Document:

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).

 

    	 	1	 

     

    

 

“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);

 

    	 	2	 

     

    

 

(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).

 

    	 	3	 

     

    

 

“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).

 

    	 	4	 

     

    

 

“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.

 

    	 	5	 

     

    

 

“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.

 

    	 	6	 

     

    

 

“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.

 

    	 	7	 

     

    

 

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.

 

    	 	8	 

     

    

 

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.

 

    	 	10	 

     

    

 

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.

 

    	 	11	 

     

    

 

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.

 

    	 	12	 

     

    

 

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.

 

    	 	13	 

     

    

 

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.

 

    	 	14	 

     

    

 

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).

 

    	 	15	 

     

    

 

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.

 

    	 	17	 

     

    

  

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

 

    	 	18	 

     

    

 

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.

 

    	 	19	 

     

    

 

		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
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

 

    	 	31Exhibit 4.7

 

TOUGHBUILT INDUSTRIES, INC.

2016 EQUITY INCENTIVE PLAN

 

1.          PURPOSE.
The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, and any Parents and Subsidiaries that exist now or in the future, by
offering them an opportunity to participate in the Company’s future performance through the grant of Awards. Capitalized
terms not defined elsewhere in the text are defined in Section 27.

 

2.          SHARES
SUBJECT TO THE PLAN.

 

2.1           Number
of Shares Available. Subject to Sections 2.6 and 21 and any other applicable provisions hereof, the total number of Shares
reserved and available for grant and issuance pursuant to this Plan as of the date of adoption of the Plan by the Board is 12,000,000
shares.

 

2.2           Lapsed,
Returned Awards. Shares subject to Awards, and Shares issued under the Plan under any Award, will again be available for grant
and issuance in connection with subsequent Awards under this Plan to the extent such Shares: (a) are subject to issuance upon exercise
of an Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any reason other than exercise
of the Option or SAR; (b) are subject to Awards granted under this Plan that are forfeited or are repurchased by the Company at
the original issue price; (c) are subject to Awards granted under this Plan that otherwise terminate without such Shares being
issued; or (d) are surrendered pursuant to an Exchange Program. To the extent an Award under the Plan is paid out in cash rather
than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Shares used
or withheld to pay the exercise price of an Award or to satisfy the tax withholding obligations related to an Award will become
available for future grant or sale under the Plan. For the avoidance of doubt, Shares that otherwise become available for grant
and issuance because of the provisions of this Section 2.2 shall not include Shares subject to Awards that initially became available
because of the substitution clause in Section 21.2 hereof.

 

2.3           Minimum
Share Reserve. At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required
to satisfy the requirements of all outstanding Awards granted under this Plan.

 

2.4           Automatic
Share Reserve Increase. The number of Shares available for grant and issuance under the Plan shall be increased on January
1, of each of the ten (10) calendar years during the term of the Plan, by the lesser of (i) two and one half percent (2.5%) of
the number of Shares issued and outstanding on each December 31 immediately prior to the date of increase or (ii) such number of
Shares determined by the Board.

 

 

2.5           Limitations.
No more than 3,000,000 Shares shall be issued pursuant to the exercise of ISO's.

 

2.6           Adjustment
of Shares. If the number of outstanding Shares is changed by a stock dividend, recapitalization, stock split, reverse stock
split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration,
then (a) the number of Shares reserved for issuance and future grant under the Plan set forth in Section 2.1, (b) the Exercise
Prices of and number of Shares subject to outstanding Options and SARs, (c) the number of Shares subject to other outstanding Awards,
(d) the maximum number of shares that may be issued as ISO’s set forth in Section 2.5, (e) the maximum number of Shares that
may be issued to an individual or to a new Employee in any one calendar year set forth in Section 3 and (f) the number of Shares
that are granted as Awards to Non-Employee Directors as set forth in Section 12, shall be proportionately adjusted, subject to
any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws; provided
that fractions of a Share will not be issued.

 

3.          ELIGIBILITY.
ISO’s may be granted only to Employees. All other Awards may be granted to Employees, Consultants, Directors and Non-Employee
Directors of the Company or any Parent or Subsidiary of the Company; provided such Consultants, Directors and Non-Employee Directors
render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. No Employee
will be eligible to receive more than 250,000 Shares in any calendar year under this Plan pursuant to the grant of Awards.

 

     

     

    

 

4.          ADMINISTRATION.

 

4.1          Committee
Composition; Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to
the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power
to implement and carry out this Plan, except, however, the Board shall establish the terms for the grant of an Award to Non-Employee
Directors. The Committee will have the authority to:

 

(a)          construe
and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;

 

(b)          prescribe,
amend and rescind rules and regulations relating to this Plan or any Award;

 

(c)          select
persons to receive Awards;

 

(d)          determine
the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or times when Awards may vest and be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine;

 

(e)          determine
the number of Shares or other consideration subject to Awards;

 

(f)          determine
the Fair Market Value in good faith and interpret the applicable provisions of this Plan and the definition of Fair Market Value
in connection with circumstances that impact the Fair Market Value, if necessary;

 

(g)          determine
whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards
under this Plan or any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company;

 

(h)          grant
waivers of Plan or Award conditions;

 

(i)           determine
the vesting, exercisability and payment of Awards;

