Document:

TOUGHBUILT
INDUSTRIES, INC.

 

CERTIFICATE
OF DESIGNATION OF PREFERENCES,

RIGHTS
AND LIMITATIONS

OF

SERIES
___CONVERTIBLE PREFERRED STOCK

 

PURSUANT
TO SECTION _____ OF THE

nEVADA
GENERAL CORPORATION LAW

 

The
undersigned, __________ and ____________, do hereby certify that:

 

1.
They are the President and Secretary, respectively, of ToughBuilt Industries, Inc., a Nevada corporation (the “Corporation”).

 

2.
The Corporation is authorized to issue ______________ shares of preferred stock, ___________ of which have been issued.

 

3.
The following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors”):

 

WHEREAS,
the certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, consisting
of _____________ shares, $___ par value per share, issuable from time to time in one or more series;

 

WHEREAS,
the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms
of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting
any series and the designation thereof, of any of them; and

 

WHEREAS,
it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions
and other matters relating to a series of the preferred stock, which shall consist of, except as otherwise set forth in the Purchase
Agreement, up to ____________ shares of the preferred stock which the Corporation has the authority to issue, as follows:

 

NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for
cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions
and other matters relating to such series of preferred stock as follows:

 

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TERMS
OF PREFERRED STOCK

 

Section
1. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

 

“Alternate
Consideration” shall have the meaning set forth in Section 7(e).

 

“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 6(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 6(c)(iv).

 

“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1 of the Purchase Agreement.

 

“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto and all conditions precedent to (i) each Holder’s obligations to pay the Subscription Amount and (ii) the
Corporation’s obligations to deliver the Securities have been satisfied or waived.

 

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

 

“Common
Stock” means the Corporation’s common stock, par value $0.0001 per share, and stock of any other class of securities
into which such securities may hereafter be reclassified or changed.

 

“Common
Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof
to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

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

 

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

 

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

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Fundamental
Transaction” shall have the meaning set forth in Section 7(e).

 

“GAAP”
means United States generally accepted accounting principles.

 

“Holder”
shall have the meaning given such term in Section 2.

 

“Liquidation”
shall have the meaning set forth in Section 5.

 

“New
York Courts” shall have the meaning set forth in Section 11(d).

 

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

 

“Original
Issue Date” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers
of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such
Preferred Stock.

 

“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Preferred
Stock” shall have the meaning set forth in Section 2.

 

“Purchase
Agreement” means the Securities Purchase Agreement, dated as of the Original Issue Date, among the Corporation and the
original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

 

“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Securities”
means the Preferred Stock.

 

“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 6(c).

 

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“Stated
Value” shall have the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.

 

“Subscription
Amount” shall mean, as to each Holder, the aggregate amount to be paid for the Preferred Stock purchased pursuant to
the Purchase Agreement as specified below such Holder’s name on the signature page of the Purchase Agreement and next to
the heading “Subscription Amount,” in United States dollars and in immediately available funds.

 

“Subsidiary”
means any subsidiary of the Corporation as set forth on Schedule 3.1(a) of the Purchase Agreement and shall, where applicable,
also include any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.

 

“Successor
Entity” shall have the meaning set forth in Section 7(e).

 

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

 

“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 American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
the New York Stock Exchange, the OTCQB or the OTCQX (or any successors to any of the foregoing).

 

“Transaction
Documents” means this Certificate of Designation, the Amendment, Consent and Waiver dated as of October __, 2018 and
any other agreements referenced therein.

 

“Transfer
Agent” means _____________________, the current transfer agent of the Corporation and any successor transfer agent of
the Corporation.

 

“Underlying
Shares” means the shares of Common Stock issued and issuable upon conversion of the Preferred Stock.

 

“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 not 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 Corporation, the fees
and expenses of which shall be paid by the Corporation.

 

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Section
2. Designation, Amount and Par Value. The series of preferred stock shall be designated as its Series __ Convertible
Preferred Stock (the “Preferred Stock”) and the number of shares so designated shall be up to ___ (which shall
not be subject to increase without the written consent of all of the holders of the Preferred Stock (each, a “Holder”
and collectively, the “Holders”)). Each share of Preferred Stock shall have a par value of $____ per share
and a stated value equal to such par value, subject to increase set forth in Section 3 below (the “Stated Value”).

 

Section
3. Dividends. Except for stock dividends or distributions for which adjustments are to be made pursuant to Section
7, Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock
basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid
on shares of the Common Stock. No other dividends shall be paid on shares of Preferred Stock.

 

Section
4. Voting Rights. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have
no voting rights. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative
vote of the Holders of a majority of the then outstanding shares of the Preferred Stock, (a) alter or change adversely the powers,
preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) amend its certificate
of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (c) increase the number
of authorized shares of Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

 

Section
5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary
(a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus,
of the Corporation an amount equal to the Stated Value, plus any accrued and unpaid dividends thereon, for each share of Preferred
Stock before any distribution or payment shall be made to the holders of the Common Stock, and if the assets of the Corporation
shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed
among the Holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon
were paid in full. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment
date stated therein, to each Holder.

 

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Section
6. Conversion.

 

a)
Conversions at Option of Holder. Each share of Preferred Stock shall be convertible, at any time and from time to time
from and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject
to the limitations set forth in Section 6(d) equal to the number of shares of Preferred Stock converted by the Holder. Holders
shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a
“Notice of Conversion”). Each Notice of Conversion shall specify the number of shares of Preferred Stock to
be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred
Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not
be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation (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 to the Corporation 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. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest
or mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not be required to surrender the certificate(s)
representing the shares of Preferred Stock to the Corporation unless all of the shares of Preferred Stock represented thereby
are so converted, in which case such Holder shall deliver the certificate representing such shares of Preferred Stock promptly
following the Conversion Date at issue. Shares of Preferred Stock converted into Common Stock or redeemed in accordance with the
terms hereof shall be canceled and shall not be reissued.

