UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report:  July 12, 2016
Earliest Event Date requiring this Report:  June 27, 2016

CAPSTONE COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Florida
000-28831
84-1047159
(State of Incorporation or organization)
(Commission File No.)
(I.R.S. Employer Identification No.)



350 Jim Moran Blvd.
Suite 120
Deerfield Beach, Florida 33442
(Address of principal executive offices)

(954) 570-8889
(Registrant's telephone number, including area code)




ITEM 1.01     Entry into a Definitive Material Agreements

Option. Involve, LLC, a Delaware limited liability company, ("Seller") owns shares of Common Stock, $0.0001 par value per share, ("Shares") of Capstone Companies, Inc. (the "Company").  The Company and Seller have entered into an Option Agreement, dated June 27, 2016, (the "Option Agreement") whereby Seller has granted options to the Company to repurchase 25 million shares at a purchase price of $0.01 per share in five (5) increments of 5,000,000 shares (each, an "Option" and collectively the "Options") for $50,000 per Option (the "Exercise Price"), or for a total purchase price of $250,000 in the aggregate if all Options are exercised.   The Options terminate on the earlier of the twelve (12) month anniversary of the first date that the Company exercises any Option or June 27, 2019, the thirty-six (36) month anniversary of the effective date of the Option Agreement.

Under a Joinder Agreement to the Option Agreement, the Company will receive 100 Membership Interests in the Seller as consideration under the Option Agreement.

The Option Agreement provides for an absolute release by the Company and its affiliates of any claims or causes of action that the Company may have against the Seller and his affiliates, excepting claims or causes of action under the Option Agreement.

The Option Agreement is part of the transactions contemplated by the Purchase Agreement reported below.

Securities Purchase Agreement.  Each of the Company, Neil Singer, an individual and a principal of the Seller ("Singer"), and AC Kinetics, Inc., a private Delaware corporation and an affiliate of Singer ("ACK"), are concurrently with the Option Agreement entering into that certain Securities Purchase Agreement, dated June 27, 2016 (the "Purchase Agreement"), whereby Singer will purchase all of the outstanding securities of ACK owned by the Company in exchange for (1) the making by Singer to the order of the Company a promissory note in the initial principal amount of $1,500,000 (the "Note"), which Note provides for: (1) following the closing of the transactions contemplated by the Purchase Agreement, Singer will assign the Note to NLO Holdco, LLC, a Delaware limited liability company and an affiliate of Singer ("NLO"), and (2) before the occurrence of a certain funding transaction between Koch Minerals, LLC, and ACK NLO, LLC, a Delaware limited liability company and an affiliate of Singer, ACK and NLO ("Newco"), NLO shall assign to and Newco shall assume, all of NLO's rights and obligations under the Note.  Singer shall have no liability under the Note upon its assignment.

The Purchase Agreement provides for the Company to release Singer, ACK and their respective affiliates from any and all claims and causes of action occurring as of or prior to the closing date of the Purchase Agreement, including but not limited to any claims or causes of action related to intellectual property held by Singer or ACK, a January 15, 2013 Royalty Agreement between ACK and the Company, and a January 13, 2013 Letter Agreement by the Company and ACK, which release does not apply to claims or causes of action under  the Purchase Agreement.

Note.  Pursuant to the Purchase Agreement, Singer shall issue the Note to the Company, which Note is executed by Singer to acquire the securities of ACK owned by the Company and which Note provides for: (1) principal amount of $1,5000,000; (2) annual interest of 3.5% per annum; and (3) subject to any restrictions contained in a certain Subordination Agreement to be executed in connection with the Note and discussed below, the outstanding principal amount and all accrued and unpaid interest thereon shall be due upon the earlier of (i) a Change in Control of Newco or (ii) June 27, 2025. "Change in Control" means, directly or indirectly, (i) the acquisition by any person or group of persons (other than an affiliate of Newco, including, for the avoidance of doubt, NLO and/or ACK) who does not currently own at least 50% of the voting equity, in the aggregate, of Newco, (ii) any merger, reorganization, or similar transaction between Newco and any person (other than an affiliate of Newco, including, for the avoidance of doubt, NLO and/or ACK), (iii) a divestiture (whether by sale or exclusive license), not in the ordinary course of business, of all or substantially all of the assets of Newco (other than to an affiliate of Newco, including, for the avoidance of doubt, NLO and/or ACK).

Subordination Agreement.  The Company signed a Subordination Agreement with Koch Minerals, LLC ("KM") on June 27, 2016, (the "Subordination Agreement") in connection with the Note, whereby the Company subordinated the Note to all debt obligations of Newco and any guarantors (including ACK and NLO) owed to KM or its affiliates.  The Subordination Agreement was required under and part of the transactions contemplated by the Purchase Agreement and related agreements involving ACK.


Termination Agreement.  As required under the Purchase Agreement, the Company and ACK entered into a June 27, 2016 Termination Agreement (the "Termination Agreement") whereby and subject to execution of the Purchase Agreement, the Company and ACK cancelled the January 13, 2013 Royalty Agreement and a January 13, 2013 Letter Agreement and all other contracts between the Company and ACK (other than agreements specifically identified therein as surviving contracts).  The previously-described terminated agreements pertained to Company's royalty interest in any intellectual property developed by ACK for the Company.

Effectiveness. The Company did not receive fully signed originals of the Purchase Agreement, Subordination Agreement, Option Agreement, Termination Agreement and Note until July 1, 2016, prior to the July 4th holiday, and with confirmation of execution of all agreements and closing in the following week.

The above summaries of the Purchase Agreement, Subordination Agreement, Option Agreement, Termination Agreement and Note are qualified in their entirety by reference to the actual Purchase Agreement, Subordination Agreement, Termination Agreement, Option Agreement and Note, each filed as an exhibit to this Current Report on Form 8-K.

ITEM 9.01.    Financial Statements and Exhibits.

Exhibit Number   Exhibit Description
 
10.1 Option Agreement, dated June 27, 2016, by Capstone Companies, Inc. and Involve, LLC
10.2 Promissory Note, dated June 27, 2016, by Neil Singer in favor of Capstone Companies, Inc.
10.3 Subordination Agreement, dated June 27, 2016, by Capstone Companies, Inc. and Koch Minerals, LLC
10.4 Securities Purchase Agreement, dated June 27, 2016, by Capstone Companies, Inc., Neil Singer and AC Kinetics, Inc.
10.5 Termination Agreement, dated June 27, 2016, by Capstone Companies, Inc. and AC Kinetics, Inc.