 

(j)           correct
any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;

 

(k)          determine
whether an Award has been earned;

 

(l)           determine
the terms and conditions of any, and to institute any Exchange Program;

 

(m)          reduce
or waive any criteria with respect to Performance Factors;

 

(n)          adjust
Performance Factors to take into account changes in law and accounting or tax rules as the Committee deems necessary or appropriate
to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships provided that
such adjustments are consistent with the regulations promulgated under Section 162(m) of the Code with respect to persons whose
compensation is subject to Section 162(m) of the Code;

 

(o)          adopt
rules and/or procedures (including the adoption of any subplan under this Plan) relating to the operation and administration of
the Plan to accommodate requirements of local law and procedures outside of the United States;

 

(p)          make
all other determinations necessary or advisable for the administration of this Plan; and

 

    	 	2	 

     

    

 

 (q)          delegate
any of the foregoing to a subcommittee consisting of one or more executive officers pursuant to a specific delegation.

 

4.2           Committee
Interpretation and Discretion. Any determination made by the Committee with respect to any Award shall be made in its sole
discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later
time, and such determination shall be final and binding on the Company and all persons having an interest in any Award under the
Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement shall be submitted by the Participant or Company
to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and the
Participant. The Committee may delegate to one or more executive officers the authority to review and resolve disputes with respect
to Awards held by Participants who are not Insiders, and such resolution shall be final and binding on the Company and the Participant.

 

4.3           Section
162(m) of the Code and Section 16 of the Exchange Act. When necessary or desirable for an Award to qualify as “performance-based
compensation” under Section 162(m) of the Code the Committee shall include at least two persons who are “outside directors”
(as defined under Section 162(m) of the Code) and at least two (or a majority if more than two then serve on the Committee) such
“outside directors” shall approve the grant of such Award and timely determine (as applicable) the Performance Period
and any Performance Factors upon which vesting or settlement of any portion of such Award is to be subject. When required by Section
162(m) of the Code, prior to settlement of any such Award at least two (or a majority if more than two then serve on the Committee)
such “outside directors” then serving on the Committee shall determine and certify in writing the extent to which such
Performance Factors have been timely achieved and the extent to which the Shares subject to such Award have thereby been earned.
Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more “non-employee
directors” (as defined in the regulations promulgated under Section 16 of the Exchange Act). With respect to Participants
whose compensation is subject to Section 162(m) of the Code, and provided that such adjustments are consistent with the regulations
promulgated under Section 162(m) of the Code, the Committee may adjust the performance goals to account for changes in law and
accounting and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary
or unusual items, events or circumstances to avoid windfalls or hardships, including without limitation (i) restructurings, discontinued
operations, extraordinary items, and other unusual or non-recurring charges, (ii) an event either not directly related to the operations
of the Company or not within the reasonable control of the Company’s management, or (iii) a change in accounting standards
required by generally accepted accounting principles.

 

4.4           Documentation.
The Award Agreement for a given Award, the Plan and any other documents may be delivered to, and accepted by, a Participant or
any other person in any manner (including electronic distribution or posting) that meets applicable legal requirements.

 

5.          OPTIONS.
The Committee may grant Options to Participants and will determine whether such Options will be Incentive Stock Options within
the meaning of the Code (“ISO’s”) or Nonqualified Stock Options (“NQSO’s”), the
number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may vest and be exercised,
and all other terms and conditions of the Option, subject to the following:

 

5.1           Option
Grant. Each Option granted under this Plan will identify the Option as an ISO or an NQSO. An Option may be, but need not be,
awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participant’s
individual Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will:
(x) determine the nature, length and starting date of any Performance Period for each Option; and (y) select from among the Performance
Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously
with respect to Options that are subject to different performance goals and other criteria.

 

5.2           Date
of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option,
or a specified future date. The Award Agreement and a copy of this Plan will be delivered to the Participant within a reasonable
time after the granting of the Option.

 

5.3           Exercise
Period. Options may be vested and exercisable within the times or upon the conditions as set forth in the Award Agreement governing
such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option
is granted; and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution
owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company (“Ten Percent Stockholder”) will be exercisable after the expiration of five (5) years
from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to
time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.

 

    	 	3	 

     

    

 

5.4           Exercise
Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted; provided that: (i) the
Exercise Price of an Option will be not less than one hundred percent (100%) of the Fair Market Value of the Shares on the date
of grant and (ii) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent
(110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance
with Section 11 and the Award Agreement and in accordance with any procedures established by the Company.

 

5.5           Method
of Exercise. Any Option granted hereunder will be vested and exercisable according to the terms of the Plan and at such times
and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for
a fraction of a Share. An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the
Committee may specify from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration
and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise
of an Option will be issued in the name of the Participant. Until the Shares are issued (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any
other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will
issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are issued, except as provided in Section 2.6 of the Plan.
Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is exercised.

 

5.6           Termination.
The exercise of an Option will be subject to the following (except as may be otherwise provided in an Award Agreement):

 

(a)          If
the Participant is Terminated for any reason except for Cause or the Participant’s death or Disability, then the Participant
may exercise such Participant’s Options only to the extent that such Options would have been exercisable by the Participant
on the Termination Date no later than ninety (90) days after the Termination Date (or such shorter time period or longer time period
not exceeding five (5) years as may be determined by the Committee, with any exercise beyond three (3) months after the Termination
Date deemed to be the exercise of an NQSO), but in any event no later than the expiration date of the Options.