 

b)
Conversion Ratio. The Conversion Ratio for the Preferred Stock shall equal one share of Common Stock for each share of
Preferred Stock converted, subject to adjustment herein (the “Conversion Ratio”).

 

c)
Mechanics of Conversion

 

i.
Delivery of Conversion Shares Upon Conversion. Not later than the earlier of two (2) Trading Days after each Conversion
Date (the “Share Delivery Date”), the Corporation shall deliver, or cause to be delivered, to the converting
Holder (A) Conversion Shares which, on or after the earlier the six month anniversary of the Original Issue 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 the Preferred Stock, and (B) a bank check in the amount
of accrued and unpaid dividends, if any. On or after the six month anniversary of the Original Issue Date, the Corporation shall
use its best efforts to deliver the Conversion Shares required to be delivered by the Corporation under this Section 6 electronically
through the Depository Trust Company or another established clearing corporation performing similar functions.

 

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ii.
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 Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event
the Corporation shall promptly return to the Holder any original Preferred Stock certificate delivered to the Corporation and
the Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Notice
of Conversion.

 

iii.
Obligation Absolute; Partial Liquidated Damages. The Corporation’s obligation to issue and deliver the Conversion
Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by a 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 such Holder or any other Person of any obligation to the Corporation or any violation or alleged
violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such
obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; provided, however,
that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such
Holder. In the event a Holder shall elect to convert any or all of its Preferred Stock, the Corporation may not refuse conversion
based on any claim that such Holder or any one associated or affiliated with such 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 the Preferred Stock of such Holder shall have been sought and obtained, and the Corporation posts a surety bond
for the benefit of such Holder in the amount of 150% of the market value of Preferred Stock (valued at the VWAP) 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 such Holder to the extent it obtains judgment. In the absence of such injunction,
the Corporation shall issue Conversion Shares and, if applicable, cash, upon a properly noticed conversion. If the Corporation
fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) by the Share Delivery Date applicable to such
conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each 1,000 shares
of Preferred Stock being converted (subject to adjustment hereunder), $50 per Trading Day (increasing to $100 per Trading Day
on the third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after such damages begin to accrue) for
each Trading Day after the 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 for the Corporation’s failure to deliver Conversion
Shares within the period specified herein and such 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 a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable
law.

 

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iv.
Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights
available to the Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the
Share Delivery Date pursuant to Section 6(c)(i), and if after such Share Delivery Date such 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 such Holder of the Conversion Shares which such Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Corporation shall (A)
pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which
(x) such 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 such 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 such Holder, either reissue (if surrendered) the shares of Preferred
Stock equal to the number of shares of Preferred Stock submitted for conversion (in which case, such conversion shall be deemed
rescinded) or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely
complied with its delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Preferred Stock 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 Corporation shall be required to
pay such Holder $1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to such Holder
in respect of the Buy-In and, upon request of the Corporation, 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 Corporation’s failure to timely deliver Conversion
Shares upon conversion of the shares of Preferred Stock as required pursuant to the terms hereof.

 

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v.
Reservation of Shares Issuable Upon Conversion. The Corporation 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 the Preferred Stock
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 Preferred Stock), 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 7) upon the conversion of the then outstanding shares of Preferred Stock. The Corporation covenants that all shares
of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable

 

vi.
Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of
the Preferred Stock. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion,
the Corporation 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 Ratio or round up to the next whole share.

 

vii.
Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Preferred Stock shall be made without
charge to any Holder 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 Corporation 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 Holders of
such shares of Preferred Stock and the Corporation 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 Corporation the amount of such tax or shall
have established to the satisfaction of the Corporation that such tax has been paid. The Corporation 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.

 

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d)
Beneficial Ownership Limitation. The Corporation shall not effect any conversion of the Preferred Stock, and a Holder shall
not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the conversion set
forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting
as a group together with such Holder or any of such 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 such Holder and its Affiliates and Attribution Parties shall include
the number of shares of Common Stock issuable upon conversion of the Preferred Stock 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 Stated Value of Preferred Stock beneficially owned by such 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 Corporation subject to
a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, the Preferred
Stock) beneficially owned by such Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding
sentence, for purposes of this Section 6(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
6(d) applies, the determination of whether the Preferred Stock is convertible (in relation to other securities owned by such Holder
together with any Affiliates and Attribution Parties) and of how many shares of Preferred Stock are convertible shall be in the
sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination
of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder together with
any Affiliates and Attribution Parties) and how many shares of the Preferred Stock are convertible, in each case subject to the
Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation
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 Corporation 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 6(d), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of
the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as the case may be,
(ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer
Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request (which may be via email)
of a Holder, the Corporation shall within one Trading Day confirm orally and in writing to such Holder the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Corporation, including the Preferred Stock, by such Holder or its Affiliates
or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any shares of Preferred
Stock, 9.99%) 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 Preferred Stock held by the applicable Holder. A Holder, upon notice to the Corporation,
may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d) applicable to its Preferred Stock
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 Preferred Stock held by the
Holder and the provisions of this Section 6(d) shall continue to apply. Any such increase in the Beneficial Ownership Limitation
will not be effective until the 61st day after such notice is delivered to the Corporation and shall only apply to
such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than
in strict conformity with the terms of this Section 6(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 Preferred Stock.

 

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Section
7. Certain Adjustments.

