EMPLOYMENT AGREEMENT


 


This Employment Agreement (this
“Agreement”), dated as of January 3, 2023, but effective as of December 29, 2022, is entered into between ToughBuilt Industries,
Inc., a Nevada corporation (the “Company”), and Zareh Khachatoorian (“Executive”).


 


WHEREAS, Executive is the
Chief Operating Officer and Secretary of the Company, and


 


WHEREAS, the Company desires
to employ and retain the services of Executive, and Executive wishes to be employed by the Company, on the terms set forth in this Agreement;


 


NOW, THEREFORE, in consideration
of the promises and the mutual covenants set forth in this Agreement, the undersigned agree as follows:


 


1.       Term
of Employment. Subject to the termination provisions hereinafter set forth, the Company will employ Executive, and Executive accepts
employment with the Company, for a period of three years from the date of this Agreement (the “Initial Term”). The Initial
Term shall be automatically renewed for successive one-year periods (“Successive Terms”) unless either party gives ninety
(90) calendar days written notice of nonrenewal prior to the expiration of the then-current term (the Initial Term and any Successive
Term are jointly referred to herein as the “Term”). Notwithstanding the above, or anything else provided herein, Executive
shall be an at-will Executive, serving at the pleasure and direction of the Board of Directors (as defined below). Accordingly, either
party may terminate the employment relationship at any time for any reason, subject, however, to the notice and any payment requirements
set forth herein.


 


2.       Duties.
During the Term, Executive will serve as Chief Operating Officer and Secretary of the Company, reporting to the Company’s Chief
Executive Officer (the “CEO”). Executive will discharge such duties and responsibilities as are customary for such position
or are prescribed from time to time by the CEO. Executive will devote his full time and attention to the affairs of the Company and will
not enter the employ of or serve as a consultant to, or in any way perform any services for, with or without compensation, any other person,
business or organization without the prior approval of the CEO. In no event may any such service be inconsistent with, or prevent Executive
from carrying out, his duties under this Agreement, as determined at the sole discretion of the CEO. During the Term, Executive shall
serve as a member of the Board of Directors of the Company, subject to the conditions and requirements set forth in the Company's bylaws,
as applicable, including but not limited to shareholder approval.


 


3.       Maintaining
Confidential Information/Property Rights. Executive agrees to sign and abide by all Company’s policies regarding confidential
information and ethics including, but not limited to the Proprietary Information, Inventions Assignment, and Non-Disclosure Agreement,
as attached hereto as Exhibit A.


 




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4.       Duty
of Loyalty. During the Term the Executive shall not, directly or indirectly:


 


(a)       whether
as an officer, director, employee, stockholder, partner, proprietor, associate, representative, consultant, contractor, or in any other
capacity whatsoever engage in, become financially interested in, be employed by or have any business connection with any other person,
corporation, firm, partnership or other entity whatsoever that competes with the Company or its Affiliates, anywhere in the United States,
Europe, South America and Asia, in any line of business engaged in (or planned to be engaged in) by the Company or its Affiliates, however,
that such restriction shall not apply to Executive's ownership of any passive investment representing an interest of less than five percent
(5%) of an outstanding class of publicly traded securities; or


 


(b)       recruit,
encourage or solicit any person who is an employee or contractor of the Company or any entity affiliated with the Company (each, an “Affiliated
Entity”) to leave the Company’s or Affiliated Entity’s employ or service for any reason, or interfere in any material
manner with employment or service relationships at the time existing between the Company or Affiliated Entity and the subject employee
or contractor (except as may be required in any bona fide termination decision during the Term regarding any Company or Affiliated Entity
employee) in order to induce such employee or contractor of the Company or any Affiliated Entity to accept other employment or a consulting
agreement with any other person or entity.


 


Executive acknowledges that the services that he shall
provide to the Company under this Agreement are unique and that irreparable harm shall be suffered by the Company in the event of the
breach by Executive of any of his obligations under this Section 4, and that the Company shall be entitled, in addition to its other rights
and remedies, whether legal or equitable, to enforce such obligations by an injunction or decree of specific performance. If any restriction
set forth in this section is found by a court to be unreasonable, then Executive agrees, and hereby submits, to the reduction and limitation
of such prohibition to such area or period as shall be deemed reasonable by such court.


 


5.       Salary
and Incentives.


 


(a)       Salary.
During the Term, the Company will pay Executive an annual salary of $300,000 (the “Base Salary”), subject to applicable tax
withholding and payable in accordance with the Company's normal payroll practices; provided that Executive's Base Salary may be reduced
to the extent that Executive elects to defer any portion thereof under the terms of any deferred compensation or savings plan maintained
by the Company, subject to any requirements under applicable law. During the Term, the Board of Directors shall review Executive's Base
Salary on an annual basis and, in its discretion, may award merit increases of Executive's Base Salary in accordance with the Company’s
policy.


 




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(b)       Incentive
Payments. Executive will be eligible to receive incentive bonus payments from time to time in accordance with any incentive bonus
program of the Company that may then be in effect and will be eligible to receive an annual targeted cash incentive bonus of up to $150,000
under any such program upon the achievement of revenue and cashflow targets and other objectives for each fiscal year as may be approved
annually on behalf of the Company by the Compensation Committee of the Board of Directors (the “Annual Bonus”). Such a program
will be administered on the Company's fiscal year basis. In the event that an incentive payment is earned by Executive under such a program
for any fiscal year, such payment shall be made to Executive in a lump sum all-cash amount within sixty (60) days following the date that
the Company determines the amount (if any) of the Annual Bonus, provided that as a condition of earning such Annual Bonus, Executive must
remain continuously employed in the Company's service through the date that the Company determines the amount of the Annual Bonus.


 


(c)       Stock
Options. On or following the effective date of this Agreement and subject to approval of the Board, the Company will grant Executive
an option under the Company’s 2022 Equity Incentive Plan (the “Plan”) to purchase One Hundred Twelve Thousand Five Hundred
(112,500) of the Company’s Common Stock (the “Option”). The Option will have an exercise price that is no less than
fair market value per share and will vest over three (3) years in equal installments on the last day of each of the Thirty-Six (36) full
calendar months following the date of grant (the “Vesting Schedule”). Vesting will depend on Executive’s Continued Service
as an Employee (as such terms are defined in the Plan) with the Company and will be subject to the terms and conditions of the Plan and
the written Stock Option Agreement governing the Option.