 

(b)          If
the Participant is Terminated because of the Participant’s death (or the Participant dies within ninety (90) days after a
Termination other than for Cause or because of the Participant’s Disability), then the Participant’s Options may be
exercised only to the extent that such Options would have been exercisable by the Participant on the Termination Date and must
be exercised by the Participant’s legal representative, or authorized assignee, no later than twelve (12) months after the
Termination Date (or such shorter time period not less than six (6) months or longer time period not exceeding five (5) years as
may be determined by the Committee), but in any event no later than the expiration date of the Options.

 

(c)          If
the Participant is Terminated because of the Participant’s Disability, then the Participant’s Options may be exercised
only to the extent that such Options would have been exercisable by the Participant on the Termination Date and must be exercised
by the Participant (or the Participant’s legal representative or authorized assignee) no later than six (6) months after
the Termination Date (with any exercise beyond (a) three (3) months after the Termination Date when the Termination is for a Disability
that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code, or (b) twelve (12) months
after the Termination Date when the Termination is for a Disability that is a “permanent and total disability” as defined
in Section 22(e)(3) of the Code, deemed to be exercise of an NQSO), but in any event no later than the expiration date of the Options.

 

(d)          If
the Participant is terminated for Cause, then Participant’s Options shall expire on such Participant’s Termination
Date, or at such later time and on such conditions as are determined by the Committee, but in any no event later than the expiration
date of the Options. Unless otherwise provided in the Award Agreement, Cause will have the meaning set forth in the Plan.

 

    	 	4	 

     

    

 

5.7           Limitations
on Exercise. The Committee may specify a minimum number of Shares that may be purchased on any exercise of an Option, provided
that such minimum number will not prevent any Participant from exercising the Option for the full number of Shares for which it
is then exercisable.

 

5.8           Limitations
on ISO’s. With respect to Awards granted as ISO’s, to the extent that the aggregate Fair Market Value of the Shares
with respect to which such ISO’s are exercisable for the first time by the Participant during any calendar year (under all
plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated
as NQSO’s. For purposes of this Section 5.8, ISO’s will be taken into account in the order in which they were granted.
The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. In the
event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit
on the Fair Market Value of Shares permitted to be subject to ISO’s, such different limit will be automatically incorporated
herein and will apply to any Options granted after the effective date of such amendment.

 

5.9           Modification,
Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options
in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such
Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise
altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 18 of this Plan, by written notice to
affected Participants, the Committee may reduce the Exercise Price of outstanding Options without the consent of such Participants;
provided, however, that the Exercise Price may not be reduced below the Fair Market Value on the date the action is taken to reduce
the Exercise Price.

 

5.10         No
Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISO’s will be interpreted,
amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under
Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.

 

6.            RESTRICTED
STOCK AWARDS.

 

6.1           Awards
of Restricted Stock. A Restricted Stock Award is an offer by the Company to sell to a Participant Shares that are subject to
restrictions (“Restricted Stock”). The Committee will determine to whom an offer will be made, the number of
Shares the Participant may purchase, the Purchase Price, the restrictions under which the Shares will be subject and all other
terms and conditions of the Restricted Stock Award, subject to the Plan.

 

6.2           Restricted
Stock Purchase Agreement. All purchases under a Restricted Stock Award will be evidenced by an Award Agreement. Except as may
otherwise be provided in an Award Agreement, a Participant accepts a Restricted Stock Award by signing and delivering to the Company
an Award Agreement with full payment of the Purchase Price, within thirty (30) days from the date the Award Agreement was delivered
to the Participant. If the Participant does not accept such Award within thirty (30) days, then the offer of such Restricted Stock
Award will terminate, unless the Committee determines otherwise.

 

6.3           Purchase
Price. The Purchase Price for a Restricted Stock Award will be determined by the Committee and may be less than Fair Market
Value on the date the Restricted Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section
11 of the Plan, and the Award Agreement and in accordance with any procedures established by the Company.

 

6.4           Terms
of Restricted Stock Awards. Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are
required by law. These restrictions may be based on completion of a specified number of years of service with the Company or upon
completion of Performance Factors, if any, during any Performance Period as set out in advance in the Participant’s Award
Agreement. Prior to the grant of a Restricted Stock Award, the Committee shall: (a) determine the nature, length and starting date
of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance
goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and
a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance
Periods and having different performance goals and other criteria.

 

    	 	5	 

     

    

 

6.5           Termination
of Participant. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such Participant’s
Termination Date (unless determined otherwise by the Committee).

 

7.            STOCK BONUS AWARDS.

 

7.1           Awards
of Stock Bonuses. A Stock Bonus Award is an award to an eligible person of Shares for services to be rendered or for past services
already rendered to the Company or any Parent or Subsidiary. All Stock Bonus Awards shall be made pursuant to an Award Agreement.
No payment from the Participant will be required for Shares awarded pursuant to a Stock Bonus Award.