 

a)
Stock Dividends and Stock Splits. If the Corporation, at any time while this Preferred Stock 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 other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the
Corporation upon conversion of, or payment of a dividend on, this Preferred Stock), (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 Corporation, then the same adjustment shall be made to the Preferred Stock to provide for an equivalent
adjustment to the number of shares of Preferred Stock and the Conversion Ratio. Any adjustment made pursuant to this Section 7(a)
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 Rights Offerings. In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation
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 of 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 such Holder’s
Preferred Stock (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).

 

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c)
Pro Rata Distributions. During such time as this Preferred Stock is outstanding, if the Corporation declares or makes 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 Preferred Stock, 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 Preferred Stock (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).

 

d)
Fundamental Transaction. If, at any time while this Preferred Stock is outstanding, (i) the Corporation, directly or indirectly,
in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the
Corporation, 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 Corporation 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 Corporation, 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, or (v) the Corporation,
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 Preferred Stock, 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 6(d) on the conversion of this Preferred Stock), the number of shares of Common Stock of the
successor or acquiring corporation or of the Corporation, 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 Preferred Stock is convertible immediately prior to such Fundamental Transaction (without
regard to any limitation in Section 6(d) on the conversion of this Preferred Stock). For purposes of any such conversion, the
determination of the Conversion Ratio shall be appropriately adjusted to apply to such Alternate Consideration based on the amount
of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation
shall apportion the Conversion Ratio 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 Preferred Stock following such Fundamental Transaction. To the extent necessary
to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall
file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred stock consistent
with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration.
The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation is not the survivor (the
“Successor Entity”) to assume in writing all of the obligations of the Corporation under this Certificate of
Designation and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this
Section 7(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 Preferred Stock,
deliver to the Holder in exchange for this Preferred Stock a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Preferred Stock 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 Preferred Stock (without regard to any limitations on the conversion of this Preferred Stock) prior to
such Fundamental Transaction, and with a Conversion Ratio which applies the Conversion Ratio 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 Ratio being for the purpose
of protecting the economic value of this Preferred Stock 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 Certificate of Designation and the other Transaction Documents referring to the “Corporation”
shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of
the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents with the same effect
as if such Successor Entity had been named as the Corporation herein.

 

    	 	12	 

    	 

    

 

e)
Calculations. All calculations under this Section 7 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 7, 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 Corporation) issued
and outstanding.

 

f)
Notice to the Holders.

 

i.
Adjustment to Conversion Ratio. Whenever the Conversion Ratio is adjusted pursuant to any provision of this Section 7,
the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Ratio 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 Corporation shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Corporation 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 Corporation
shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation
is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall
cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to
be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, 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 Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant
to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Preferred Stock (or any part hereof) 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.

 

    	 	13	 

    	 

    

 

Section
8. Miscellaneous.

 

a)
Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without
limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized
overnight courier service, addressed to the Corporation, at the address set forth above Attention: _________________, facsimile
number _______________, e-mail address _________ or such other facsimile number, e-mail address or address as the Corporation
may specify for such purposes by notice to the Holders delivered in accordance with this Section 11. Any and all notices or other
communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile,
or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such
Holder appearing on the books of the Corporation, or if no such facsimile number or address appears on the books of the Corporation,
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 set forth in this Section 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 set forth in this Section 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 Certificate of Designation shall alter or
impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages and accrued dividends,
as applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.

 

    	 	14	 

    	 

    

 

c)
Lost or Mutilated Preferred Stock Certificate. If a Holder’s Preferred Stock certificate shall be mutilated, lost,
stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of
Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction
of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.

 

d)
Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Certificate
of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without
regard to the principles of conflict of laws thereof. 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”). The Corporation and each Holder 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. The Corporation and each Holder 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 Certificate of Designation
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. The Corporation
and each Holder 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 Certificate of Designation or the transactions contemplated hereby.
If the Corporation or any Holder shall commence an action or proceeding to enforce any provisions of this Certificate of Designation,
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.

 

    	 	15	 

    	 

    

 

e)
Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation 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 Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict
adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive
that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this
Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

 

f)
Severability. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of
this Certificate of Designation 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.

 

g)
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.

 

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

 

i)
Status of Converted or Redeemed Preferred Stock. Shares of Preferred Stock may only be issued pursuant to the Purchase
Agreement. If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume
the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series __ Convertible Preferred
Stock.

 

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

 

    	 	16	 

    	 

    

 

RESOLVED,
FURTHER, that the Chairman, the president or any vice-president, and the secretary or any assistant secretary, of the Corporation
be and they hereby are authorized and directed to prepare and file this Certificate of Designation of Preferences, Rights and
Limitations in accordance with the foregoing resolution and the provisions of Nevada law.

 

IN
WITNESS WHEREOF, the undersigned have executed this Certificate this ___ day of October 2018.

 

	 	 	 
	Name:	 	Name:
	Title:	 	Title: 

 

    	 	17	 

    	 

    

 

ANNEX
A

 

NOTICE
OF CONVERSION

 

(To
be Executed by the Registered Holder in order to Convert Shares of Preferred Stock)

 

The
undersigned hereby elects to convert the number of shares of Series [___Convertible Preferred Stock indicated below into shares
of common stock, par value $______ per share (the “Common Stock”), of ToughBuilt Industries, Inc., a Nevada
corporation (the “Corporation”), 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 may be required by the Corporation in
accordance with the Purchase Agreement. No fee will be charged to the Holders for any conversion, except for any such transfer
taxes.