 


(d)       Expenses.
The Company will reimburse Executive for all reasonable travel, entertainment and miscellaneous business expenses actually and necessarily
incurred in connection with the performance of his duties under this Agreement, provided that Executive's expenses are in accordance with
the Company's current practices and that Executive properly accounts for such expenses. Any amounts payable under this Section 5(d) shall
be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of Executive's taxable
year following the taxable year in which Executive incurred the expenses. The amounts provided under this Section 5(d) during any taxable
year of Executive's will not affect such amounts provided in any other taxable year of Executive's, and Executive's right to reimbursement
for such amounts shall not be subject to liquidation or exchange for any other benefit.


 


(e)       Vehicle
Allowance. During Executive's employment under this Agreement, the Company shall pay Executive a monthly automobile allowance in the
amount of $500, and shall pay for or reimburse Executive for expenses regarding the operation, insurance and routine maintenance of such
vehicle, including deductibles, fuel, parking, tolls and car washes.


 


(f)       Vacation.
The Executive shall be eligible to accrue three (3) weeks paid vacation per annum which shall accrue on a pro rata basis each pay period;
provided, that the Executive shall be paid annually in cash for accrued vacation days not taken by him in such year; provided that no
more than four (4) weeks of vacation may be accrued each year for purposes of such cash payments; and provided further that any such payment
shall be paid to the Executive not later than March 15 of the year following the calendar year in which the unused vacation days accrued.


 




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6.       Benefits.
Executive will be entitled during the Term to participate in any vacation, health, pension, insurance or other benefit plan that is maintained
by the Company for its (or its subsidiaries’) Executives and/or executives to the extent and in the manner prescribed by the applicable
plan documents.


 


7.       Long-term
Incentives. Executive will be eligible to receive annual long-term equity incentive awards from time to time in accordance with
the terms and conditions of long-term equity incentive compensation plans and programs as in effect from time to time as approved by the
Board of Directors. The Board of Directors shall have discretion to determine both the target levels and the actual grants made, and shall
have discretion to change from an annual grant program to a multi-year grant program. Any long-term incentive grants shall be subject
to the terms and conditions, including any vesting conditions, as determined by the Board of Directors in its sole discretion.


 


8.       Termination.


 


(a)      Termination
without Cause; Resignation for Good Reason. If, at any time, the Company terminates Executive’s employment without Cause (as
defined herein), or Executive resigns with Good Reason (as defined herein), and Executive executes and delivers to the Company a general
release in favor of, and in a form satisfactory to, the Company (the “Separation Date Release”), and does not revoke the
Separation Date Release during any applicable revocation period prescribed by law and the Separation Date Release becomes effective within
sixty (60) days following Executive’s termination date, then the Company will provide Executive with the following severance benefits:


 


(i)       Cash
Severance. The Company agrees that it will provide Executive with all accrued compensation, wages and benefits through the effective
date of termination and in addition pay to Executive a single cash payment equal to six (6) months’ salary, less all applicable
federal, state and local withholdings and payable on the date the Separation Date Release becomes effective.


 


(ii)       Continued
Health Insurance Coverage. To the extent provided by the federal COBRA law or, if applicable, state insurance laws, and by the Company’s
then-current group health insurance policies, Executive may be eligible to continue Executive’s then-current group health insurance
benefits after termination of Employment. If eligible and if Executive timely elects continued health insurance coverage, then the Company
shall pay the Company’s portion of any premiums necessary to provide coverage for a period of six (6) months after the termination
date; provided, however, that no such premium payments shall be made following the effective date of Executive’s coverage
by a medical, dental or vision insurance plan of a subsequent employer. Executive shall notify the Company immediately if he becomes covered
by a medical, dental or vision insurance plan of a subsequent employer.


 


(iii)       Stock
Options/Equity Awards. Executive’s rights with respect to any stock options and/or other equity awards granted to the Executive
by the Company shall be governed by the terms and provisions of the Plan and Plan rules (provided that the Executive shall have three
(3) months from the date of termination to exercise any vested incentive stock options), and award agreements pursuant to which such stock
options and equity awards were awarded, as in effect at the date of termination.


 




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The amounts described in paragraph (i) shall be paid
in two equal lump sum installments, subject to applicable tax withholding, with the first installment to be made within sixty (60) days
following the date of Executive's Separation from Service and the second installment to be made on the first anniversary of Executive's
Separation from Service. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (including,
without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), Executive's right to receive the foregoing installment
payments shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment shall at all
times be considered a separate and distinct payment. Notwithstanding any provision to the contrary in this Agreement, no amount shall
be paid pursuant to this Section 8(a) unless, on or prior to the fifty-fifth (55th) day following the date of Executive's Separation from
Service, Executive has executed an effective waiver and release of claims agreement (the “Release”) in form and substance
acceptable to the Company and any applicable revocation period has expired.


 


(b)      Termination by Executive
for Good Reason. Executive may voluntarily elect to resign his employment with the Company prior to the end of the Initial Term or
any Successive Term for Good Reason (as hereinafter defined). In the event of Executive's Separation from Service for Good Reason at any
time during the Initial Term or any Successive Term, then, subject to the provisions of Section 9 below, Executive shall be entitled to
receive the payments or benefits set forth in Section 8(a) as if such Separation from Service was as a result of Executive's termination
by the Company without Cause during the Initial Term or thereafter (as applicable). “Good Reason” shall mean any of the following
that are undertaken without Executive's express written consent: (i) the assignment to Executive of principal duties or responsibilities,
or the substantial reduction of Executive's duties and responsibilities, either of which is materially inconsistent with Executive's position
as Chief Operating Officer of the Company; (ii) a material reduction by the Company in Executive's annual Base Salary, except to the extent
the salaries of other executive employees of the Company and any other controlled subsidiary of the Company are similarly reduced; (iii)
Executive’s principal place of business is, without his consent, relocated by a distance of more than thirty (40) miles from the
center of Irvine, California; or (iv) any material breach by the Company of any provision of this Agreement. For avoidance of doubt, any
notice of non-renewal provided by the Company to Executive pursuant to Section 1 of this Agreement shall not constitute or give rise to
Good Reason under this Section 8(b).