 

7.2           Terms
of Stock Bonus Awards. The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus
Award and any restrictions thereon. These restrictions may be based upon completion of a specified number of years of service with
the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in
advance in the Participant’s Stock Bonus Agreement. Prior to the grant of any Stock Bonus Award the Committee shall: (a)
determine the nature, length and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance
Factors to be used to measure performance goals; and (c) determine the number of Shares that may be awarded to the Participant.
Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject
to different Performance Periods and different performance goals and other criteria.

 

7.3           Form
of Payment to Participant. Payment may be made in the form of cash, whole Shares, or a combination thereof, based on the Fair
Market Value of the Shares earned under a Stock Bonus Award on the date of payment, as determined in the sole discretion of the
Committee.

 

7.4           Termination
of Participation. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such Participant’s
Termination Date (unless determined otherwise by the Committee).

 

8.            STOCK APPRECIATION
RIGHTS.

 

8.1           Awards
of SARs. A Stock Appreciation Right (“SAR”) is an award to a Participant that may be settled in cash, or
Shares (which may consist of Restricted Stock), having a value equal to (a) the difference between the Fair Market Value on the
date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled
(subject to any maximum number of Shares that may be issuable as specified in an Award Agreement). All SARs shall be made pursuant
to an Award Agreement.

 

8.2           Terms
of SARs. The Committee will determine the terms of each SAR including, without limitation: (a) the number of Shares subject
to the SAR; (b) the Exercise Price and the time or times during which the SAR may be settled; (c) the consideration to be distributed
on settlement of the SAR; and (d) the effect of the Participant’s Termination on each SAR. The Exercise Price of the SAR
will be determined by the Committee when the SAR is granted, and may not be less than Fair Market Value. A SAR may be awarded upon
satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the Participant’s
individual Award Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (x)
determine the nature, length and starting date of any Performance Period for each SAR; and (y) select from among the Performance
Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously
with respect to SARs that are subject to different Performance Factors and other criteria.

 

8.3           Exercise
Period and Expiration Date. A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee
and set forth in the Award Agreement governing such SAR. The SAR Agreement shall set forth the expiration date; provided that no
SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted. The Committee may also provide
for SARs to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon
the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage
of the Shares subject to the SAR as the Committee determines. Except as may be set forth in the Participant’s Award Agreement,
vesting ceases on such Participant’s Termination Date (unless determined otherwise by the Committee). Notwithstanding the
foregoing, the rules of Section 5.6 also will apply to SARs.

 

    	 	6	 

     

    

 

8.4           Form
of Settlement. Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined
by multiplying (i) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price; times
(ii) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the
Company for the SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The portion of a SAR
being settled may be paid currently or on a deferred basis with such interest or dividend equivalent, if any, as the Committee
determines, provided that the terms of the SAR and any deferral satisfy the requirements of Section 409A of the Code.

 

8.5           Termination
of Participation. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such Participant’s
Termination Date (unless determined otherwise by the Committee).

 

9.            RESTRICTED
STOCK UNITS.

 

9.1           Awards
of Restricted Stock Units. A Restricted Stock Unit (“RSU”) is an award to a Participant covering a number
of Shares that may be settled in cash, or by issuance of those Shares (which may consist of Restricted Stock). All RSU’s
shall be made pursuant to an Award Agreement.

 

9.2           Terms
of RSU’s. The Committee will determine the terms of an RSU including, without limitation: (a) the number of Shares subject
to the RSU; (b) the time or times during which the RSU may be settled; (c) the consideration to be distributed on settlement; and
(d) the effect of the Participant’s Termination on each RSU. An RSU may be awarded upon satisfaction of such performance
goals based on Performance Factors during any Performance Period as are set out in advance in the Participant’s Award Agreement.
If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length
and starting date of any Performance Period for the RSU; (y) select from among the Performance Factors to be used to measure the
performance, if any; and (z) determine the number of Shares deemed subject to the RSU. Performance Periods may overlap and participants
may participate simultaneously with respect to RSU’s that are subject to different Performance Periods and different performance
goals and other criteria.

 

9.3           Form
and Timing of Settlement. Payment of earned RSU’s shall be made as soon as practicable after the date(s) determined by
the Committee and set forth in the Award Agreement. The Committee, in its sole discretion, may settle earned RSU’s in cash,
Shares, or a combination of both. The Committee may also permit a Participant to defer payment under a RSU to a date or dates after
the RSU is earned provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code.

 

9.4           Termination
of Participant. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such Participant’s
Termination Date (unless determined otherwise by the Committee).

 

10.          PERFORMANCE
AWARDS.

 

10.1         Performance
Awards. A Performance Award is an award to a Participant of a cash bonus or a Performance Share bonus. Grants of Performance
Awards shall be made pursuant to an Award Agreement.

 

10.2         Terms
of Performance Awards. The Committee will determine, and each Award Agreement shall set forth, the terms of each award of Performance
Award including, without limitation: (a) the amount of any cash bonus; (b) the number of Shares deemed subject to a Performance
Share bonus; (c) the Performance Factors and Performance Period that shall determine the time and extent to which each Performance
Award shall be settled; (d) the consideration to be distributed on settlement; and (e) the effect of the Participant’s Termination
on each Performance Award. In establishing Performance Factors and the Performance Period the Committee will: (x) determine the
nature, length and starting date of any Performance Period; and (y) select from among the Performance Factors to be used. Prior
to settlement the Committee shall determine the extent to which Performance Awards have been earned. Performance Periods may overlap
and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods
and different performance goals and other criteria. No Participant will be eligible to receive more than $100,000 in Performance
Awards in any calendar year under this Plan.