 

Conversion
calculations:

 

Date
to Effect Conversion: _____________________________________________

 

Number
of shares of Preferred Stock owned prior to Conversion: _______________

 

Number
of shares of Preferred Stock to be Converted: ________________________

 

Number
of shares of Common Stock to be Issued: ___________________________

 

Number
of shares of Preferred Stock subsequent to Conversion: ________________

 

Address
for Delivery: ______________________

or

DWAC
Instructions:

Broker
no: _________

Account
no: ___________

 

	 	[HOLDER]
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

    	 	18AMENDMENT,
CONSENT AND WAIVER

 

This
AMENDMENT, CONSENT AND WAIVER is entered into as of October __, 2018, by and between ToughBuilt Industries, Inc., a Nevada corporation
(the “Company”) and the undersigned investor (the “Investor”), which is one of two investors
which are the holders of $6,300,210.00 in aggregate principal amount Amended and Restated 10% Original Issue Discount Senior Convertible
Debenture, due September 1, 2018, as amended (the “Debenture”), issued by the Company to the Investor. All
capitalized terms used and not defined herein are used as defined in the Debenture and the Securities Purchase Agreement (“Purchase
Agreement”), dated as of October 17, 2016, pursuant to which the Debentures were issued, both as amended from time to
time.

 

RECITALS:

 

WHEREAS,
Section 6(b)(i) of the Debenture, as amended, requires the Company in a Going Public Event to redeem, for cash, 50% of the then
outstanding principal amount of Debenture plus all accrued but unpaid interest and other fees (“Redemption”);

 

WHEREAS,
Section 6(b)(ii) of the Debenture requires that the portion of the Debentures not redeemed in a Going Public Event be converted
into the securities offered by the Company in the Going Public Event (“Conversion”);

 

WHEREAS,
the securities offered by the Company in the Going Public Event are registered on the Company’s registration statement filed
on Form S-1 (File No. 333-226104) (the “Registration Statement”) which includes in the most recent amendment
to the Registration Statement, share securities issued to the holders of the Debentures (“Exchange Securities”);
and

 

WHEREAS,
the Company has requested that the Investors amend the terms of the Redemption and Conversion and consent to the removal of the
Exchange Securities from the Registration Statement; and

 

WHEREAS,
the Investor desires to amend the terms of the Redemption and Conversion and grant the consent and provide the waiver on the terms
and conditions set forth herein.

 

NOW,
THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the undersigned Investor and the Company hereby agree as follows:

 

1.
Amendment to Redemption. The “Going Public Redemption Amount” is hereby amended add the following proviso to
the end of such definition: “provided, however, in the event that the Going Public Event occurs prior to November 15, 2018,
the Going Public Redemption Amount shall be equal to (i) a cash premium of $454,869.65 and (b) $540,980.35 of accrued but unpaid
interest on the Debentures as of the date hereof.

 

    	 	1	 

    	 

    

 

2.
Increase in Principal Amount and Stated Value. The Company hereby increases the principal amount of the Debentures and
the Stated value of any shares of Class B Convertible Preferred Stock (“Preferred Stock”) by five percent (5%)
above the current principal amount of the Debentures and stated value of any shares of Preferred Stock without any further action
by either party. Such increases shall be recorded on the books and records of the Company and upon request by the undersigned,
the Company shall provide any additional evidence of the amended increase in principal amount of Debentures and the Stated Value
of Preferred Stock. The principal amount of Debentures and Stated Value of the Preferred Stock as of the date hereof after taking
into consideration such increase, is set forth on the spreadsheet attached hereto as Annex A.

 

3.
Amendment to Conversion. Section 6(b)(ii) of the Debenture is hereby amended and restated as follows: “The balance
of this Debenture not subject to redemption pursuant to clause (i) above (including all accrued but unpaid interest) shall be
automatically converted into the securities offered by the Company in the Going Public Event (“IPO Securities”),
which shall be inclusive of any additional securities, units or rights granted to the participants in the Going Public Event)
on a $1.00 principal amount of Debenture for $1.20 basis; provided, however, that, to the extent that the Holder’s
right to receive IPO Securities would result in the Holder exceeding the Beneficial Ownership Limitation, then the Company shall
issue to the Holder, to the extent such Securities cause the Holder to exceed such Beneficial Ownership Limitation (or in the
beneficial ownership of any shares of Common Stock as a result of such issuance of IPO Securities to such extent), shares of zero-coupon
convertible preferred stock with the same economic benefit as the IPO Securities, which shall be in form and substance reasonably
satisfactory to the Holder and which would otherwise not result in the Holder exceeding the Beneficial Ownership Limitation.”

 

4.
Waiver of Inclusion of Securities on Registration Statement. Subject to the terms of this Consent and Waiver, the undersigned
hereby waives the requirement set forth in Section 6(b)(ii) to issue the Exchange Securities pursuant to the Registration Statement
and consents to the removal of Exchange Securities from the Registration Statement. The Exchange Securities shall be issued with
customary Securities Act legends, otherwise pursuant to the Purchase Agreement.

 

5.
Negative Covenants. From the date hereof until the first anniversary of the Going Public Event, except as set forth on Annex
B attached hereto, neither the Company nor any Subsidiary shall, directly or indirectly

 

	 	a.	sell
    or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any
    offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents in a private
    or public offering, at an effective price per share less than the public offering price of the IPO Securities (anticipated
    to be $4.50 per share, subject to adjustment for reverse and forward stock splits and the like) without the prior written
    consent of the undersigned;

 

    	 	2	 

    	 

    

 

	 	b.
    	other
    than Permitted Indebtedness, future debt as described on Annex B and incorporated into the definition of Permitted
    Indebtedness hereafter and the debt that exists on Annex B attached hereto which will either convert into the IPO Securities
    or be repaid in the Going Public Event, 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;
	 	 	 
	 	c.
    	other
    than Permitted Liens (including Liens incurred in connection with the new definition of Permitted Indebtedness as set forth
    on Annex B attached hereto, 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;
	 	 	 
	 	d.
    	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;
	 	 	 
	 	e.
    	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 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; 
	 	 	 
	 	f.
    	except
    with respect to the debts as disclosed on Annex B attached hereto, repay, repurchase or offer to repay, repurchase
    or otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata basis;
	 	 	 
	 	g.
    	pay
    cash dividends or distributions on any equity securities of the Company;
	 	 	 
	 	h.
    	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
	 	 	 
	 	i.
    	enter
    into any agreement with respect to any of the foregoing.