 


Executive must provide written
notice to the Company of the occurrence of any of the foregoing events or conditions without Executive's written consent within ninety
(90) days of the occurrence of such event. The Company or any surviving entity shall have a period of thirty (30) days to cure such event
or condition after receipt of written notice of such event from Executive. Any Separation from Service by reason of Executive's resignation
for Good Reason following such thirty (30) day cure period must occur no later than the date that is six (6) months following the initial
occurrence of one of the foregoing events or conditions without Executive's written consent. Executive's Separation from Service by reason
of his resignation for Good Reason shall be treated as involuntary. For avoidance of doubt, in the event Executive provides the foregoing
notice to the Company prior to the expiration of the Initial Term but the ensuing cure period of the Company expires following the end
of the Initial Term and during any Successive Term and (the applicable event or condition constituting or giving rise to Good Reason having
not been cured by the Company during the applicable cure period) Executive subsequently resigns for Good Reason pursuant to this Section
8(b), such resignation shall be treated for all purposes of this Section 8(b) as having occurred during the Initial Term.


 




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(c)      Termination
by the Company for Cause. Subject to the thirty (30) day cure period, if applicable, set forth below in this Section 8(c), the Company
may immediately terminate Executive's employment at any time for Cause by giving written notice to Executive specifying in reasonable
detail the reason for such termination. Upon any such termination for Cause, Executive shall be entitled to payment of all accrued and
unpaid compensation and wages (including accrued but unused vacation time) through the effective date of termination, but Executive shall
have no right to compensation or benefits for any period subsequent the effective date of termination. For the purposes of this Agreement,
“Cause” shall mean: Executive willfully engages in an act or omission which is in bad faith and to the detriment of the Company,
engages in gross misconduct, gross negligence, or willful malfeasance, in each case that causes material harm to the Company, breaches
this Agreement in any material respect, habitually neglects or materially fails to perform his duties (other than any such failure resulting
solely from Executive’s physical or mental disability or incapacity) after a written demand for substantial performance is delivered
to Executive which identifies the manner in which the Company believes that Executive has not performed Executive’s duties, commits,
pleads nolo contendere, or is convicted of a felony or any crime involving fraud, embezzlement, misappropriation, theft, or moral turpitude,
uses drugs or alcohol in a way that either interferes with the performance of his duties or compromises the integrity or reputation of
the Company, Executive’s violation of any law relating to the Company’s business, or violation of any lawful Company policy,
procedure or guideline that results in material harm to the Company as determined by the Company, in its reasonable discretion, or engages
in any act of dishonesty involving the Company, Executive’s breach of any agreement with the Company containing confidentiality
obligations, commercial bribery, or perpetration of fraud; provided, however, that Executive shall have at least forty-five (45) calendar
days to cure, if curable, any of the events which could lead to Executive’s termination for Cause.


 


(d)       Termination
by Death or Disability. In the event that Executive dies or becomes completely disabled from performing his duties during the Initial
Term or any Successive Term, the Company shall be relieved of all obligations under this Agreement, except for payment to Executive or
Executive's heirs as if the Executive had been terminated without Cause in accordance with Section 8(a) herein during the Initial Term
or thereafter (as applicable). For clarification purposes, the parties agree that the Company may satisfy its obligations pursuant to
this Section 8(d) through life and/or disability insurance coverage with respect to Executive, subject to applicable laws.


 


(e)       Termination
by Executive without Good Reason. Executive may terminate his employment under this Agreement without Good Reason at any time by giving
written notice to the Company. Such termination will become effective upon the date specified in such notice, provided that such date
is at least ninety (90) calendar days after the date of delivery of the notice. Upon any such termination, the Company shall be relieved
of all of its obligations under this Agreement, except for payment of all accrued compensation and wages and the provision of benefits
through the effective date of termination, and the Company may, in its sole discretion, cause the termination to become effective sooner
than such ninety (90) day notice period (in which case any authority granted under Section 2 shall be suspended).


 




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(f)       Involuntary
Termination other than for Cause, Death or Disability or Voluntary Termination for Good Reason Following a Change of Control. If,
within one year following a Change of Control, the Executive's employment is terminated involuntarily by the Company other than for Cause,
death, or disability or by the Executive pursuant to a Voluntary Termination for Good Reason, and the Executive executes and does not
revoke a general release of claims against the Company and its affiliates in a form acceptable to the Company, then the Company shall,
in addition to any other earned but unpaid base salary and vacation pay due through the date of such termination, provide the Executive
with the benefits as set forth below:


 


(i)       Cash
Award. A lump sum payment in the amount equal to one (1) times Executive’s then prevailing Base Salary. This lump sum payment
is to be paid as soon as practicable on or after the effective date of the termination for Cause or Voluntary Termination for Good Reason
following a Change of Control but in any case, by no later than March 14 of the calendar year following the calendar year in which such
termination occurs, unless otherwise required by applicable law.


 


(ii)       Acceleration
of Equity Awards. All outstanding and unvested options to purchase the common stock of the Company or any affiliate of the Company
granted under any equity plan of the Company or affiliate of the Company, restricted stock then held by the Executive and other equity
and equity equivalent awards then held by the Executive shall be accelerated in full, and thereafter all such options, restricted stock
and other equity awards shall be immediately vested, and exercisable for such period of time following termination as provided for by
the specific agreements governing each such award.


 


(iii)       Benefits
Continuation. For the period beginning on the date of such involuntary termination by the Company other than for Cause, death or disability
or the Executive's Voluntary Termination for Good Reason occurs and ending on the earlier of the date which is twelve (12) months following
the date of such termination or the date upon which the Executive commences receiving generally comparable medical benefits through employment
elsewhere, the Company shall pay directly or reimburse the Executive, at its option, for premium costs incurred by the Executive and the
Executive's dependents for medical and dental benefits continuation coverage pursuant to Section 4980B of the Internal Revenue Code of
1986, as amended (the “Code”), Sections 601-608 of the Employee Retirement Income Security Act of 1974, as amended, and under
any other applicable law, to the extent required by such laws, as if the Executive had terminated employment with the Company on the date
such benefits coverage terminates.


 


(iv)       All
of the foregoing benefits shall replace and be in lieu of any other severance benefit(s) to which Executive would otherwise be entitled
following a Change of Control.