 

    	 	7	 

     

    

 

10.3         Value,
Earning and Timing of Performance Shares. Any Performance Share bonus will have an initial value equal to the Fair Market Value
of a Share on the date of grant. After the applicable Performance Period has ended, the holder of a Performance Share bonus will
be entitled to receive a payout of the number of Shares earned by the Participant over the Performance Period, to be determined
as a function of the extent to which the corresponding Performance Factors or other vesting provisions have been achieved. The
Committee, in its sole discretion, may pay an earned Performance Share bonus in the form of cash, in Shares (which have an aggregate
Fair Market Value equal to the value of the earned Performance Shares at the close of the applicable Performance Period) or in
a combination thereof. Performance Share bonuses may also be settled in Restricted Stock.

 

10.4         Termination
of Participant. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such Participant’s
Termination Date (unless determined otherwise by the Committee).

 

11.          PAYMENT
FOR SHARE PURCHASES.

 

Payment from a Participant
for Shares purchased pursuant to this Plan may be made in cash or by check or, where expressly approved for the Participant by
the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement):

 

(a)           by
cancellation of indebtedness of the Company to the Participant;

 

(b)           by
surrender of shares of the Company held by the Participant that have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Award will be exercised or settled;

 

(c)           by
waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent or
Subsidiary of the Company;

 

(d)           by
consideration received by the Company pursuant to a broker-assisted or other form of cashless exercise program implemented by the
Company in connection with the Plan;

 

(e)           by
any combination of the foregoing; or

 

(f)           by
any other method of payment as is permitted by applicable law.

 

12.          GRANTS
TO NON-EMPLOYEE DIRECTORS.

 

12.1         Types
of Awards. Non-Employee Directors are eligible to receive any type of Award offered under this Plan except ISO’s. Awards
pursuant to this Section 12 may be automatically made pursuant to policy adopted by the Board, or made from time to time as determined
in the discretion of the Board.

 

12.2         Eligibility.
Awards pursuant to this Section 12 shall be granted only to Non-Employee Directors. A Non-Employee Director who is elected or re-elected
as a member of the Board will be eligible to receive an Award under this Section 12.

 

12.3         Vesting,
Exercisability and Settlement. Except as set forth in Section 21, Awards shall vest, become exercisable and be settled as determined
by the Board. With respect to Options and SARs, the exercise price granted to Non-Employee Directors shall not be less than the
Fair Market Value of the Shares at the time that such Option or SAR is granted.

 

12.4         Election
to receive Awards in Lieu of Cash. A Non-Employee Director may elect to receive his or her annual retainer payments and/or
meeting fees from the Company in the form of cash or Awards or a combination thereof, as determined by the Committee. Such Awards
shall be issued under the Plan. An election under this Section 12.4 shall be filed with the Company on the form prescribed by the
Company.

 

13.          WITHHOLDING
TAXES.

 

13.1         Withholding
Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company, or to the Parent or Subsidiary employing the Participant, an amount sufficient to satisfy
applicable U.S. federal, state, local and international withholding tax requirements or any other tax liability legally due from
the Participant prior to the delivery of Shares pursuant to exercise or settlement of any Award. Whenever payments in satisfaction
of Awards granted under this Plan are to be made in cash, such payment will be net of an amount sufficient to satisfy applicable
U.S. federal, state, local and international withholding tax requirements or any other tax liability legally due from the Participant.
The Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld and such Shares
will be valued based on the value of the actual trade or, if there is none, the Fair Market Value of the Shares as of the previous
trading day.

 

    	 	8	 

     

    

 

13.2         Stock
Withholding. The Committee, in its sole discretion and pursuant to such procedures as it may specify from time to time and
to limitations of local law, may require or permit a Participant to satisfy such tax withholding obligation or any other tax liability
legally due from the Participant, in whole or in part by (without limitation) (i) paying cash, (ii) electing to have the Company
withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld,
or (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the minimum amount required to be withheld.

 

14.          TRANSFERABILITY.

 

14.1         Transfer
Generally. Unless determined otherwise by the Committee or pursuant to Section 14.2, an Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. If the Committee
makes an Award transferable, including, without limitation, by instrument to an inter vivos or testamentary trust in which the
Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift to a Permitted Transferee, such Award
will contain such additional terms and conditions as the Committee deems appropriate. All Awards shall be exercisable: (i) during
the Participant’s lifetime only by (A) the Participant, or (B) the Participant’s guardian or legal representative;
(ii) after the Participant’s death, by the legal representative of the Participant’s heirs or legatees; and (iii) in
the case of all awards except ISO’s, by a Permitted Transferee.