 

6.
Effect on Purchase Agreement and Debentures. The rights of the Investors and obligations of the Company with respect to
the Exchange Securities shall be subject to the terms of the Purchase Agreement including but not limited to all requirement to
remove legends on the Legend Removal Date and any liquidated damages and other payments required thereunder for failure of the
Company to comply with such covenants in a timely manner; provided that all references to three Trading Days thereunder to remove
legends are hereby amended to be two Trading Days. Additionally, as it relates to the Exchange Securities, the Legend Removal
Date shall be the 6 month-anniversary of the pricing of the Going Public Event and the Company shall, within one-day thereof (for
Exchange Securities issued on that date, and within one day of issuance from the date of conversion of any zero coupon preferred
stock as referenced above, to the extent that conversion complies with the requirements of Section 3(a)(9) of the Securities Act
of 1933, as amended), issue to the Investors Exchange Securities not bearing any legends or other restrictions on resale and the
Investors shall return the legended Exchange Securities within 3 Trading Days thereof. If available, all such issuances shall
be electronic to the DTC account of the Investors.

 

    	 	3	 

    	 

    

 

7.
Except as specifically set forth herein, the terms, provisions and conditions of the Purchase Agreement, the Debentures and the
other Transaction Documents shall remain in full force and effect and the rights and obligations of the parties with respect thereto
shall, except as specifically provided herein, be unaffected by this Consent and Waiver and shall continue as provided in such
documents and shall not be in any way changed, modified or superseded by the terms set forth herein.

 

8.
Effectiveness of Consent and Waiver. This Consent and Waiver shall only be effective upon the execution and delivery of
this Consent and Waiver by both holders of Debentures and satisfaction of the terms and conditions herein.

 

9.
Independent Nature of Investor Obligations and Rights. The obligations of the Investor under this Consent and Waiver are
several and not joint with the obligations of any other Investor, and the Investor shall not be responsible in any way for the
performance of the obligations of any other Investor under any other Consent and Waiver. Nothing contained herein or in any other
Consent and Waiver, and no action taken by the Investor pursuant hereto, shall be deemed to constitute the Investor and other
Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investor
and other Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated
by this Consent and Waiver or any other Consent and Waiver and the Company acknowledges that the Investors are not acting in concert
or as a group with respect to such obligations or the transactions contemplated by this Consent and Waiver or any other Consent
and Waiver. The Company and the Investor each confirm that the Investor has independently participated in the negotiation of the
transactions contemplated hereby with the advice of its own counsel and advisors. The Investor shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights arising out of this Consent and Waiver or, any other
Consent and Waiver, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding
for such purpose.

 

10.
No Third Party Beneficiaries. This Consent and Waiver is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

11.
Amendments. No provision of this Consent and Waiver may be amended other than by an instrument in writing signed by the
Company and both holders of Debentures.

 

12.
Notice. Whenever notice is required to be given under this Consent and Waiver, unless otherwise provided herein, such notice
shall be given in accordance with Section 5.4 of the Purchase Agreement.

 

13.
Successors and Assigns. This Consent and Waiver shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns.

 

REMAINDER
OF PAGE INTENTIONALLY BLANK

 

    	 	4	 

    	 

    

 

IN
WITNESS WHEREOF, the undersigned has caused this Amendment, Consent and Waiver to be executed as of the date first above written.

 

	HILLAIR CAPITAL INVESTMENTS L.P.	 
	 	               	 
	By:	 	 
	Name:	 	 
	Title:	 	 

 

    	 	5	 

    	 

    

 

AGREED
AND ACCEPTED:

 

	TOUGHBUILT INDUSTRIES, INC.	 
	 	                   	 
	By:	 	 
	Name:	Manu
    Ohri	 
	Title:	CFO	 

 

    	 	6	 

    	 

    

 

Annex
- A

 

ToughBuilt
Industries, Inc.

Hillair
- Computations of Debenture Conversion and Class B Convertible Preferred Stock 

 

	Convertible Debentures:	 	Principal	 	 	Accrued Interest	 	 	TOTAL	 
	Hillair Capital	 	$	4,182,709.42	 	 	$	365,987.07	 	 	$	4,548,696.49	 
	HSPL Capital	 	$	2,117,500.58	 	 	$	185,281.30	 	 	$	2,302,781.88	 
	Total	 	$	6,300,210.00	 	 	$	551,268.38	 	 	$	6,851,478.38	 

 

	Preferred Shares	 	# of Shares	 	 	Price per Share	 	 	Total Value	 
	Hillair Capital	 	 	112,781	 	 	$	10.00	 	 	$	1,127,810	 
	HSPL Capital	 	 	57,093	 	 	$	10.00	 	 	$	570,930	 
	Total	 	 	 	 	 	 	 	 	 	 	 	 

 