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CAPSTONE COMPANIES, INC., A FLORIDA CORPORATION

Date:   July 12, 2016


By: /s/ James McClinton
Chief Financial Officer









OPTION AGREEMENT
by and between
CAPSTONE COMPANIES, INC.
and
INVOLVE LLC

Dated effective as of June 27, 2016
 
 
 
 


TABLE OF CONTENTS
   
Page
ARTICLE 1 OPTION TO PURCHASE
1
1.1
Grant of Option and Term
1
1.2
Duties Upon Exercise of Option
2
1.3
Failure to Exercise Option
2
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3
2.1
Authority, Validity, Effect and No Conflict
3
2.2
Consents
3
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER
3
3.1
Existence and Good Standing
3
3.2
Authority, Validity, Effect and No Conflict
3
3.3
Consents
4
3.4
Securities
4
ARTICLE 4 ADDITIONAL AGREEMENTS
4
4.1
Escrow
4
4.2
No Transfer of Securities without Entry Into Joinder Agreement
5
4.3
Waiver and Release
5
ARTICLE 5 MISCELLANEOUS
6
5.1
Assignment
6
5.2
Headings
6
5.3
Integration, Modification and Waiver
6
5.4
Construction
6
5.5
Severability
7
5.6
Notices
7
5.7
Governing Law
7
5.8
Jurisdiction and Venue
8
5.9
Waiver of Jury Trial
8
5.10
No Third Party Beneficiaries
8
5.11
Counterparts
9
ii


OPTION AGREEMENT
This Option Agreement (this " Agreement "), effective this 27 day of June, 2016 (the " Effective Date "), is by and between Involve, LLC, a Florida limited liability company (" Seller "), and Capstone Companies, Inc., a Florida corporation (the " Company ").  Seller and the Company are sometimes individually referred to as a " Party ," and collectively as the " Parties ." Capitalized terms not defined herein shall have the meaning set forth in the Purchase Agreement (as defined below).
RECITALS
A.   Seller owns 25,000,000 shares of the Company (the " Securities "), which securities are evidenced by stock certificate number 2629-4 (the " Certificate ");
B.   Each of the Company, Neil Singer, an individual and an Affiliate of Seller (" Singer ") and AC Kinetics, Inc., a Delaware limited liability company and an Affiliate of Singer (" ACK ") are concurrently entering into that certain Securities Purchase Agreement (the " Purchase Agreement "), whereby Singer will purchase all of the outstanding securities of ACK owned by the Company in exchange for (1) the making by Singer to the order of the Company a promissory note in the initial principal amount of $1,500,000 (the " Note "), provided that following the closing of the transactions contemplated by the Purchase Agreement, Singer shall assign to NLO Holdco, LLC, a Delaware limited liability company and an Affiliate of Singer (" NLO "), and NLO shall assume, all of Singer's rights and obligations under the Note, and NLO shall immediately thereafter assign to ACK NLO, LLC, a Delaware limited liability company and an affiliate of Singer and NLO (" Newco "), and Newco shall assume, all of NLO's rights and obligations under the Note, and (2) the entry by Seller and the Company into this Agreement; and
C.   In connection with and as consideration for the entry by the Company, Singer and ACK into the Purchase Agreement, the Parties desire to enter into this Agreement that, among other things, grants to the Company an option to repurchase the Securities subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1
OPTION TO PURCHASE
1.1   Grant of Option and Term .  Subject to the terms hereof and in reliance upon the representations and warranties of the respective Parties contained herein:
(a)
Seller hereby grants to the Company options to repurchase the Securities at a purchase price of $0.01 per share in five (5) increments of 5,000,000 shares (each, an " Option " and collectively the " Options ") for $50,000 per Option (the " Exercise Price "), for a total purchase price of $250,000 in the aggregate if all Options are exercised.
(b)
Each Option may be exercised or not by the Company in its sole discretion, by written notice from the Company to Seller (each, an " Exercise Notice ").  For the avoidance of doubt, the Company's ability to exercise any Option is not contingent upon the occurrence of any transaction involving Seller and/or any of its Affiliates or any Affiliates of Neil Singer.
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(c)
Each unexercised Option shall terminate on the Termination Date (as defined below).  For the avoidance of doubt, the Company may not exercise any Option that has not been exercised before the expiration of the Option Period (as defined below).
(d)
The following terms used in this Agreement shall have the meanings set forth below:
(i)
The " First Exercise Date " means the first date that the Company exercises any Option in accordance with the terms of this Agreement.
(ii)
The " Termination Date " means the earlier of (A) the twelve (12) month anniversary of the First Exercise Date or (B) the thirty-six (36) month anniversary of the Effective Date.
(iii)
The " Option Period " means the period between the Effective Date and the Termination Date.
1.2   Duties Upon Exercise of Option; Option Closing .  If an Option is exercised during the Option Period, then, within five days of receipt of the Exercise Notice, subject to the terms and conditions of this Agreement, the Company will repurchase from Seller, and Seller will sell, transfer, assign, convey and deliver to the Company, free and clear of all Liens (other than any Liens existing under securities Laws), all right, title and interest in, to and under the Securities underlying such Option (the " Applicable Securities "). The total consideration payable by the Company to Seller in consideration for the Applicable Securities shall be the Exercise Price.  The closing of such transaction (each, an " Option Closing ") will take place at a location to be mutually agreed between the Parties.  At each Option Closing, (a) the Company shall (i) pay the Exercise Price to Seller; (ii) update the Company's stock ledger to reflect the exercise of such Option and (iii) issue a new stock certificate to the Escrow Agent, on behalf of Seller, reflecting Seller's true and correct ownership in the Company following such Option Closing (each, a " Revised Certificate ") and cancel the Certificate or any Revised Certificate, as applicable, upon receipt of such Certificate or Revised Certificate, as applicable, from the Escrow Agent, and (b) the Parties shall instruct the Escrow Agent to (i) surrender the Certificate or any Revised Certificate, as applicable, to the Company for cancellation upon receipt of a Revised Certificate, and (ii) hold the applicable Revised Certificate in Escrow pursuant to Section 4.1 .  Upon the final Option Closing, the Parties shall instruct the Escrow Agent to release the Certificate or any Revised Certificate, as applicable, to the Company.  In the event that the Company exercises each Option, upon Seller's receipt of the Exercise Price at the final Option Closing, Seller shall no longer have any rights to the Securities.  For the avoidance of doubt, Seller shall execute and deliver to the Company, or cause to be executed and delivered on behalf of Seller to the Company, such instruments and other documents as the Company may reasonably request in order to implement the transactions contemplated by this Agreement, including all further materials, documents and instruments of conveyance, Transfer or assignment to effect, record or verify the Transfer to, and vesting in the Company of, all right, title and interest in and to the Applicable Securities at each Option Closing, free and clear of Liens (other than Liens existing under Securities Laws), in accordance with the terms of this Agreement.
1.3   Failure to Exercise Option .  This Agreement shall automatically terminate at the end of the Option Period, even if the Company has not exercised each Option, provided that if the Company has exercised an Option in accordance with Section 1.1 hereof, this Agreement shall not terminate until the date that is at least five (5) days following the date of the Exercise Notice with respect to such Option to permit the Parties to consummate the Option Closing in accordance with Section 1.2 hereof.
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Notwithstanding the foregoing or anything to the contrary in this Agreement, Section 1.2 , this Section 1.3 , Section 4.1 , Section 4.3 and ARTICLE 5 shall survive the termination of this Agreement.  For the avoidance of doubt, the Company only has the right to exercise the Options during the Option Period.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Seller as of the Effective Date as follows:
2.1   Authority, Validity, Effect and No Conflict .
(a)
The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the Florida.
(b)
The Company has all requisite power and authority to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.  This Agreement has been duly approved by all requisite action and this Agreement has been duly executed and delivered by the Company pursuant to all necessary authorization and is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar Laws and principles of equity affecting creditors' rights and remedies generally (the " General Enforceability Exceptions ").
(c)
Neither the execution of this Agreement by the Company, nor the performance by the Company of its obligations hereunder will (i) violate or conflict with the organizational or governing documents of the Company or any Law, Permit or Order, (ii) violate, conflict with or result in a breach or termination of, or otherwise give any Person additional rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of any note, deed, mortgage, or other Contract to which the Company is a party or by which any of its assets or properties are bound or (iii) result in the creation or imposition of any Lien with respect to, or otherwise have an adverse effect upon, its assets or properties.
2.2   Consents .  No Consent is required in connection with the execution and delivery by the Company of this Agreement or the consummation of the transactions contemplated hereby.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to the Company as of the Effective Date as follows:
3.1   Existence and Good Standing .  Seller is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Florida.
3.2   Authority, Validity, Effect and No Conflict .
3