 

14.2         Award
Transfer Program. Notwithstanding any contrary provision of the Plan, the Committee shall have all discretion and authority
to determine and implement the terms and conditions of any Award Transfer Program instituted pursuant to this Section 14.2 and
shall have the authority to amend the terms of any Award participating, or otherwise eligible to participate in, the Award Transfer
Program, including (but not limited to) the authority to (i) amend (including to extend) the expiration date, post-termination
exercise period and/or forfeiture conditions of any such Award, (ii) amend or remove any provisions of the Award relating to the
Award holder’s continued service to the Company, (iii) amend the permissible payment methods with respect to the exercise
or purchase of any such Award, (iv) amend the adjustments to be implemented in the event of changes in the capitalization and other
similar events with respect to such Award, and (v) make such other changes to the terms of such Award as the Committee deems necessary
or appropriate in its sole discretion.

  

15.          PRIVILEGES
OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.

 

15.1         Voting
and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are
issued to the Participant, except for any dividend equivalent rights permitted by an applicable Award Agreement. After Shares are
issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such
Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares;
provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become
entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate
or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the
Participant will have no right to retain such stock dividends or stock distributions with respect to Shares that are repurchased
at the Participant’s Purchase Price or Exercise Price, as the case may be, pursuant to Section 15.2.

 

15.2         Restrictions
on Shares. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) a right to repurchase
(a “Right of Repurchase”) a portion of any or all Unvested Shares held by a Participant following such Participant’s
Termination at any time within ninety (90) days after the later of the Participant’s Termination Date and the date the Participant
purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant’s Purchase
Price or Exercise Price, as the case may be.

 

    	 	9	 

     

    

 

16.          CERTIFICATES.
All Shares or other securities whether or not certificated, delivered under this Plan will be subject to such stock transfer orders,
legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable U.S.
federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or
automated quotation system upon which the Shares may be listed or quoted and any non-U.S. exchange controls or securities law restrictions
to which the Shares are subject.

 

17.          ESCROW;
PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to
deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee,
appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions
have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates.
Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under
this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure
the payment of the Participant’s obligation to the Company under the promissory note; provided, however, that the Committee
may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company
will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s
Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver
a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory
note may be released from the pledge on a pro rata basis as the promissory note is paid.

 

18.          REPRICING;
EXCHANGE AND BUYOUT OF AWARDS. Without prior stockholder approval the Committee may (i) reprice Options or SARS (and where
such repricing is a reduction in the Exercise Price of outstanding Options or SARS, the consent of the affected Participants is
not required provided written notice is provided to them, notwithstanding any adverse tax consequences to them arising from the
repricing), and (ii) with the consent of the respective Participants (unless not required pursuant to Section 5.9 of the Plan),
pay cash or issue new Awards in exchange for the surrender and cancellation of any, or all, outstanding Awards.

 

19.          SECURITIES
LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable
U.S. and foreign federal and state securities laws, rules and regulations of any governmental body, and the requirements of any
stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date
of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the
Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals
from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or
other qualification of such Shares under any state or federal or foreign law or ruling of any governmental body that the Company
determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect
compliance with the registration, qualification or listing requirements of any foreign or state securities laws, stock exchange
or automated quotation system, and the Company will have no liability for any inability or failure to do so.

 

20.          NO
OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of
the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant’s
employment or other relationship at any time.

 

21.          CORPORATE
TRANSACTIONS.

 

21.1         Assumption
or Replacement of Awards by Successor. In the event of a Corporate Transaction any or all outstanding Awards may be assumed
or replaced by the successor corporation, which assumption or replacement shall be binding on all Participants. In the alternative,
the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was
provided to stockholders (after taking into account the existing provisions of the Awards). The successor corporation may also
issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject
to repurchase restrictions no less favorable to the Participant. In the event such successor or acquiring corporation (if any)
refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, then notwithstanding
any other provision in this Plan to the contrary, such Awards shall have their vesting accelerate as to all shares subject to such
Award (and any applicable right of repurchase fully lapse) immediately prior to the Corporate Transaction unless otherwise determined
by the Board and then such Awards will terminate. In addition, in the event such successor or acquiring corporation (if any) refuses
to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, the Committee will notify
the Participant in writing or electronically that such Award will be exercisable for a period of time determined by the Committee
in its sole discretion, and such Award will terminate upon the expiration of such period. Awards need not be treated similarly
in a Corporate Transaction.

 

    	 	10	 

     

    

 

21.2         Assumption
of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this
Plan in substitution of such other company’s award; or (b) assuming such award as if it had been granted under this Plan
if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if
the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another
company, the terms and conditions of such award will remain unchanged (except that the Purchase Price or the Exercise Price, as
the case may be, and the number and nature of Shares issuable upon exercise or settlement of any such Award will be adjusted appropriately
pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option in substitution rather than assuming
an existing option, such new Option may be granted with a similarly adjusted Exercise Price.

 

21.3         Non-Employee
Directors’ Awards. Notwithstanding any provision to the contrary herein, in the event of a Corporate Transaction, the
vesting of all Awards granted to Non-Employee Directors shall accelerate and such Awards shall become exercisable (as applicable)
in full prior to the consummation of such event at such times and on such conditions as the Committee determines.

 

22.          ADOPTION
AND STOCKHOLDER APPROVAL. This Plan shall be submitted for the approval of the Company’s stockholders, consistent with
applicable laws, within twelve (12) months before or after the date this Plan is adopted by the Board.