	IPO Deal Terms	 	 	 	 	 	 	 	$ Paid To Debenture Holders	 	 	IPO Common Shares	 	 	IPO Warrant Shares	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Descripton	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	$1,500,000 Payment	 	 	10% Premium	 	 	$	685,147.84	 	 	 		 	 	 		 	 	 		 
	 	 	 	Accrued Int Inc	 	 	$	-	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	$	814,852.16	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	$	1,500,000.00	 	 	 	-	 	 	 	-	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Debenture Conversion at 20% Discount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Face Value	 	 	$	6,851,478.38	 	 	 	 	 	 	 	 	 	 	 	 	 
	20%	 	 	Adjusted IPO Price	 	 	 	3.6	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	$	-	 	 	 	1,903,188	 	 	 	1,903,188	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Additional Pref and Purchase	 	 	# Shares	 	 	 	$ Amount of Shares	 	 	 	 	 	 	 	 	 	 	 	 	 
	Existing Pref	 	 	169,874	 	 	$	1,698,740	 	 	 	 	 	 	 	 	 	 	 	 	 
	Oct 15 Shares	 	 	15,000	 	 	$	150,000	 	 	 	 	 	 	 	 	 	 	 	 	 
	5% Addition	 	 	31,501	 	 	$	315,011	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	216,375	 	 	$	2,163,751	 	 	 	 	 	 	 	 	 	 	 	 	 
	Adjusted IPO Purchase Price	 	$	3.15	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	686,905	 	 	 	686,905	 

 

	 	 	 	TOTAL	 	 	$	1,500,000.00	 	 	 	2,590,093	 	 	2,590,093
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Hillair PMT	 	 	$	995,850.00	 	 	 	1,719,563	 	 	1,719,563
	 	 	 	HSPL PMT	 	 	$	504,150.00	 	 	 	870,530	 	 	870,530
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total cash payment through IPO	 	$	1,500,000.00	 	 	 	 	 	 	 	 	 
	Less: Total accrued interest + 10% premium to be paid in cash	 	$	1,236,416.21	 	 	 	 	 	 	 	 	 
	Additional cost to Toughbuilt - interest	 	$	263,583.79	 	 	 	 	 	 	 	 	 

 

    	 	7	 

    	 

    

 

ANNEX
B

 

		(i)	Securities
                                         issued pursuant to acquisitions or strategic transactions approved by a majority of the
                                         disinterested directors of the Company, provided that such securities are issued as “restricted
                                         securities” (as defined in Rule 144) and carry no registration rights, and provided
                                         that any such issuance shall only be to a Person (or to the equity holders of a Person)
                                         which is, itself or through its subsidiaries, an operating company or an owner of an
                                         asset in a business synergistic with the business of the Company and shall provide to
                                         the Company additional benefits in addition to the investment of funds, but shall not
                                         include a transaction in which the Company is issuing securities primarily for the purpose
                                         of raising capital or to an entity whose primary business is investing in securities;
                                         and

 

		(ii)	Securities
                                         issued to current or prospective officers, directors or employees of the Company for
                                         the purpose of compensation, retention or recruitment, whether or not such securities
                                         are issued pursuant to an existing stock option or similar plan.

 

		(iii)	Any
                                         line of credit, factoring or other credit facility or loan from a commercial banking
                                         institution including any such facility which includes the grant of a first lien on all
                                         Company assets to such institution.

 

		(iv)	Note
                                         payable to an officer in the principal amount of $200,000, to be paid at the closing
                                         of the public offering.

 

		(v)	Note
                                         payable to Elephant Partners in the principal amount of $100,000, to be paid at the closing
                                         of the public offering.

 

    	 	8	 

    	 

    

 

AMENDMENT,
CONSENT AND WAIVER

 

This
AMENDMENT, CONSENT AND WAIVER is entered into as of October __, 2018, by and between ToughBuilt Industries, Inc., a Nevada corporation
(the “Company”) and the undersigned investor (the “Investor”), which is one of two investors
which are the holders of $6,300,210.00 in aggregate principal amount Amended and Restated 10% Original Issue Discount Senior Convertible
Debenture, due September 1, 2018, as amended (the “Debenture”), issued by the Company to the Investor. All
capitalized terms used and not defined herein are used as defined in the Debenture and the Securities Purchase Agreement (“Purchase
Agreement”), dated as of October 17, 2016, pursuant to which the Debentures were issued, both as amended from time to
time.

 

RECITALS:

 

WHEREAS,
Section 6(b)(i) of the Debenture, as amended, requires the Company in a Going Public Event to redeem, for cash, 50% of the then
outstanding principal amount of Debenture plus all accrued but unpaid interest and other fees (“Redemption”);

 

WHEREAS,
Section 6(b)(ii) of the Debenture requires that the portion of the Debentures not redeemed in a Going Public Event be converted
into the securities offered by the Company in the Going Public Event (“Conversion”);

 

WHEREAS,
the securities offered by the Company in the Going Public Event are registered on the Company’s registration statement filed
on Form S-1 (File No. 333-226104) (the “Registration Statement”) which includes in the most recent amendment
to the Registration Statement, share securities issued to the holders of the Debentures (“Exchange Securities”);
and

 

WHEREAS,
the Company has requested that the Investors amend the terms of the Redemption and Conversion and consent to the removal of the
Exchange Securities from the Registration Statement; and

 

WHEREAS,
the Investor desires to amend the terms of the Redemption and Conversion and grant the consent and provide the waiver on the terms
and conditions set forth herein.

 

NOW,
THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the undersigned Investor and the Company hereby agree as follows:

 

1. Amendment
to Redemption. The “Going Public Redemption Amount” is hereby amended add the following proviso to the end
of such definition: “provided, however, in the event that the Going Public Event occurs prior to November 15, 2018, the
Going Public Redemption Amount shall be equal to (i) a cash premium of $230,278.19 and (b) $273,871.81 of accrued but unpaid
interest on the Debentures as of the date hereof.