(a)
Seller has all requisite authority and full legal capacity to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly approved by all requisite action and has been duly executed and delivered by Seller pursuant to all necessary authorization and is the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to the General Enforceability Exceptions.
(b)
Neither the execution of this Agreement by Seller, nor the performance by Seller of its obligations hereunder will violate or conflict with the organizational documents of Seller or any Law, Permit or Order or any Contract to which Seller is a party or by which Seller may be bound.
3.3   Consents .  No Consent is required in connection with the execution and delivery by Seller of this Agreement or the consummation of the transactions contemplated hereby.
3.4   Securities .  Seller owns the Securities, free and clear of any and all Liens (other than any Liens existing under securities Laws).
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1   Escrow .
(a)
On the date hereof, the Company and Seller, as applicable, shall deposit, and Escrow Agent hereby acknowledges receipt of, the Certificate and duly executed stock powers in blank with the Escrow Agent, to be held in escrow pending written release by Seller and the Company in accordance with the terms hereof.  Seller and the Company each hereby appoint the Escrow Agent to serve as, and the Escrow Agent hereby agrees to act as, escrow agent, and to hold the Certificate (and any Revised Certificate, as instructed by the Parties in accordance with the terms of this Agreement) in escrow pursuant to the terms and conditions set forth herein.  The Escrow Agent shall not release the Certificate or any Revised Certificate except as directed in a writing signed by an authorized representative of each of Seller and the Company directing the Escrow Agent to release the Certificate or such Revised Certificate, as applicable, (i) to the Company at an Option Closing pursuant to Section 1.2 (including for cancellation following receipt of a Revised Certificate in accordance with Section 1.2 ), or (ii) in the event that not all of the Options are exercised before the expiration of the Option Period, to Seller.  All notices, requests, claims, demands and other communications to the Escrow Agent hereunder shall be in writing in accordance with the procedures set forth in Section 5.6 to the following address: Nason Yeager Gerson White & Lioce, P.A., 3001 PGA Boulevard, Suite 305, Palm Beach Gardens, Florida 33410, Attn: Michael D. Harris, Esq.  For purposes of this Agreement, " Escrow Agent " means Nason Yeager Gerson White & Lioce, P.A.
(b)
If, at any time, (i) there shall exist any dispute between Seller and the Company with respect to the holding or disposition of all or any portion of the Securities or any other obligations of the Escrow Agent hereunder or (ii) the Escrow Agent is unable to determine, to the Escrow Agent's satisfaction, the proper disposition of all or any portion of the Securities or the Escrow Agent's proper actions with respect to its obligations hereunder, then the Escrow Agent may, in its sole discretion, petition any court of competent jurisdiction (including, for the avoidance of doubt, the Florida Circuit Court in and for Palm Beach County, and if jurisdiction in the Florida Circuit Court shall be unavailable, the federal courts of the U.S. sitting in the State of
4