 

23.          TERM
OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date
and will terminate ten (10) years from the date this Plan is adopted by the Board. This Plan and all Awards granted hereunder shall
be governed by and construed in accordance with the laws of the State of Nevada.

 

24.          AMENDMENT
OR TERMINATION OF PLAN. The Board may at any time terminate or amend this Plan in any respect, including, without limitation,
amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board
will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder
approval; provided further, that a Participant’s Award shall be governed by the version of this Plan then in effect at the
time such Award was granted.

 

25.          NON-EXCLUSIVITY
OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company
for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such
additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock awards and
bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific
cases.

 

26.          INSIDER
TRADING POLICY. Each Participant who receives an Award shall comply with any policy adopted by the Company from time to time
covering transactions in the Company’s securities by Employees, officers and/or directors of the Company.

 

27.          DEFINITIONS.
As used in this Plan, and except as elsewhere defined herein, the following terms will have the following meanings:

 

 

“Award”
means any award under the Plan, including any Option, Restricted Stock, Stock Bonus, Stock Appreciation Right, Restricted Stock
Unit or award of Performance Shares.

 

“Award Agreement”
means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the
terms and conditions of the Award, which shall be in substantially a form (which need not be the same for each Participant) that
the Committee has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.

 

    	 	11	 

     

    

 

“Award Transfer
Program” means any program instituted by the Committee which would permit Participants the opportunity to transfer any
outstanding Awards to a financial institution or other person or entity approved by the Committee.

 

“Board”
means the Board of Directors of the Company.

 

“Cause”
means (i) Participant’s willful failure substantially to perform his or her duties and responsibilities to the Company or
deliberate violation of a Company policy; (ii) Participant’s commission of any act of fraud, embezzlement, dishonesty or
any other willful misconduct that has caused or is reasonably expected to result in material injury to the Company; (iii) unauthorized
use or disclosure by Participant of any proprietary information or trade secrets of the Company or any other party to whom the
Participant owes an obligation of nondisclosure as a result of his or her relationship with the Company; or (iv) Participant’s
willful breach of any of his or her obligations under any written agreement or covenant with the Company. The determination as
to whether a Participant is being terminated for Cause shall be made in good faith by the Company and shall be final and binding
on the Participant. The foregoing definition does not in any way limit the Company’s ability to terminate a Participant’s
employment or consulting relationship at any time as provided in Section 20 above, and the term “Company” will be interpreted
to include any Subsidiary or Parent, as appropriate.

 

“Code”
means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

 

“Committee”
means the Compensation Committee of the Board or those persons to whom administration of the Plan, or part of the Plan, has been
delegated as permitted by law.

 

“Common Stock”
means the Common Stock of the Company.

 

“Company”
means ToughBuilt Industries, Inc., or any successor corporation.

 

“Consultant”
means any person, including an advisor or independent contractor, engaged by the Company or a Parent or Subsidiary to render services
to such entity.

 

“Corporate
Transaction” means the occurrence of any of the following events: (i) any “person” (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange
Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented
by the Company’s then-outstanding voting securities; (ii) the consummation of the sale or disposition by the Company of all
or substantially all of the Company’s assets; (iii) the consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities
of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities
of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation or (iv) any other
transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders
of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially
all of the outstanding shares of the Company).

 

“Director”
means a member of the Board.

 

“Disability”
means in the case of incentive stock options, total and permanent disability as defined in Section 22(e)(3) of the Code and in
the case of other Awards, that the Participant is unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months.

 

“Effective
Date” means the day immediately prior to the date of the underwritten initial public offering of the Company’s
Common Stock pursuant to a registration statement that is declared effective by the SEC.

 

    	 	12	 

     

    

 

“Employee”
means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment”
by the Company.

 

“Exchange
Act” means the United States Securities Exchange Act of 1934, as amended.

 

“Exchange
Program” means a program pursuant to which outstanding Awards are surrendered, cancelled or exchanged for cash, the same
type of Award or a different Award (or combination thereof).

 

“Exercise
Price” means, with respect to an Option, the price at which a holder may purchase the Shares issuable upon exercise of
an Option and with respect to a SAR, the price at which the SAR is granted to the holder thereof.

 

“Fair Market
Value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:

 

(a)          if
such Common Stock is publicly traded and is then listed on a national securities exchange, the closing price on the date of determination
on the principal national securities exchange on which the Common Stock is listed or admitted to trading as officially quoted in
the composite tape of transactions on such exchange or such other source as the Committee deems reliable for the applicable date;

 

(b)          if
such Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average
of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as
the Committee deems reliable;

 

(c)          in
the case of an Option or SAR grant made on the Effective Date, the price per share at which shares of the Company’s Common
Stock are initially offered for sale to the public by the Company’s underwriters in the initial public offering of the Company’s
Common Stock pursuant to a registration statement filed with the SEC under the Securities Act; or

 

(d)          if
none of the foregoing is applicable, by the Board or the Committee in good faith.

 

“Insider”
means an officer or director of the Company or any other person whose transactions in the Company’s Common Stock are subject
to Section 16 of the Exchange Act.

 

“Non-Employee
Director” means a Director who is not an Employee of the Company or any Parent or Subsidiary.

 

“Option”
means an award of an option to purchase Shares pursuant to Section 5.