 




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(g)      Change
of Control. “Change of Control” means the occurrence of any of the following events:


 


(i)       A
change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”),
acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent
(50%) of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection, the acquisition
of additional stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of
the Company will not be considered a Change of Control; or


 


(ii)       A
change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any
twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to
the date of the appointment or election. For purposes of this clause (ii), if any Person is considered to be in effective control of the
Company, the acquisition of additional control of the Company by the same Person will not be considered a Change of Control; or


 


(iii)       A
change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has
acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from
the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of
all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection
(iii), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets: (A) a transfer
to an entity that is controlled by the Company’s stockholders immediately after the transfer, or (B) a transfer of assets by the
Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s
stock, (2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the
Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding
stock of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or
indirectly, by a Person described in this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value means
the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated
with such assets.


 


For purposes of this definition,
persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase
or acquisition of stock, or similar business transaction with the Company.


 


(h)      Notice
of Non-Renewal. For the avoidance of doubt, any notice of nonrenewal of a Successive Term provided by the Company pursuant to Section
1 of this Agreement shall constitute termination of Executive by the Company without Cause during a Successive Term.


 




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9.       Limitations
on Payment.


 


(a)       Payment
Delay. Notwithstanding anything herein to the contrary, to the extent any payments to Executive pursuant to Section 8 are treated
as non-qualified deferred compensation subject to Section 409A of the Code, then (i) no amount shall be payable pursuant to such section
unless Executive's termination of employment constitutes a “'separation from service” with the Company (as such term is defined
in Treasury Regulation Section 1.409A-1(h) and any successor provision thereto) (a “Separation from Service”), (ii) if any
of the amounts described in Sections 8(a)(i)-(ii) above constitute non-qualified deferred compensation subject to Section 409A of the
Code then any such amounts that become payable hereunder shall in all cases be paid in two installment payments pursuant to the terms
described in the last paragraph of Section 8(a), provided that the first lump-sure payment shall be paid on the 60th day following Executive's
Separation from Service subject to clause (iii) of this Section 9(a) and (iii) if Executive, at the time of his Separation from Service,
is determined by the Company to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code and the Company
determines that delayed commencement of any portion of the termination benefits payable to Executive pursuant to this Agreement is required
in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(1) of the Code (any such delayed commencement, a “Payment
Delay”), then such portion of Executive's termination benefits described in Section 8 shall not be provided to Executive prior to
the earlier of (A) the expiration of the six-month period measured from the date of Executive's Separation from Service, (B) the date
of Executive's death or (C) such earlier date as is permitted under Section 409A. Upon the expiration of the applicable Code Section 409A(a)(2)(B)(i)
deferral period, all payments deferred pursuant to a Payment Delay shall be paid in a lump sum to Executive within thirty (30) days following
such expiration, and any remaining payments due under the Agreement shall be paid as otherwise provided herein. The determination of whether
Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of his Separation
from Service shall be made by the Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder
(including without limitation Treasury Regulation Section 1.409A-1(i) and any successor provision thereto).


 


(b)       Exceptions
to Payment Delay. Notwithstanding Section 9(a), to the maximum extent permitted by applicable law, amounts payable to Executive pursuant
to Section 8 shall be made in reliance upon Treasury Regulation Section 1.409A-1(b)(9) (with respect to separation pay plans) or Treasury
Regulation Section 1.409A-1(b)(4) (with respect to short-term deferrals). Accordingly, the severance payments provided for in Section
8 may not be intended to provide for any deferral of compensation subject to Section 409A of the Code to the extent (i) the severance
payments payable pursuant to Section 8, by their terms and determined as of the date of Executive's Separation from Service, may not be
made later than the fifteenth (15th) day of the third calendar month following the later of (A) the end of the Company's fiscal year in
which Executive's Separation from Service occurs or (B) the end of the calendar year in which Executive's Separation from Service occurs,
or (ii) (A) such severance payments do not exceed an amount equal to two times the lesser of (1) the amount of Executive's annualized
compensation based upon Executive's annual rate of pay for the calendar year immediately preceding the calendar year in which Executive's
Separation from Service occurs (adjusted for any increase during the calendar year in which such Separation from Service occurs that would
be expected to continue indefinitely had Executive remained employed with the Company) or (2) the maximum amount that may be taken into
account under a qualified plan pursuant to Section 401(a)(17) for the calendar year in which Executive's Separation from Service occurs,
and (B) such severance payments shall be completed no later than December 31 of the second calendar year following the calendar year in
which Executive's Separation from Service occurs. Moreover, the COBRA premium payments contemplated under Section 8 are intended to be
exempt from Section 409A of the Code pursuant to Treasury Regulation Section 1.409A-1(b)(9)(v) as direct service recipient payments for
medical benefits.


 




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(c)       Interpretation.
To the extent the payments and benefits under this Agreement are subject to Section 409A of the Code, this Agreement shall be interpreted,
construed and administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury
Regulations thereunder (and any applicable transition relief under Section 409A of the Code).


 


(d)       Parachute
Payments. Notwithstanding anything contained in this Agreement to the contrary, to the extent that payments and benefits provided
under this Agreement or otherwise (including the acceleration of vesting of equity awards) to Executive (such payments or benefits are
collectively referred to as the “Payments”) would be subject to the excise tax (the “Excise Tax”) imposed under
Section 4999 of the Code, the Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be made or
benefit to be provided to Executive shall be subject to the Excise Tax, but only if, by reason of such reduction, the net after-tax benefit
received by Executive shall exceed the net after-tax benefit received by him if no such reduction was made. For purposes of this Section
9(d), “net after-tax benefit” shall mean (i) the Payments which Executive receives or is then entitled to receive from
the Company that would constitute “parachute payments” within the meaning of Section 280G of the Code, less (ii) the amount
of all federal, state and local income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate
for each year in which the foregoing shall be paid to Executive (based on the rate in effect for such year as set forth in the Code as
in effect at the time of the first payment of the foregoing), less (iii) the amount of excise taxes imposed with respect to the payments
and benefits described in (i) above by Section 4999 of the Code. The foregoing determination will be made by a nationally recognized accounting
firm (the “Accounting Firm”) selected by Executive and reasonably acceptable to the Company (which may be, but will not be
required to be, the Company's independent auditors). The Company will direct the Accounting Firm to submit its determination and detailed
supporting calculations to both the affected Executive and the Company within fifteen (15) calendar days after Executive's date of Separation
from Service. If the Accounting Firm determines that such reduction is required by this Section 9(d) and no Payment constitutes non-qualified
deferred compensation that is subject to Section 409A of the Code, Executive, in Executive's sole and absolute discretion, may determine
which Payments shall be reduced to the extent necessary so that no portion thereof shall be subject to the excise tax imposed by Section
4999 of the Code, and the Company shall pay such reduced amount to him. If the Accounting Firm determines that a reduction is required
by this Section 9(d), and any Payment constitutes a “deferral of compensation” within the meaning of Section 409A of the Code,
then the Payments shall be reduced in the following order; (a) reduction in the cash severance payments described herein (with such reduction
being applied to the payments in the reverse order in which they would otherwise be made, that is, later payments shall be reduced before
earlier payments); (b) reduction in any other cash payments payable to Executive (with such reduction being applied to the payments in
the reverse order in which they would otherwise be made, that is, later payments shall be reduced before earlier payments); (c) cancellation
of acceleration of vesting on any equity awards for which the exercise price exceeds the then fair market value of the underlying equity;
and (d) cancellation of acceleration of vesting of equity awards not covered under (c) above; provided, however that in the event that
acceleration of vesting of equity awards is to be cancelled, such acceleration of vesting shall be cancelled in the reverse order of the
date of grant of such equity awards, that is, later equity awards shall be canceled before earlier equity awards.