Florida, Southern District of Florida, and the Parties consent to such jurisdiction and agree that matters submitted by the Escrow Agent to such courts pursuant to this Section 4.1 may be heard and determined in such courts) for instructions with respect to such dispute or uncertainty, and, to the extent required or permitted by Law, release to such court, for holding and disposition in accordance with the instructions of such court, all or any portion of the Securities, after payment by the Parties to the Escrow Agent of all expenses (including reasonable attorneys' fees and court costs) incurred by the Escrow Agent in connection with the exercise of its rights hereunder.  The Escrow Agent shall have no liability to Seller, the Company or any other person with respect to any such disbursement into court, specifically including any Liability that may arise, or be alleged to have arisen, out of or as a result of any delay in the release of the Securities or any delay in or with respect to any other action required or requested of the Escrow Agent.
(c)
Seller shall retain ownership of the Securities and shall be entitled to exercise any and all voting rights pertaining to the Securities until the Option Closing occurs with respect to such Securities.
4.2   No Transfer of Securities without Entry Into Joinder Agreement .  During the Option Period, Seller shall not Transfer any Securities, and no such attempted Transfer of the Securities shall be deemed completed, until the potential Transferee shall have entered into a Joinder Agreement in the form attached hereto as Exhibit A (the " Joinder Agreement ").
4.3   Waiver and Release .
(a)
The Company, on behalf of itself, its Affiliates and each of their respective heirs, administrators, executors, officers, directors, employees, stockholders, partners, managers, members, agents and representatives, and the successors and assigns of each (individually, a " Releasor ", collectively, the " Releasors "), FULLY AND FINALLY RELEASES, ACQUITS AND FOREVER DISCHARGES, AND COVENANTS NOT TO SUE, the Seller and its respective Affiliates (and, to the extent they would be liable in respect of their position with the foregoing, each of the present and former officers, directors, stockholders, members, partners, managers, representatives, employees, agents, Affiliates, subsidiaries, predecessors, successors, assigns, beneficiaries, heirs, executors, insurers, personal representatives and attorneys of the foregoing) (the " Released Parties ") from or for any and all Actions, Liens, Contracts, offers, Liabilities and compensation of any kind or nature whatsoever, KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, FORESEEN OR UNFORESEEN, KNOWN OR UNKNOWN, DISCLOSED OR UNDISCLOSED, MATURED OR UNMATURED, FIXED OR CONTINGENT, PAST, PRESENT OR FUTURE, IN LAW OR IN EQUITY (" Released Matters "), which Releasors presently have, have ever had or may hereafter have against the Released Parties arising contemporaneously with or prior to the Effective Date, or on account of or arising out of any matter, cause or event occurring contemporaneously with or prior to the Effective Date (including the entry into this Agreement); provided, however , that nothing contained herein operates to release any obligations of Seller or any of its Affiliates or any other Released Party arising under this Agreement. In compliance with any Law which requires a specific release of unknown claims or benefits, the Company acknowledges that this release includes a release of unknown claims (except claims of fraud), and hereby expressly waives and relinquishes any and all such claims, rights or benefits that such may have which are unknown at the effective time of this release. Each Party understands and agrees that if, hereafter, it discovers facts different from or in addition to those that it now knows or believe to be true, that the waivers and releases granted hereby will be and remain effective in all respects notwithstanding such different or additional facts or the discovery of such facts except in the case of claims of fraud.
5


(b)
The Company further agrees not to institute any Action, and will not cooperate or assist in any such Action, against the Released Parties, or any of them, pursuing any Released Matter released pursuant to Section 4.3(a) .
(c)
The Company represents that it has not assigned any Released Matter or potential Released Matter against the Released Parties to any other Person.
(d)
It is understood and agreed that Seller (on behalf of itself and the other Released Parties) does not admit any Liability regarding the matters released hereby.
ARTICLE 5
MISCELLANEOUS
5.1   Assignment .  Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned by any Party without the prior written consent of the other Parties; provided , however , that Seller may assign this Agreement and any or all rights or obligations hereunder to any Affiliate or Affiliates of Seller or any Person or Persons to which Seller or any of its Affiliates sells, transfers, assigns or delegates all or any portion of its business.  Upon any such permitted assignment, the references in this Agreement to Seller shall also apply to any such assignees unless the context otherwise requires.
5.2   Headings .  The headings contained in this Agreement are included for purposes of convenience only and do not affect the meaning or interpretation of this Agreement.
5.3   Integration, Modification and Waiver .  This Agreement, the Purchase Agreement (and the Ancillary Agreements, as defined therein) together with the Exhibits and Schedules delivered hereunder, constitutes the entire agreement between the Parties and their Affiliates with respect to the subject matter hereof and supersedes all prior understandings of the Parties.  No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the Parties.  No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a continuing waiver.  No waiver shall be binding unless executed in writing by the Party making the waiver.
5.4   Construction .  The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.  Any reference to any federal, state, local or foreign statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  Unless the context clearly indicates otherwise: (a) each definition herein includes the singular and the plural, (b) each reference herein to any gender includes the masculine, feminine and neuter where appropriate, (c) the words "include" and "including" and variations thereof shall not be deemed terms of limitation, but rather shall be deemed to be followed by the words "without limitation," (d) the words "hereof," "herein," "hereto," "hereby," "hereunder" and derivative or similar words refer to this Agreement as an entirety and not solely to any particular provision of this Agreement, (e) each reference in this Agreement to a particular Article, Section, Exhibit or Schedule means an Article or Section of, or an Exhibit or Schedule to, this Agreement, unless another agreement is specified, (f) unless otherwise specified, any definition of or reference to any Contract, instrument, document or Law shall be construed as referring to such Contract, instrument, document or Law as it may from time to time be amended, supplemented, renewed, restated or otherwise modified, and (g) all references to "$" or "Dollars" shall mean U.S. Dollars.
6



5.5   Severability .  If any provision of this Agreement or the application of any provision of this Agreement to any Party or circumstance is, to any extent, adjudged invalid or unenforceable, the application of the remainder of such provision to such Party or circumstance, the application of such provision to other Parties or circumstances, and the application of the remainder of this Agreement shall not be affected thereby.
5.6   Notices .  All notices and other communications required or permitted under this Agreement must be in writing and shall be deemed to have been duly given and delivered (a) when delivered in person, (b) when sent by electronic mail transmission (with read receipt confirmed), (c) one Business Day after having been dispatched by a nationally recognized overnight courier service or (d) upon tender by the U.S. Post Office after being sent by registered or certified mail, return receipt requested, postage prepaid, to the appropriate Party at the following address or facsimile number:
If to Seller:
Involve, LLC
20 Bedford Road
Armonk, New York 10504
Attention: Neil Singer, PhD
Facsimile No.: (914) 816-1221
Email: nsing@ackinetics.com

with a copy to (which will not constitute notice):
Sherman, Wells, Sylvester & Stamelman LLP
210 Park Avenue
Florham Park, New Jersey 07932
Fax: (973) 845-2546
Attention: Andrew J. Stamelman, Esq.
Email: astamelman@shermanwells.com

If to the Company:
Capstone Companies, Inc.
350 Jim Moran Boulevard
Deerfield Beach, Florida  33442
Attention: Stewart Wallach, Aimee Gaudet and Gerry McClinton
Email: swallach@capstoneindustries.com ; aimee@capstonecompaniesinc.com ; gmcclinton@capstoneindustries.com