 

    	 	9	 

    	 

    

 

2. Increase
in Principal Amount and Stated Value. The Company hereby increases the principal amount of the Debentures and the Stated
value of any shares of Class B Convertible Preferred Stock (“Preferred Stock”) by five percent (5%) above
the current principal amount of the Debentures and stated value of any shares of Preferred Stock without any further action
by either party. Such increases shall be recorded on the books and records of the Company and upon request by the
undersigned, the Company shall provide any additional evidence of the amended increase in principal amount of Debentures and
the Stated Value of Preferred Stock. The principal amount of Debentures and Stated Value of the Preferred Stock as of the
date hereof after taking into consideration such increase, is set forth on the spreadsheet attached hereto as Annex
A.

 

3. Amendment
to Conversion. Section 6(b)(ii) of the Debenture is hereby amended and restated as follows: “The balance of
this Debenture not subject to redemption pursuant to clause (i) above (including all accrued but unpaid interest) shall be
automatically converted into the securities offered by the Company in the Going Public Event (“IPO
Securities”), which shall be inclusive of any additional securities, units or rights granted to the participants in
the Going Public Event) on a $1.00 principal amount of Debenture for $1.20 basis; provided, however, that, to
the extent that the Holder's right to receive IPO Securities would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Company shall issue to the Holder, to the extent such Securities cause the Holder to exceed such
Beneficial Ownership Limitation (or in the beneficial ownership of any shares of Common Stock as a result of such issuance of
IPO Securities to such extent), shares of zero-coupon convertible preferred stock with the same economic benefit as the IPO
Securities, which shall be in form and substance reasonably satisfactory to the Holder and which would otherwise not result
in the Holder exceeding the Beneficial Ownership Limitation.”

 

4. Waiver of Inclusion of Securities on Registration Statement. Subject to the
terms of this Consent and Waiver, the undersigned hereby waives the requirement set forth in Section 6(b)(ii) to issue the
Exchange Securities pursuant to the Registration Statement and consents to the removal of Exchange Securities from the
Registration Statement. The Exchange Securities shall be issued with customary Securities Act legends, otherwise pursuant to
the Purchase Agreement.

 

5. Negative Covenants. From the date hereof until the first anniversary of the Going
Public Event, except as set forth on Annex B attached hereto, neither the Company nor any Subsidiary shall, directly
or indirectly

 

		a.	sell
                                         or grant any option to purchase, or sell or grant any right to reprice, or otherwise
                                         dispose of or issue (or announce any offer, sale, grant or any option to purchase or
                                         other disposition) any Common Stock or Common Stock Equivalents in a private or public
                                         offering, at an effective price per share less than the public offering price of the
                                         IPO Securities (anticipated to be $4.50 per share, subject to adjustment for reverse
                                         and forward stock splits and the like) without the prior written consent of the undersigned;

 

    	 	10	 

    	 

    

 

		b.	other
                                         than Permitted Indebtedness, future debt as described on Annex B and incorporated
                                         into the definition of Permitted Indebtedness hereafter and the debt that exists on Annex
                                         B attached hereto which will either convert into the IPO Securities or be repaid
                                         in the Going Public Event, 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;

 

		c.	other
                                         than Permitted Liens (including Liens incurred in connection with the new definition
                                         of Permitted Indebtedness as set forth on Annex B attached hereto, 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;

 

		d.	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;

 

		e.	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 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;

 

		f.	except
                                         with respect to the debts as disclosed on Annex B attached hereto, repay, repurchase
                                         or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debentures
                                         if on a pro-rata basis;

 

		g.	pay
                                         cash dividends or distributions on any equity securities of the Company;

 

		h.	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

 

		i.	enter
                                         into any agreement with respect to any of the foregoing.

 

    	 	11	 

    	 

    

 

6. Effect on Purchase Agreement and Debentures. The rights of the Investors and
obligations of the Company with respect to the Exchange Securities shall be subject to the terms of the Purchase Agreement
including but not limited to all requirement to remove legends on the Legend Removal Date and any liquidated damages and
other payments required thereunder for failure of the Company to comply with such covenants in a timely manner; provided that
all references to three Trading Days thereunder to remove legends are hereby amended to be two Trading Days. Additionally, as
it relates to the Exchange Securities, the Legend Removal Date shall be the 6 month-anniversary of the pricing of the Going
Public Event and the Company shall, within one-day thereof (for Exchange Securities issued on that date, and within one day
of issuance from the date of conversion of any zero coupon preferred stock as referenced above, to the extent that conversion
complies with the requirements of Section 3(a)(9) of the Securities Act of 1933, as amended), issue to the Investors Exchange
Securities not bearing any legends or other restrictions on resale and the Investors shall return the legended Exchange
Securities within 3 Trading Days thereof. If available, all such issuances shall be electronic to the DTC account of the
Investors.

 

7. Except as specifically set forth herein, the terms, provisions and conditions of
the Purchase Agreement, the Debentures and the other Transaction Documents shall remain in full force and effect and the
rights and obligations of the parties with respect thereto shall, except as specifically provided herein, be unaffected by
this Consent and Waiver and shall continue as provided in such documents and shall not be in any way changed, modified or
superseded by the terms set forth herein.

 

8. Effectiveness
of Consent and Waiver. This Consent and Waiver shall only be effective upon the execution and delivery of this Consent
and Waiver by both holders of Debentures and satisfaction of the terms and conditions herein.