 




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10.     Clawback.
Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based or other compensation paid to the Executive
under this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation,
or stock exchange listing requirement will be subject to such deductions and clawback as may be required to be made pursuant to such law,
government regulation, or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government
regulation or stock exchange listing requirement).


 





11.       Arbitration.
Executive and
the Company
agree to submit any and all DISPUTES, CONTROVERSIES,
OR CLAIMS BETWEEN THEM BASED UPON, RELATING
TO, OR ARISING from
Executive’s
employment by the Company
or the terms of this Agreement
(including
the validity, enforceability,
scope or breach of this Agreement)
to FINAL AND BINDING ARBITRATION
BEFORE A SINGLE NEUTRAL ARBITRATOR IN LOS ANGELES,
California,
and governed by the Federal
Arbitration
Act
(“FAA”). Subject
to the terms of this paragraph, the
arbitration proceedings shall be initiated in accordance with,
and governed by,
the Employment
Arbitration
Rules
and Mediation
Procedures
(“Rules”)
of the American
Arbitration
Association
(“AAA”). The
arbitrator shall be appointed by agreement of the parties hereto or,
IF NO AGREEMENT CAN BE REACHED, BY
THE AAA PURSUANT TO ITS RULES.
Notwithstanding the Rules,
the parties may take discovery in accordance with Sections
1283.05(a)-(d)
of the California
Code
of Civil
Procedure
(but
not subject to the restrictions of Section
1283.05(e)),
and prior to the arbitration hearing the parties may file,
and the arbitrator shall rule on,
pre-trial
motions such as demurrers and motions for summary judgment (applying
the procedural standard embodied in Rule
56 of the Federal
Rules
of Civil
Procedure).
The time for filing such motions shall be determined by the arbitrator.
The arbitrator will rule on ALL
PRE-TRIAL MOTIONS AT LEAST TEN (10)
BUSINESS DAYS PRIOR TO THE SCHEDULED HEARING date.
Arbitration may be compelled,
the arbitration award shall be enforced,
and judgment thereon shall be entered,
pursuant to the California
Arbitration
Act
(Code
of Civil
Procedure
§§ 1280 et seq.).
The Company
shall bear AAA’S administrative
fees and the arbitrator’s
fees and costs. If
any party is required to compel arbitration of a dispute governed by this paragraph,
the party prevailing IN THAT
PROCEEDING SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ITS reasonable
costs and attorneys’ fees
and expenses incurred to compel arbitration to the extent permitted by applicable law.
any dispute between Executive
and the Company
shall be brought on an individual basis only, and
not on a class or collective basis, and
Executive
shall not participate in a class or collective action against the Company.
The arbitrator shall not have the authority or jurisdiction to
hear any Claim
in arbitration as a class or collective or representative action.
For the avoidance of doubt and to the maximum extent permitted
by applicable law, PAGA
claims concerning alleged Labor
Code
VIOLATIONS TOWARDS EXECUTIVE
ARE SUBJECT TO INDIVIDUAL ARBITRATION AND ARE divisible from non-arbitrable
PAGA representative claims brought
on behalf of the State
concerning alleged Labor
Code
violations towards any “aggrieved
employees” other
than Executive.
If either Party
pursues a civil action in court INVOLVING CLAIMS WHICH ARE NOT ARBITRABLE AND ALSO PURSUES COVERED
CLAIMS, LITIGATION
OF THE NON-ARBITRABLE CLAIMS SHALL BE STAYED PENDING THE OUTCOME
OF the covered claims Covered
claims subject to this section do not include: (i)
claims arising under the National
Labor
Relations
Act
which are brought before the National
Labor
Relations
Board;
(ii)
claims for workers’
compensation,
DISABILITY OR UNEMPLOYMENT BENEFITS; (III) CLAIMS
BASED ON ANY PENSION OR WELFARE plan,
the terms of which may contain arbitration or other non-judicial
dispute resolution procedures; (iv)
claims by whistleblowers arising pursuant to the Sarbanes-Oxley
Act
and alleging unlawful retaliation or seeking any relief pursuant to that Act;
(v)
sexual assault or sexual harassment disputes under either federal
or state law, unless
Executive
explicitly and in writing agrees, post-dispute,
to arbitrate a sexual assault or sexual harassment dispute,
and WAIVE THE RIGHT TO FILE
THAT SAME CLAIM(S) IN
COURT; (VI) CLAIMS
THAT ARE EXPRESSLY prohibited by applicable law from being subject to
arbitration, provided
such law is not preempted or otherwise prohibited under the FAA; and
(vii)
petitions to a court of competent jurisdiction for injunctive relief
related to a dispute subject to arbitration where such temporary equitable relief would be otherwise authorized by law.
In addition,
nothing in this Agreement
prohibits (i)
Executive from engaging in concerted activities under Section
7 of the National
Labor
Relations
Act
or filing an unfair labor practice charge with the National
Labor
Relations
Board
(NLRB), (ii)
from making a report to or filing a claim or charge WITH
THE U.S. Equal
EMPLOYMENT OPPORTUNITY
COMMISSION (EEOC) OR
CALIFORNIA Department
of Fair
Employment
and Housing
(DFEH), or a charge or complaint
of retaliation under the Sarbanes-Oxley
Act
or Dodd-Frank
Act
with the Department
of Labor
(DOL) or Securities
and Exchange
Commission
(SEC) respectively,
or a similar administrative charge,
claim,
or complaint with any federal,
state or local government agency,
office or official (“Government
Complaint”),
or (iii)
any such agency from investigating a Government
Complaint
or from pursuing legal action on Executive’s
behalf (to
the extent permitted by applicable law). Executive
may pursue legal action against Employer
before an administrative adjudicative body only to the extent that applicable law requires such an action to proceed notwithstanding
the existence of an enforceable agreement to arbitrate under the FAA. Additionally,
nothing in this Agreement
precludes or excuses a party from exhausting administrative remedies where required by law before making a claim in arbitration.
This paragraph is intended to be the exclusive method for resolving
any and all claims by the parties against EACH OTHER for
PAYMENT OF DAMAGES UNDER THIS AGREEMENT
OR RELATING TO Executive’s
employment; provided,
however,
that neither this Agreement
nor the submission to arbitration shall limit the parties’
right to seek provisional relief,
including without limitation injunctive relief,
in any court of competent jurisdiction.
Executive and the Company
expressly waive their right to a jury trial. This
paragraph shall survive the expiration or termination of this Agreement.
If any part of this paragraph is found to be void as a matter of
law or public policy, the
remainder of the paragraph will continue to be in full force and effect.