Any Party may change its address, electronic mail address or facsimile number for the purposes of this Section 5.6 by giving notice to the other Parties as provided in this Agreement.
5.7   Governing Law .  This Agreement shall be governed by and construed and enforced in accordance with the Laws of the State of Delaware without regard to principles of conflicts of law.
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5.8   Jurisdiction and Venue .  Each of the Parties acknowledges and agrees that this Agreement involves at least $100,000, and that it has been entered into in express reliance on Section 2708 of the Delaware Code.  Except as otherwise set forth with respect to the Escrow Agent in Section 4.1(b) , each of the Parties hereby irrevocably and unconditionally, for itself and its property, submits to the exclusive jurisdiction of the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery shall be unavailable, the federal courts of the U.S. sitting in the State of Delaware), and any appellate court from any thereof, in any judicial proceeding brought against any of the Parties in connection with any controversy or claim arising out of or relating to this Agreement, or the breach hereof or thereof (each, a " Proceeding ") and agrees that all claims in respect of any such Proceeding may be heard and determined in any such court, and each of the Parties hereby irrevocably and unconditionally (a) agrees not to commence any such Proceeding or other Action except in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), (b) agrees that any claim in respect of any such Proceeding may be heard and determined in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), and any appellate court from any thereof, (c) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such Proceeding in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), and (d) waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such Proceeding in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper).
5.9   Waiver of Jury Trial .  EACH OF THE PARTIES WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  EACH OF THE PARTIES HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
5.10   No Third Party Beneficiaries .  This Agreement is for the sole benefit of the Parties and the Released Parties and their respective successors and permitted assigns and nothing herein express or implied shall give or be construed to give to any Person, other than the Parties and the Released Parties and such respective successors and permitted assigns, any legal or equitable right or remedy of any nature whatsoever hereunder.
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5.11   Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Signatures transmitted by facsimile or electronic mail shall be deemed originals for purposes of this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Company has caused its duly authorized representative to execute this Agreement effective as of the day and year first above written.
CAPSTONE COMPANIES, INC.
a Florida corporation

By: /s/ James G. McClinton
Name: James G. McClinton
Title: C.F.O.


IN WITNESS WHEREOF, the Company has caused its duly authorized representative to execute this Agreement effective as of the day and year first above written.
INVOLVE LLC
A Florida limited liability company

By: /s/ Neil Singer
Name: Neil Singer
Title: Member


IN WITNESS WHEREOF, the Escrow Agent has caused its duly authorized representative to execute this Agreement solely for the purposes of Section 4.1 and ARTICLE 5 effective as of the day and year first above written.
NASON YEAGER GERSON WHITE & LIOCE, P.A.

By: /s/ Michael D Harris
Name: Michael D Harris
Title: Director


EXHIBIT A

FORM OF JOINDER AGREEMENT
Reference is made to that certain Option Agreement dated June 27, 2016 among Capstone Companies, Inc. and Involve LLC (the " Option Agreement ").

In accordance with the Option Agreement, and in consideration of the undersigned's receipt of 100 membership interests of the Company, the undersigned agrees that he has read the Option Agreement, and he agrees to become a party to the Option Agreement and agrees to be bound thereby as if an original party thereto.


DATED ______________________, 20___.

     
Witness
 
Name:


ACCEPTED:

CAPSTONE COMPANIES, INC.



By:  /s/ James G. McClinton
      Name: James G. McClinton
      Title: C.F.O.

 
 



THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATE TO THE PRIOR PAYMENT IN FULL OF CERTAIN SENIOR DEBT (AS DEFINED IN THE SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THAT CERTAIN SUBORDINATION AGREEMENT, DATED THE DATE HEREOF, IN FAVOR OF KOCH MINERALS, LLC, AS THE SAME MAY BE AMENDED, RESTATED, CONSOLIDATED, REPLACED OR OTHERWISE MODIFIED FROM TIME TO TIME (THE " SUBORDINATION AGREEMENT ").  THIS INSTRUMENT MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNTIL THE PURCHASER, ASSIGNEE OR TRANSFEREE HAS BECOME A PARTY TO AND BOUND BY SUCH SUBORDINATION AGREEMENT.

NOTE
$1,500,000.00 June 27, 2016
For value received, the undersigned, NEIL SINGER, an individual (" Borrower ", which term shall include any subsequent permitted assigns), promises to pay to the order of Capstone Companies, Inc., a Florida corporation (" Lender "; which term shall include any subsequent holder hereof), in lawful money of the United States of America, without setoff, deduction or counterclaim, the principal amount of One Million Five Hundred Thousand Dollars (U.S. $1,500,000.00), together with interest thereon as provided below.
Following execution of this Note, Borrower shall assign this Note (and all of his rights and obligations hereunder) to NLO Holdco, LLC, a Delaware limited liability company (" NLO ") and an affiliate of Borrower, and, immediately following such assignment, NLO shall assign this Note (and all of its rights and obligations hereunder) to ACK NLO, LLC, a Delaware limited liability company (" Newco ") and an affiliate of NLO and Borrower (collectively, the " Assignments ").  Lender hereby acknowledges and agrees that the Assignments shall relieve Neil Singer of all of his individual obligations to Lender hereunder and waives and releases any and all claims or rights of any kind that Lender may have against Neil Singer in his individual capacity for the obligations hereunder following the Assignments.
Interest shall accrue on the outstanding principal balance of this Note at an annual rate of 3.5% (the " Applicable Rate "), which is the rate of interest published in the Wall Street Journal as the prime rate in effect as of the date hereof .
Interest on the outstanding principal balance of this Note shall be computed on the basis of a year of 365 or 366 days, as the case may be, for the actual number of days elapsed.  Interest on the outstanding principal balance of the Note that has accrued and is outstanding on December 31 of each year shall be added to and treated as principal outstanding under the Note as of January 1 of the following year, and interest shall accrue thereon as otherwise provided herein.
Subject to any restrictions contained in the Subordination Agreement, the outstanding principal amount under this Note, and all accrued and unpaid interest thereon, shall be due upon the earlier of (i) a Change in Control of Newco or (ii) June 27, 2025.  " Change in Control " means, directly or indirectly, (i) the acquisition by any person or group of persons (other than an affiliate of Newco, including, for the avoidance of doubt, NLO and/or AC Kinetics, Inc., a Delaware corporation and an affiliate of NLO and Newco (" ACK ")) who does not currently own at least 50% of the voting equity, in the aggregate, of Newco, (ii) any merger, reorganization, or similar transaction between Newco and any person (other than an affiliate of Newco, including, for the avoidance of doubt, NLO and/or ACK), (iii) a divestiture
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(whether by sale or exclusive license), not in the ordinary course of business, of all or substantially all of the assets of Newco (other than to an affiliate of Newco, including, for the avoidance of doubt, NLO and/or ACK).
Notwithstanding anything to the contrary herein, but subject to any restrictions contained in the Subordination Agreement, Borrower may prepay this Note (or cause this Note to be prepaid) in whole without the consent of Lender.
This Note shall be binding upon and inure to the benefit of the successors and assigns of Borrower and Lender and, except as otherwise set forth herein, shall only be assignable on the same terms and conditions as that certain Securities Purchase Agreement, dated as of the date hereof, by and among Borrower, Lender and ACK.
Time is of the essence of this Note.  To the fullest extent permitted by applicable law, Borrower, for itself and its successors and assigns, waives presentment, demand, protest, notice of dishonor, and any and all other notices, demands and consents in connection with the delivery, acceptance, performance, default or enforcement of this Note, and consents to any extensions of time, renewals, releases of any parties to this Note, waivers and any other modifications that may be granted or consented to by Lender from time to time in respect of the time of payment or any other provision of this Note.
This Note shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to principles of conflicts of law.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the date first above written.
BORROWER:

/s/ Neil Singer
Neil Singer, individually



ACCEPTED AND AGREED:
LENDER:
CAPSTONE COMPANIES, INC.