 

“Parent”
means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations
other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

 

“Participant”
means a person who holds an Award under this Plan.

 

“Performance
Award” means cash or stock granted pursuant to Section 10 or Section 12 of the Plan.

 

“Performance
Factors” means any of the factors selected by the Committee and specified in an Award Agreement, from among the following
objective measures, either individually, alternatively or in any combination, applied to the Company as a whole or any business
unit or Subsidiary, either individually, alternatively, or in any combination, on a GAAP or non-GAAP basis, and measured, to the
extent applicable on an absolute basis or relative to a pre-established target, to determine whether the performance goals established
by the Committee with respect to applicable Awards have been satisfied:

 

		•	Profit Before Tax;

 

    	 	13	 

     

    

 

		•	Billings;

 

		•	Revenue;

 

		•	(Net revenue;

 

		•	Earnings (which may include earnings before interest and taxes, earnings before taxes, and net
earnings);

 

		•	Operating income;

 

		•	Operating margin;

 

		•	Operating profit;

 

		•	Controllable operating profit, or net operating profit;

 

		•	Net Profit;

 

		•	Gross margin;

 

		•	Operating expenses or operating expenses as a percentage of revenue;

 

		•	Net income;

 

		•	Earnings per share;

 

		•	Total stockholder return;

 

		•	Market share;

 

		•	Return on assets or net assets;

 

		•	The Company’s stock price;

 

		•	Growth in stockholder value relative to a pre-determined index;

 

		•	Return on equity;

 

		•	Return on invested capital;

 

		•	Cash Flow (including free cash flow or operating cash flows)

 

		•	Cash conversion cycle;

 

		•	Economic value added;

 

		•	Individual confidential business objectives;

 

		•	Contract awards or backlog;

 

		•	Overhead or other expense reduction;

 

		•	Credit rating;

 

		•	Strategic plan development and implementation;

 

		•	Succession plan development and implementation;

 

    	 	14	 

     

    

 

		•	Customer indicators;

 

		•	New product invention or innovation;

 

		•	Attainment of research and development milestones;

 

		•	Attainment of objective operating goals and employee metrics; and

 

		•	Any other metric that is capable of measurement as determined by the Committee.

 

The Committee may,
in recognition of unusual or non-recurring items such as acquisition-related activities or changes in applicable accounting rules,
provide for one or more equitable adjustments (based on objective standards) to the Performance Factors to preserve the Committee’s
original intent regarding the Performance Factors at the time of the initial award grant. It is within the sole discretion of the
Committee to make or not make any such equitable adjustments.

 

“Performance
Period” means the period of service determined by the Committee, during which years of service or performance is to be
measured for the Award.

 

“Performance
Share” means a performance share bonus granted as a Performance Award.

 

“Permitted
Transferee” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive
relationships) of the Employee, any person sharing the Employee’s household (other than a tenant or employee), a trust in
which these persons (or the Employee) have more than 50% of the beneficial interest, a foundation in which these persons (or the
Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than 50% of
the voting interests.

 

“Plan”
means this ToughBuilt Industries, Inc. 2016 Equity Incentive Plan.

 

“Purchase
Price” means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an
Option or SAR.

 

“Restricted
Stock Award” means an award of Shares pursuant to Section 6 or Section 12 of the Plan, or issued pursuant to the early
exercise of an Option.

 

“Restricted
Stock Unit” means an Award granted pursuant to Section 9 or Section 12 of the Plan.

 

“SEC”
means the United States Securities and Exchange Commission.

 

“Securities
Act” means the United States Securities Act of 1933, as amended.

 

“Shares”
means shares of the Company’s Common Stock and the common stock of any successor security.

 

“Stock Appreciation
Right” means an Award granted pursuant to Section 8 or Section 12 of the Plan.

 

“Stock Bonus”
means an Award granted pursuant to Section 7 or Section 12 of the Plan.

 

“Subsidiary”
means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

 

    	 	15	 

     

    

 

“Termination”
or “Terminated” means, for purposes of this Plan with respect to a Participant, that the Participant has for
any reason ceased to provide services as an employee, officer, director, consultant, independent contractor or advisor to the Company
or a Parent or Subsidiary of the Company. An employee will not be deemed to have ceased to provide services in the case of (i)
sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee; provided, that such leave is for
a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute or
unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees
in writing. In the case of any employee on an approved leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a Parent or Subsidiary of the Company as it may deem appropriate,
except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement.
In the event of military leave, if required by applicable laws, vesting shall continue for the longest period that vesting continues
under any other statutory or Company approved leave of absence and, upon a Participant’s returning from military leave (under
conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment
Rights Act), he or she shall be given vesting credit with respect to Awards to the same extent as would have applied had the Participant
continued to provide services to the Company throughout the leave on the same terms as he or she was providing services immediately
prior to such leave. An employee shall have terminated employment as of the date he or she ceases to be employed (regardless of
whether the termination is in breach of local laws or is later found to be invalid) and employment shall not be extended by any
notice period or garden leave mandated by local law. The Committee will have sole discretion to determine whether a Participant
has ceased to provide services for purposes of the Plan and the effective date on which the Participant ceased to provide services
(the “Termination Date”).

 

“Unvested
Shares” means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any
successor thereto).

 

    	 	16

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