 




    	 	11	 



     


    

 


12.     Miscellaneous.


 


(a)       Assignment.
The rights and obligations of the parties under this Agreement shall inure to the benefit of and be binding upon their respective successors
and assigns. Executive agrees that the Company may assign its rights and obligations under this Agreement to any successor-in-interest.
Executive may assign his rights and obligations hereunder only with the express written consent of the Company, except that the rights
under this Agreement shall inure to the benefit of Executive's heirs or assigns in the event of his death. Except as expressly provided
in this paragraph, no party may assign its/his rights and obligations hereunder; and any attempt to do so will be void.


 


(b)      Severability.
If any provision of this Agreement otherwise is deemed to be invalid or unenforceable or is prohibited by the laws of the state or jurisdiction
where it is to be performed, this Agreement shall be considered divisible as to such provision, such provision shall be replaced by a
provision that is valid and enforceable and that as closely as possible reflects the parties' intent with respect to such provision and
such provision shall be inoperative in such state or jurisdiction and shall not be part of the consideration moving from any of the parties
to any other. The remaining provisions of this Agreement shall be valid and binding and of like effect as though such provision was not
included.


 


(c)      Notice.
Notices given pursuant to the provisions of this Agreement shall be delivered personally or sent by certified mail, postage pre-paid,
or by overnight courier, or by fax, if to the Company, to the Company's then-current business address or, in the event the notice is to
Executive, to the address that Executive has represented to the Company as current.


 


(d)      Governing
Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California, without
giving effect to the conflict of laws rules thereof.


 


(e)      Waiver,
Amendment. The waiver by any party to this Agreement of a breach of any provision hereof by any other party shall not be construed
as a waiver of any subsequent breach. No provision of this Agreement may be terminated, amended, supplemented, waived or modified other
than by an instrument in writing, signed by the party against whom the enforcement of the termination, amendment, supplement, waiver or
modification is sought. If Executive and the Company determine that any payments or benefits payable under this Agreement intended to
comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, the parties agree to amend this
Agreement, or take such other actions as the parties deem reasonably necessary or appropriate, to comply with the requirements of Section
409A of the Code, the Treasury Regulations thereunder (and any applicable transition relief) while preserving the economic agreement of
the parties. If any provision of the Agreement would cause such payments or benefits to fail to so comply, such provision shall not be
effective and shall be null and void with respect to such payments or benefits, and such provision shall otherwise remain in full force
and effect.


 




    	 	12	 



     


    

 


(f)       Entire
Agreement. This Agreement represents the entire agreement among the parties with respect to the subject matter of this Agreement and
supersedes any previous agreement or understanding.


 


(g)       Execution
in Counterparts. This Agreement may be executed in counterparts with the same force and effectiveness as though executed as a single
document.


 


[Signatures on following page]


 




    	 	13	 



     


    

 


IN WITNESS WHEREOF, the
parties have executed this Agreement as of the day and year first written above.


 


	 	TOUGHBUILT INDUSTRIES, INC.
	 	 	 
	 	By:	/s/ Michael Panosian
	 	 	Michael Panosian
	 	 	CEO and President
	 	 	 
	 	EXECUTIVE:
	 	 
	 	/s/ Zareh Khachatoorian
	 	Zareh Khachatoorian


 


[Signature Page - Employment Agreement (Zareh Khachatoorian)]


 




    	 	 	 



     


    

 


EXHIBIT A


 


PROPRIETARY INFORMATION, INVENTIONS ASSIGNMENT,

AND NON-DISCLOSURE AGREEMENT


 


[Attached]


 




    	 	 	 



     


    

 


PROPRIETARY INFORMATION, INVENTIONS ASSIGNMENT AND
NON-

DISCLOSURE AGREEMENT


 


This Proprietary Information, Inventions
Assignment, and Non-Disclosure Agreement (“Agreement”) is made by and between Zareh Khachatoorian (“Employee”)
and ToughBuilt Industries, Inc. (“Employer”). Employee and Employer shall be referred to herein collectively as the
“Parties” or individually to as a “Party.”


 


1.       Purpose
of Agreement. Employee understands that Employer possesses and receives confidential knowledge and data from third parties, and has
been and will be engaged in its own continuous research, development, design, production, business and operational planning, marketing,
sales, and other endeavors in connection with Employer’s business and innovatively designed products, and that it is critical for
Employer to preserve and protect its “Confidential Information” (defined below in Section 7(a)), its rights to and
in “Inventions” (defined below in Section 2), and in all related intellectual property rights. In consideration of
Employee’s continued employment with Employer, and an express condition of such employment, Employee is entering into this Agreement,
regardless of whether Employee is expected to create inventions or other information of value for Employer. Contemporaneously with the
execution and delivery of this Agreement, the Parties have executed an employment agreement (the “Employment Agreement”)
that incorporates this entire Agreement as a condition of Employee’s employment with Employer.