By: /s/ James G McClinton
      Name: James G. McClinton
      Title: C.F.O.
 
 
 
 
 
 



SUBORDINATION AGREEMENT

This Subordination Agreement (the " Agreement ") is made as of June 27, 2016 to be effective as of the Effective Date (as defined below), by and between Koch Minerals, LLC, a Delaware limited liability company (" Senior Creditor ") and Capstone Companies, Inc., a Florida corporation (" Junior Creditor "). Senior Creditor and Junior Creditor are each referred to herein as a " Party " and are collectively as the " Parties ."
ARTICLE I
DEFINITIONS
1.1   Definitions .  As used herein, the following terms have the meanings specified below (terms defined in the singular to have the same meaning when used in the plural and vice versa):
" ACK " means AC Kinetics, Inc., a Delaware corporation.
" Agreement " has the meaning set forth in the introductory paragraph.
" Borrower " means ACK NLO, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Guarantors.
" Default " means (a) any failure by any Loan Party, or any co-borrower or guarantor in respect of such Loan Party, to pay, perform or observe any of their respective Obligations to Senior Creditor, in each case without regard to any grace, cure or notice rights, or (b) the occurrence of any other default or event of default specified in or occurring under the Senior Credit Agreement or any other Senior Credit Document (in each case other than a default by Senior Creditor).
" Effective Date " means the date on which the Senior Credit Agreement is entered into and delivered by the parties thereto.
" Guarantor " means ACK and NLO.
" Insolvency Event " has the meaning specified in Section 3.2(a) hereof.
" Junior Creditor " means the Junior Creditor referred to in the introductory paragraph hereof and any other holder or holders from time to time of any Junior Debt.
" Junior Debt " means all Obligations of each Loan Party to or acquired by Junior Creditor.  Without limiting the generality of the foregoing, Junior Debt includes the Junior Note and all other Obligations of each Loan Party of any nature whatsoever to Junior Creditor, irrespective of whether such Obligations are evidenced by any written instrument or agreement, whether now existing or hereafter arising or acquired, or however arising.
" Junior Note " means the promissory note, dated June 27, 2016, from Neil Singer, which was thereafter assigned by Neil Singer to, and assumed by, NLO, and immediately thereafter assigned by NLO to, and assumed by, Borrower, as maker, to Junior Creditor, as payee, in the original principal amount of $1,500,000.00, as the same may be amended, renewed, restated, consolidated, replaced and otherwise modified from time to time.
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" Law " means any foreign, federal, state or local law, statute, code, ordinance, regulation, judicial decision, rule, judicial order, order, executive order or other requirement.
" Loan Party " means Borrower and each Guarantor.
" NLO " means NLO Holdco, LLC, a Delaware limited liability company.
" Obligations " means all debts and other liabilities of any Loan Party or any other Person of any nature whatsoever whether now existing or hereafter incurred or arising and whether matured or unmatured, liquidated or unliquidated, contractual or non-contractual, joint, several or joint and several, fixed or contingent, disputed or undisputed, direct or indirect, and without regard to whether any such debts or other liabilities are evidenced by a writing or other record.  Obligations include all principal, interest (including interest accruing after the occurrence of an Insolvency Event, and without regard to whether the same is allowed as a claim), premium, fees, expenses, indemnification obligations or otherwise owing at any time with respect to any indebtedness or other financial obligation of any Loan Party.
" Party " and " Parties " have the meanings set forth in the introductory paragraph.
" Person " means any individual, sole proprietorship, partnership, corporation, limited liability company, unincorporated society or association, trust, governmental authority or other entity.
" Proceeding " has the meaning set forth in Section 5.7 .
" Satisfaction of the Senior Debt " means (a) the indefeasible payment in full, in collected funds, of all Obligations of each Loan Party and each affiliate of each Loan Party to Senior Creditor, and (b) the termination of any obligation Senior Creditor may have to provide credit to or for the benefit of each Loan Party or each affiliate of each Loan Party (it being agreed that the mere existence of a default, event of default or other event which gives Senior Creditor the discretion whether or not to extend credit does not constitute the termination of an obligation to extend credit for purposes of this clause (b) ).
" Senior Credit Agreement " means the Credit Agreement, dated on the Effective Date,   between Senior Creditor and Borrower, and any amendments, replacements, restatements, consolidations and other modifications thereof from time to time.
" Senior Credit Documents " means the Senior Credit Agreement and all instruments (including the Senior Notes), documents and agreements which now or hereafter evidence, secure, guarantee or otherwise relate to any Loan Party's Obligations under the Senior Credit Agreement or any other evidence of any Loan Party's Obligations to Senior Creditor, and any renewals, replacements, consolidations, amendments and other modifications of any of the foregoing from time to time.
" Senior Creditor " means the Senior Creditor referred to in the introductory paragraph above and any other holder or holders from time to time of any Senior Debt.
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" Senior Debt " means all Obligations of each Loan Party to or acquired by Senior Creditor and/or its affiliates, and their respective successors and permitted assigns, including all principal, interest, fees, expenses and other obligations owing by any Loan Party to Senior Creditor under the Senior Credit Agreement, the Senior Notes and the other Senior Credit Documents, in each case as amended or otherwise modified from time to time.
" Senior Notes " means any one or more promissory notes referred to in or executed and delivered in connection with the Senior Credit Agreement, as the same may be amended, renewed, restated, replaced consolidated or otherwise modified from time to time.
ARTICLE II
REPRESENTATIONS OF JUNIOR CREDITOR AND LOAN PARTIES
2.1   Representations and Warranties .
(a)
Junior Creditor represents and warrants to Senior Creditor as follows:
(i)
This Agreement has been duly executed and delivered by Junior Creditor and is a valid and binding obligation of Junior Creditor, enforceable against Junior Creditor in accordance with its terms.
(ii)
Junior Creditor has no lien on or other security interest in any existing or future assets of any Loan Party, whether real or personal.
(iii)
Junior Creditor is the only holder of the Junior Note and has not encumbered, hypothecated or otherwise transferred any Junior Debt or any interest of Junior Creditor therein to any other Person.  Similarly, Junior Creditor has not assigned or otherwise transferred any rights of Junior Creditor under the Junior Note.
(iv)
No Person has guaranteed the payment or performance of any Junior Debt or agreed to purchase or otherwise acquire any Junior Debt.
(v)
A true and complete copy of the Junior Note is attached as Exhibit A hereto.
(b)
Each Loan Party (by virtue of its execution and delivery of the Acknowledgment and Agreement attached hereto) represents and warrants to Senior Creditor as follows:
(i)
This Agreement has been duly executed and delivered by such Loan Party and is a valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms.
(ii)
Such Loan Party has not encumbered (or agreed to encumber at any time) any of its existing or future properties, real or personal, in any respect to secure its obligation to pay any Junior Debt.
(iii)
To each Loan Party's knowledge, after making due inquiry, the Junior Creditor is (A) the holder of the Junior Debt and has not encumbered, hypothecated or otherwise transferred any Junior Debt or any interest of Junior Creditor therein to any other Person and (B) the only Person entitled to enforce any rights under the Junior Note.
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(iv)
No Person has guaranteed the payment or performance of any Junior Debt or agreed to purchase or otherwise acquire any Junior Debt.
(v)
A true and complete copy of the Junior Note is attached as Exhibit A hereto.
ARTICLE III
SUBORDINATION TO SENIOR DEBT
3.1   Subordination .
(a)
General .  Notwithstanding anything to the contrary in any document evidencing any Junior Debt, Junior Creditor agrees and covenants that the Junior Debt is and shall be subordinate in right of payment to the prior payment in full of the Senior Debt to the extent set forth in this Agreement.  The Senior Debt shall not be deemed to have been paid in full until the Satisfaction of the Senior Debt.
(b)
Payment of Junior Debt .  Until the Satisfaction of the Senior Debt, Junior Creditor shall not be entitled to receive any payments of principal, interest, fees or any other amounts payable from any Loan Party in respect of any Junior Debt.
3.2   Priority and Payment Over of Proceeds in Certain Events .
(a)
Insolvency or Dissolution of Loan Parties .  Upon any payment or distribution of all or any of the assets or securities of any Loan Party of any kind or character, whether in cash, property or securities, upon any dissolution, winding up, liquidation, reorganization, arrangement, adjustment, protection, relief or composition of any Loan Party or its debts, whether voluntary or involuntary or in bankruptcy, insolvency, receivership, arrangement, reorganization, relief or other proceedings, or upon any assignment for the benefit of creditors or any other marshaling of the assets and liabilities of any Loan Party or otherwise (any such event being an " Insolvency Event "), all Senior Debt shall first be indefeasibly paid in full before Junior Creditor shall be entitled to receive any payment or other transfer in respect of any Junior Debt.  Upon the occurrence of any Insolvency Event in respect of any Loan Party, any payment or distribution of assets or securities of such Loan Party of any kind or character, whether in cash, property or securities, to which Junior Creditor would be entitled except for the provisions of this Article III , shall be made by such Loan Party or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, directly to Senior Creditor for application (in the case of cash) to, or as collateral (in the case of non‑cash property or securities) for, the payment or prepayment in full of all Senior Debt.
(b)
Demand for or Acceleration of Payment of Junior Debt .  If any Junior Debt is declared due and payable or the maturity thereof is accelerated for any reason, Senior Creditor shall be entitled to receive payment in full of all amounts due or to become due in respect of the Senior Debt (whether or not a default or event of default has occurred thereunder or such Senior Debt is or has been declared to be due and payable) before Junior Creditor shall be entitled to receive any payment or other transfer in respect of any Junior Debt.
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(c)
Certain Payments Held in Trust .  In the event that, notwithstanding the foregoing provisions prohibiting such payment or distribution, Junior Creditor receives any payment or distribution in respect of any Junior Debt in violation of the provisions of this Agreement, then and in such event such payment or distribution shall be received and held in trust for Senior Creditor and shall be paid over or delivered to Senior Creditor for application (in the case of cash) to, or as collateral (in the case of non‑cash property or securities) for, the payment or prepayment of all Senior Debt in full.
3.3   Suspension of Remedies .  Until the Satisfaction of the Senior Debt, Junior Creditor shall not (a) ask, demand or sue for any payment or distribution or exercise any other remedy in respect of any Junior Debt (including any action to enforce any guaranty or other credit enhancement in respect of any Junior Debt or to enforce or exercise any rights or remedies under the Junior Note), or (b) commence, or join with any other creditor (other than Senior Creditor) in commencing, any Insolvency Event.
3.4   Rights of Senior Creditor Not to be Impaired; Modification of Senior Debt .  No right of Senior Creditor to enforce subordination as herein provided shall at any time be prejudiced or impaired by any act or failure to act by Senior Creditor, or by any noncompliance by any Loan Party with the terms and provisions and covenants herein, regardless of any knowledge thereof Senior Creditor may have or otherwise be charged with.  The provisions of this Article III are intended to be for the benefit of, and shall be enforceable directly by, Senior Creditor.  Without limiting the generality of any provision of this Agreement, Junior Creditor agrees that Senior Creditor and each applicable Loan Party may from time to time modify the terms of any Senior Debt, including increasing the principal amount or adding types of indebtedness or other credit outstanding or available thereunder; extending or otherwise modifying the payment terms thereof; increasing or otherwise modifying the interest rates or fees payable thereunder; or extending the maturity thereof.  Junior Creditor agrees that Senior Creditor and each such Loan Party may so modify the terms of any Senior Debt from time to time without obtaining the consent of, or giving notice to, Junior Creditor and that Senior Creditor's right to receive prior payment in full of the Senior Debt, as so modified, and all other rights of Senior Creditor hereunder, shall not be impaired or otherwise affected by any such modification or modifications.
3.5   Actions to Effectuate Subordination .
(a)
Authorization to Senior Creditor to Act .  If an Insolvency Event occurs, Senior Creditor is irrevocably authorized and empowered (in its own name or in the name of Junior Creditor or otherwise), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution referred to in Section 3.2(a) above and to file claims and proofs of claim with respect to the Junior Debt in any bankruptcy or other insolvency proceeding, and in each case to apply any payment or other distribution of assets or securities in the manner and to the extent provided in Section 3.2(a) above.
(b)
Specific Performance; Indemnification .  Senior Creditor is entitled to specific performance of the provisions of this Agreement, at any time when Junior Creditor shall have failed to comply with any of the provisions of this Agreement.  Junior Creditor hereby irrevocably waives any defense based on the adequacy of a remedy at Law that might be asserted as a bar to such remedy of specific performance.  Junior Creditor acknowledges that the provisions of this Article III are intended to be enforceable at all times, whether before or after the commencement of an Insolvency Event.  Junior Creditor shall indemnify, defend and hold harmless Senior Creditor for any losses, liabilities, taxes, claims, debts, damages, judgments, settlements, costs, fines, expenses (including attorneys' fees), penalties or other obligations incurred by Senior