 

9. Independent
Nature of Investor Obligations and Rights. The obligations of the Investor under this Consent and Waiver are several and
not joint with the obligations of any other Investor, and the Investor shall not be responsible in any way for the
performance of the obligations of any other Investor under any other Consent and Waiver. Nothing contained herein or in any
other Consent and Waiver, and no action taken by the Investor pursuant hereto, shall be deemed to constitute the Investor and
other Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that
the Investor and other Investors are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by this Consent and Waiver or any other Consent and Waiver and the Company acknowledges that the
Investors are not acting in concert or as a group with respect to such obligations or the transactions contemplated by this
Consent and Waiver or any other Consent and Waiver. The Company and the Investor each confirm that the Investor has
independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and
advisors. The Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the
rights arising out of this Consent and Waiver or, any other Consent and Waiver, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.

 

10. No
Third Party Beneficiaries. This Consent and Waiver is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.

 

11. Amendments.
No provision of this Consent and Waiver may be amended other than by an instrument in writing signed by the Company and both
holders of Debentures.

 

12. Notice.
Whenever notice is required to be given under this Consent and Waiver, unless otherwise provided herein, such notice shall
be given in accordance with Section 5.4 of the Purchase Agreement.

 

13. Successors
and Assigns. This Consent and Waiver shall be binding upon and inure to the benefit of the parties and their respective
successors and assigns.

 

REMAINDER
OF PAGE INTENTIONALLY BLANK

 

    	 	12	 

    	 

    

 

IN
WITNESS WHEREOF, the undersigned has caused this Amendment, Consent and Waiver to be executed as of the date first above written.

 

	INVESTOR – HSPL HOLDINGS, LLC	 
	 	 	 
	By:	            	 
	Name:	 	 
	Title:
    	 	 

 

    	 	13	 

    	 

    

 

	AGREED AND ACCEPTED:	 
	 	 	 
	TOUGHBUILT INDUSTRIES, INC.	 
	 	 	 
	By:	 	 
	Name:	Manu
    Ohri	 
	Title:	Chief
    Financial Officer	 

 

    	 	14	 

    	 

    

 

Annex
- A

 

ToughBuilt
Industries, Inc. 

HSPL
- Computations of Debenture Conversion and Class B Convertible Preferred Stock

 

	Convertible
    Debentures:	 	Principal	 	 	Accrued
    Interest	 	 	TOTAL	 
	Hillair
    Capital	 	$	4,182,709.42	 	 	$	365,987.07	 	 	$	4,548,696.49	 
	HSPL
    Capital	 	$	2,117,500.58	 	 	$	185,281.30	 	 	$	2,302,781.88	 
	Total	 	$	6,300,210.00	 	 	$	551,268.38	 	 	$	6,851,478.38	 

 

	Preferred
    Shares	 	#
    of Shares	 	 	Price
    per Share	 	 	Total
    Value	 
	Hillair
    Capital	 	 	112,781	 	 	$	10.00	 	 	$	1,127,810	 
	HSPL Capital	 	 	57,093	 	 	$	10.00	 	 	$	570,930	 
	Total	 	 	 	 	 	 	 	 	 	 	 	 

 

	IPO Deal Terms	 	 	 	 	 	 	 	$ Paid
    To Debenture Holders	 	 	IPO Common
    Shares	 	 	IPO Warrant
    Shares	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Description	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	$1,500,000
    Payment	 	 	10%
                                         Premium	 	 	$	685,147.84	 	 	 		 	 	 		 	 	 		 
	 	 	 	Accrued
                                         Int Inc	 	 	$	-	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	$	814,852.16	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	$	1,500,000.00	 	 	 	-	 	 	 	-	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Debenture
    Conversion at 20% Discount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Face
                                         Value	 	 	$	6,851,478.38	 	 	 	 	 	 	 	 	 	 	 	 	 
	20%	 	 	Adjusted
                                         IPO Price	 	 	 	3.6	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	$	-	 	 	 	1,903,188	 	 	 	1,903,188	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Additional
    Pref and Purchase	 	 	#
                                         Shares	 	 	 	$
                                         Amount of Shares	 	 	 	 	 	 	 	 	 	 	 	 	 
	Existing Pref	 	 	169,874	 	 	$	1,698,740	 	 	 	 	 	 	 	 	 	 	 	 	 
	Oct 15 Shares	 	 	15,000	 	 	$	150,000	 	 	 	 	 	 	 	 	 	 	 	 	 
	5% Addition	 	 	31,501	 	 	$	315,011	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	216,375	 	 	$	2,163,751	 	 	 	 	 	 	 	 	 	 	 	 	 
	Adjusted
    IPO Purchase Price	 	$	3.15	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	686,905	 	 	 	686,905	 

 

	TOTAL	 	$	1,500,000.00	 	 	 	2,590,093	 	 	 	2,590,093	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Hillair PMT	 	$	995,850.00	 	 	 	1,719,563	 	 	 	1,719,563	 
	HSPL PMT	 	$	504,150.00	 	 	 	870,530	 	 	 	870,530	 
	 	 	 	 	 	 	 	 	 	 	 	 	 

 

    	 	15	 

    	 

    

 

ANNEX B

 

	(i)	Securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights, and provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities; and 
	 	 
	(ii)	Securities issued to current or prospective officers, directors or employees of the Company for the purpose of compensation, retention or recruitment, whether or not such securities are issued pursuant to an existing stock option or similar plan.
	 	 
	(iii)	Any line of credit, factoring or other credit facility or loan from a commercial banking institution including any such facility which includes the grant of a first lien on all Company assets to such institution.
	 	 
	(iv)	Note payable to an officer in the principal amount of $200,000, to be paid at the closing of the public offering.
	 	 
	(v)	Note payable to Elephant Partners in the principal amount of $100,000, to be paid at the closing of the public offering.

 

    	 	16

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