




    	 	24	 



    	 



    

 


Section
9. Miscellaneous.


 


a)
Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, by email attachment, or sent
by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other
facsimile number, email address, or address as the Company may specify for such purposes by notice to the Holder delivered in
accordance with this Section 9(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder
shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or email address or address of the Holder appearing on the books
of the Company, or if no such facsimile number or email attachment or address appears on the books of the Company, at the principal
place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto
prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number or email attachment to the email address set forth on the
signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service
or (iv) upon actual receipt by the party to whom such notice is required to be given.


 


b)
Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable,
on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. This Debenture ranks pari  passu with all other Debentures now or hereafter issued
under the terms set forth herein.


 


c)
Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute
and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution
for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen
or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof,
reasonably satisfactory to the Company.


 




    	 	25	 



    	 



    

 


d)
Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement
and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its
respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts
sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), 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 such New York Courts, or such New York Courts are improper or inconvenient venue for
such proceeding. 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 via registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to it under this Debenture 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 other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating
to this Debenture or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any
provisions of this Debenture, then the prevailing party in such action or proceeding shall be reimbursed by the other party for
its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.


 


e)
Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or
be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The
failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall
not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other
term of this Debenture on any other occasion. Any waiver by the Company or the Holder must be in writing.


 




    	 	26	 



    	 



    

 


f)
Severability. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall
remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable
to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates
the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the
maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal
of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Debenture, and the Company (to the extent it may lawfully do so) hereby expressly
waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though
no such law has been enacted.


 


g)
Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Debenture
shall be cumulative and in addition to all other remedies available under this Debenture and any of the other Transaction Documents
at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit
the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of
this Debenture. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than
as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and
the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein,
be subject to any other obligation of the Company (or the performance thereof). 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 shall be entitled, in addition
to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity
of showing economic loss and without any bond or other security being required. The Company shall provide all information and
documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with
the terms and conditions of this Debenture.


 


h)
Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day.


 


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


 




    	 	27	 



    	 



    

 


j)
Secured Obligation. The obligations of the Company under this Debenture are secured by all assets of the Company pursuant
to the Security Agreement, dated as of October 17, 2016 between the Company, the Subsidiaries of the Company and the Secured Parties
(as defined therein).


 


Section
10. Disclosure. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Debenture, unless
the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information
relating to the Company or its Subsidiaries, the Company shall within two (2) Business Days after such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes
that a notice contains material, non-public information relating to the Company or its Subsidiaries, the Company so shall indicate
to the Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company
or its Subsidiaries.


 


*********************


 


(Signature
Pages Follow)


 




    	 	28	 



    	 



    

 


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


 


	 	TOUGHBUILT
    INDUSTRIES, INC.
	 	 	 
	 	By:	 
	 	Name:
    	Michael
    Panosian
	 	Title:
    	Chief
    Executive Officer
	 	Facsimile
    No. for delivery of Notices: _________


 




    	 	29	 



    	 



    

 


ANNEX
A


 


NOTICE
OF CONVERSION


 


The
undersigned hereby elects to convert principal under the 8% Original Issue Discount Senior Secured Convertible Debenture due September
1, 2018 of ToughBuilt Industries, Inc., a Nevada corporation (the “Company”), into shares of common stock (the
“Common Stock”), of the Company according to the conditions hereof, as of the date written below. If shares
of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.


 


By
the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common
Stock does not exceed the amounts specified under Section 4 of this Debenture, as determined in accordance with Section 13(d)
of the Exchange Act.


 


The
undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with
any transfer of the aforesaid shares of Common Stock.


 


Conversion
calculations:


 


Date
to Effect Conversion:


 


Principal
Amount of Debenture to be Converted:


 


Payment
of Interest in Common Stock ____ yes ____ no


           If
yes, $____ of Interest Accrued on Account of Conversion at Issue.


 


Number
of shares of Common Stock to be issued:


 


Signature:


 


Name:


 


Address
for Delivery of Common Stock Certificates:


 


Or


 


DWAC
Instructions:


 


Broker
No: ____________


Account
No: ___________


 




    	 	30	 



    	 



    

 


Schedule
1


 


CONVERSION
SCHEDULE


 


The
8% Original Issue Discount Senior Secured Convertible Debentures due on September 1, 2018 in the aggregate principal amount of
$5,700,000 are issued by ToughBuilt Industries, Inc., a Nevada corporation. This Conversion Schedule reflects conversions made
under Section 4 of the above referenced Debenture.


 


Dated:


 


	Date
        of Conversion

        (or
        for first entry,

        Original
        Issue Date)
	 	Amount
        of

        Conversion
	 	Aggregate

        Principal

        Amount

        Remaining

        Subsequent
        to

        Conversion

        (or
        original

        Principal

        Amount)
	 	Company
    Attest
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 


 




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