 


2.       Disclosure
of Inventions. Employee will promptly disclose in confidence to Employer all inventions and discoveries, developments, improvements,
enhancements, upgrades, formulas, concepts, designs, ideas, data, original works of authorship, processes, compositions of matter, trade
secrets, know-how, and other technological advances and other work product of any nature (collectively, “Inventions”)
that Employee makes, conceives, or first reduces to practice or creates, either alone or jointly with others, during the period of Employee’s
employment with Employer, whether or not in the course of the employment, and whether or not such Inventions are patentable, copyrightable,
or otherwise able to be registered or protected as trade secrets.


 


3.       Work
for Hire; Assignment of Inventions. Employee acknowledges and agrees that any patentable or copyrightable works prepared by Employee
within the scope of Employee’s work performed for Employer, including any patentable or copyrightable Inventions, are “works
for hire” under applicable law, including the Copyright Act, and that Employer will be considered the author and owner of such copyrightable
works and other Inventions. Employer agrees that all Inventions that (a) are developed using equipment, supplies, facilities, or trade
secrets of Employer, (b) result from work performed by Employee for Employer, or


(c)       relate
to Employer’s current or anticipated business or current or anticipated research and development, will be the sole and exclusive
property of Employer and are hereby irrevocably assigned by Employee to Employer from the moment of their creation.


 




    	 	 	 



     


    

 


4.       Assignment
of Other Rights. In addition to the foregoing assignment of Inventions to Employer, Employee hereby irrevocably transfers and assigns
to Employer: (a) all worldwide patents, patent applications, copyrights, mask works, trade secrets, and other intellectual property rights
in any Invention and (b) any and all “Moral Rights” (defined below in this Section 4) that Employee may have in or
with respect to any Invention. Employee also hereby forever waives and agrees never to assert any and all Moral Rights Employee may have
in or with respect to any Invention, even after termination of Employee’s employment with Employer. “Moral Rights”
mean any rights to claim authorship of an Invention, to object to or prevent the modification of any Invention, or to withdraw from circulation
or control the publication or distribution of any Invention, and any similar right, existing under judicial or statutory law of any country
in the world, or under any treaty, regardless of whether or not such right is denominated or generally referred to as a “moral right.”


 


5.       Assistance.
Employee agrees to assist Employer in every proper way to obtain for Employer and enforce patents, copyrights, mask work rights, registration
rights, trade secret rights, and other legal protections for Employer’s Inventions in any and all countries. Employee will execute
any documents that Employer may reasonably request for use in obtaining or enforcing such patents, copyrights, mask work rights, registration
rights, trade secrets, and other legal protections. Employee’s obligations under this Section 5 will continue beyond the
termination of Employee’s employment with Employer. Employee appoints the Chief Executive Officer of Employer as Employee’s
attorney-in-fact to execute documents on Employee’s behalf for this purpose.


 


6.       Notice
of California Labor Code Section 2872. Notwithstanding the foregoing rights and obligations, and pursuant to California Labor Code
section 2872, an Invention assigned to Employer by Employee shall not include inventions that qualify fully under the provisions of California
Labor Code section 2870 (a copy of which is attached as Exhibit A), including any idea or invention which is developed entirely
on Employee’s own time without using Employer’s equipment, supplies, facilities, or trade secrets, which is not related to
Employer’s business (either actual or demonstrably anticipated), and which does not result from work performed for Employer.


 


7.       Confidentiality
Obligations.


 


(a)       Employee
acknowledges that, during the course of Employee’s employment, Employee may have knowledge of and access to certain confidential,
proprietary, and trade secrets information belonging to Employer, including, but not limited to, Employer’s financial documents,
unpublished projections and financial statements, future plans and strategies, business information, operation information and plans,
designs, research, new products and methodologies developed, supplier information, potential customer information (including names, representatives,
their needs or desires with respect to the types of products or services offered by Employer, and other non-public information), and any
other non-public information that a competitor of Employer could use to Employer’s competitive disadvantage (collectively, “Confidential
Information”). Employee agrees to undertake a fiduciary obligation to protect against the disclosure and third-party use of
any Confidential Information. Employee shall not disclose, communicate, divulge, or allow other person or entity to use to their personal,
competitive, or economic advantage any Confidential Information, except where Employee has received prior written consent from Employer
or as otherwise required by law or by judicial or administrative process or order, and in that case only after compliance with Section
7(c) below.


 




    	 	 	 



     


    

 


(b)       Employee
will not remove any Confidential Information from Employer’s premises or make copies of such materials, except where Employee has
received prior written consent from Employer or as otherwise required by law or by judicial or administrative process or order, and in
that case only after compliance with Section 7(c) below.


 


(c)       If
a person not a Party to this Agreement requests or demands that Employee disclose Confidential Information or produce documents containing
Confidential Information, Employee will, to the extent permitted by law, immediately notify Employer and provide Employer with a reasonable
opportunity to respond to such request or demand before Employee responds to the request or demand.


 


(d)       Upon
termination of Employee’s employment with Employer, or any request by Employer, Employee agrees to immediately return all Employer
property, documents, files, records, stored data, emails, pictures, videos, laptops, computers, phones, equipment, and Confidential Information
to Employer.


 


(e)       Notwithstanding
the foregoing nondisclosure obligations, pursuant to 18 U.S.C § 1833(b), Employee shall not be held criminally or civilly liable
under any federal or state trade secret law for the disclosure of a trade secret that is made: (i) in confidence to a federal, state,
or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating
a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made
under seal.


 


(f)       Employee
understands and acknowledges that nothing contained in this Agreement limits Employee’s ability to file a charge or complaint with
the U.S. Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration,
the Securities and Exchange Commission, or any other federal, state, or local governmental agency or commission (individually, “Government
Agency”; collectively, “Government Agencies”). Employee further understands and acknowledges that this Agreement
does not limit Employee’s ability to communicate with any Government Agencies or to otherwise participate in any investigation or
proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to Employer.
Employee also understands that this Agreement does not limit Employee’s right to discuss Employee’s employment or unlawful
acts in the workplace, such as harassment or discrimination or any other conduct that Employee has reason to believe is unlawful, or to
initiate communications directly with, or respond to any inquiry from, or provide truthful testimony before, any self-regulatory organization
or state or federal regulatory authority, or to exercise Employee’s right to engage in concerted activities as provided under Section
7 of the National Labor Relations Act, or to the extent that such disclosure is protected under the applicable provisions of law or regulation.


 




    	 	 	 



     


    

 


8.       Additional
Restrictive Covenants.


 


(a)       During
Executive’s employment with Employer, Executive shall be subject to and must comply with the entirety of the duty of loyalty related
provisions set forth in Section 4 of Executive’s Employment Agreement, dated as of December 29, 2022. Further, during Employee’s
employment with Employer, Employee shall not directly or indirectly perform work, or assistance in the performance of work, for any entity,
third party, or person (including Employee) in the same business, industry, or profession as Employer or Employer’s affiliates,
subsidiaries, parent companies, or related companies (collectively, the “Employer and the Related Companies”).


 


(b)       To
the extent permitted by law, both during and after Employee’s employment with Employer, Employee shall not use Employer’s
trade secrets to directly or indirectly perform work, or assistance in the performance of work, for any entity, third party, or person
(including Employee) in the same business, industry, or profession as Employer and the Related Companies.


 


(c)       To
the extent permitted by law, both during and after Employee’s employment with Employer, Employee shall not use Employer’s
trade secrets to directly or indirectly (i) solicit, induce, or attempt to induce any officer, employee, consultant, or contractor of
Employer and the Related Companies to terminate his or her employment or his, her, or its services with Employer and the Related Companies;
(ii) solicit, induce, or attempt to induce any officer, employee, consultant, or contractor of Employer and the Related Companies to take
employment with another party; (iii) interfere with the relations between Employer and the Related Companies and their current or potential
vendors or suppliers.


 


9.       Equitable
Remedies. Employee acknowledges and agrees that Employer would be irreparably damaged in the event that any provision of this Agreement
were to be breached and that money damages would be an inadequate remedy for any such nonperformance or breach. Employee agrees that,
to the extent permissible under applicable law, Employer shall be entitled, in addition to all other rights and remedies existing in
Employer’s favor, to obtain injunctive or other equitable relief (including a temporary restraining order, a preliminary injunction,
and a final injunction) against Employee to prevent any actual or threatened breach of any of such provisions and to enforce such provisions
specifically in any court of the United States or any state having jurisdiction, without the necessity of posting a bond or other security
or of proving actual damages.


 


10.       Notices.
Notices given pursuant to the provisions of this Agreement shall be delivered personally or sent by certified mail, postage pre-paid,
or by overnight courier, or by fax, if to the Company, to the Company's then-current business address or, in the event the notice is to
Executive, to the address that Executive has represented to the Company as current.*


 


11.       Authority.
Employer represents and warrants that the undersigned has the authority to act on behalf of Employer and to bind Employer and all who
may claim through Employer to the terms and conditions of this Agreement. Employee represents and warrants that Employee has the capacity
to act on Employee’s own behalf and on behalf of all who might claim through Employee to bind them to the terms and conditions of
this Agreement.


 




    	 	 	 



     


    

 


12       No
Representations. Employee represents that Employee has had an opportunity to consult with an attorney and has carefully read and understands
the scope and effect of the provisions of this Agreement. Employee has not relied upon any representations or statements made by Employer
that are not specifically set forth in this Agreement.


 


13.       Severability.
In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or is declared
by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall continue in full force
and effect without said provision or portion of provision.


 


14.       Fees
and Costs. In the event that either Party brings an action to enforce or affect its rights under this Agreement, the prevailing Party
shall be entitled to recover its costs and expenses, including the costs of mediation, litigation, court fees, and reasonable attorneys’
fees incurred in connection with such an action (“Fees and Costs”). Specifically, unless otherwise prohibited by applicable
law, an arbitrator, court, governmental agency, or other judicial tribunal shall (i) award Fees and Costs to the prevailing party of an
arbitration under this Agreement and (ii) award Fees and Costs to the prevailing party in the event any legal action or arbitration is
commenced of any kind or character to enforce the provisions of this Agreement or to obtain damages for a breach thereof.


 


15.       Mutual
Drafting. Each Party has participated, or had the right to participate, in the drafting, negotiation, and preparation of this Agreement.
The Parties expressly waive any Claim, rule of law, contention, or argument that would require ambiguities in this Agreement to be interpreted
or construed against the Party that drafted the Agreement.


 


16.       Complete
Integration; Entire Agreement. Except for the Employment Agreement, which is incorporated herein by reference, this Agreement represents
the entire agreement and understanding between the Parties concerning the subject matter of this Agreement and supersedes and replaces
any and all prior agreements and understandings concerning the subject matter of this Agreement, except as subsequently modified pursuant
to Section 17 below. Except for the Employment Agreement, no extrinsic evidence whatsoever may be introduced in any judicial proceedings
or arbitration involving this Agreement.


 


17.       No
Oral Modification. This Agreement shall only be amended in a writing signed by both Employee and an executive of Employer.


 


18.       Governing
Law. This Agreement shall be governed by the laws of the State of California, without regard to choice-of-law provisions. Employee
consents to personal and exclusive jurisdiction and venue in the State of California.


 


19.       Section
Headings. Section headings used in this Agreement are for convenience of reference only and shall not affect the meaning of any provision
of this Agreement.


 


20.       Counterparts.
This Agreement may be executed in counterparts, each of which shall have the same force and effect as an
original and shall constitute an effective, binding agreement on the part of each of the undersigned. The Parties also understand and
agree that a facsimile, electronic signature, or digital signature shall be deemed an original signature for purposes of this Agreement.


 




    	 	 	 



     


    

 


21.       Effective
Date. This Agreement will become effective on the date a copy signed by Employee is tendered to Employer.


 


22.       Voluntary
Execution of Agreement. Employee understands and agrees that he executed this Agreement voluntarily, without any duress or undue influence
on the part or behalf of Employer or any third party. Employee acknowledges that:


 


a.       Employee has read
this entire Agreement;


 


b.       Employee understands
the terms and consequences of this Agreement; and


 


c.       Employee is fully
aware of the legal and binding effect of this Agreement.


 


[Signature Page Follows]


 




    	 	 	 



     


    

 


IN WITNESS WHEREOF, the Parties have executed this Agreement
on the respective dates set forth below.


 


	 	Zareh Khachatoorian, an individual
	 	 
	Dated: December 29, 2022	/s/ Zareh Khachatoorian
	 	Zareh Khachatoorian
	 	 
	 	TOUGHBUILT INDUSTRIES, INC.
	 	 
	Dated: December 29, 2022	By	/s/ Michael Panosian
	 	 	Michael Panosian
	 	 	CEO and President


 


[Signature Page to Proprietary Information, Inventions
Assignment and Non-Disclosure Agreement]