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Creditor based upon, arising out of or otherwise relating to (i) any breach of any representation or warranty of Junior Creditor set forth in this Agreement or (ii) any breach of any covenant or obligation of Junior Creditor set forth in this Agreement.
3.6   Subordination Legend; Further Assurances .
(a)
Junior Debt .  Junior Creditor will cause each instrument now or hereafter held by or on behalf of Junior Creditor evidencing any Junior Debt to contain, in a conspicuous manner, the following legend:
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATE TO THE PRIOR PAYMENT IN FULL OF CERTAIN SENIOR DEBT (AS DEFINED IN THE SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF JUNE 27, 2016 IN FAVOR OF KOCH MINERALS, LLC, AS THE SAME MAY BE AMENDED, RESTATED, CONSOLIDATED, REPLACED OR OTHERWISE MODIFIED FROM TIME TO TIME.  THIS INSTRUMENT MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNTIL THE PURCHASER, ASSIGNEE OR TRANSFEREE HAS BECOME A PARTY TO AND BOUND BY SUCH SUBORDINATION AGREEMENT.
(b)
Further Assurances .  Junior Creditor will further mark Junior Creditor's books of account, if any, in such a manner as shall be effective to give proper notice of the effect of this Agreement, and will, in the case of any Junior Debt which is not evidenced by any instrument, upon Senior Creditor's request cause such Junior Debt to be evidenced by an appropriate instrument or instruments endorsed with the above legend.  Junior Creditor will, at Junior Creditor's expense and at any time and from time to time, promptly execute and deliver all further instruments and documents, and take all commercially reasonable further action, that may be necessary or desirable, or that Senior Creditor may request, in order to protect any right or interest granted or purported to be granted hereby or to enable Senior Creditor to exercise and enforce its rights and remedies hereunder.
3.7   Miscellaneous .
(a)
All rights and interests of Senior Creditor under this Agreement, and all agreements and obligations of Junior Creditor under this Agreement, shall remain in full force and effect irrespective of:  (i) any lack of validity or enforceability of instruments or agreements evidencing or otherwise relating to any Senior Debt; (ii) any change in the time, manner or place of payment of, or in any other term of, any Senior Debt, or any other amendment or waiver of or any consent to departure from any instruments or agreements evidencing or otherwise relating to any Senior Debt; (iii) any exchange, release or non‑perfection of any collateral, any release of any Person liable in whole or in part, or any release or amendment or waiver of or consent to departure from any guaranty, for any Senior Debt; or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, a surety.
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(b)
The provisions of this Article III shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any Senior Debt is rescinded or must otherwise be returned by Senior Creditor upon the insolvency, bankruptcy or reorganization of any Loan Party or otherwise, all as though such payment had not been made.
(c)
Junior Creditor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any Senior Debt and this Article III and any requirement that Senior Creditor protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against any Loan Party or any other Person or any collateral.
(d)
No failure on the part of Senior Creditor to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative and not exclusive of any remedies provided by Law or equity.
(e)
The provisions of this Article III , and all other provisions of this Agreement, constitute a continuing agreement and shall (i) remain in full force and effect until the Satisfaction of the Senior Debt, (ii) be binding upon Junior Creditor and Junior Creditor's successors, permitted assigns, heirs and personal representatives, as applicable, and (iii) inure to the benefit of and be enforceable by Senior Creditor and its successors and assigns.  Without limiting the generality of the foregoing clause (iii), Senior Creditor may assign or otherwise transfer its rights under this Agreement to any other Person, and such other Person shall thereupon become vested with all such rights granted to Senior Creditor herein or otherwise.  Notwithstanding anything to the contrary herein, no Junior Creditor may assign or otherwise transfer this Agreement to any other Person without the prior written consent of Senior Creditor.  Any purported assignment or transfer by Junior Creditor in violation of this Agreement will be null and void.
ARTICLE IV
COVENANTS
4.1   Covenants of Junior Creditor .  Junior Creditor covenants and agrees with Senior Creditor that, unless Senior Creditor shall otherwise agree in writing, until the Satisfaction of the Senior Debt:
(a)
Junior Creditor will not cancel or otherwise discharge any Junior Debt (except upon payment in full thereof to the extent permitted by Article III ) without the prior written consent of Senior Creditor, which consent shall not be unreasonably withheld so long as no Insolvency Event has occurred and is continuing.
(b)
Junior Creditor will not sell, assign, pledge, encumber or otherwise dispose of any Junior Debt held by Junior Creditor unless each such sale, assignment, pledge, encumbrance or disposition is made expressly subject to this Agreement.
(c)
Junior Creditor will not permit the terms of any Junior Debt held by Junior Creditor to be amended or otherwise modified in any respect without obtaining the prior written consent of Senior Creditor.  Similarly, Junior Creditor will not permit the Junior Note to be amended or otherwise modified in any respect without obtaining the prior written consent of Senior Creditor.
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(d)
Junior Creditor will not secure the payment of any Junior Debt, or obtain a lien, security interest or other charge or encumbrance of any nature whatsoever against any Loan Party's property, whether now owned or hereafter acquired; and, notwithstanding the foregoing, should Junior Creditor have or obtain at any time any lien, security interest or other charge or encumbrance of any nature whatsoever (including any judgment lien) against any property of any Loan Party, such lien, security interest or other charge or encumbrance shall be in all respects subject, junior and subordinate to all liens, security interests or other charges or encumbrances of any nature whatsoever (including any judgment lien) at any time granted or suffered by such Loan Party in favor of Senior Creditor, and without regard to the method or manner of creation, attachment or perfection of any such liens, security interests or other charges and encumbrances and without regard to the order of filing of any Uniform Commercial Code financing statements, mortgages or other lien perfection documents or the issuance or recordation of any judgment liens.
(e)
Junior Creditor will not accept or be the beneficiary under any guaranty, debt purchase agreement or similar assurance of payment or performance from any Person who has guaranteed or hereafter guarantees any Senior Debt, or who is or hereafter becomes a co-borrower under any Senior Debt, or who otherwise has assured or hereafter assures payment of any Senior Debt, in each case without obtaining the prior written consent of Senior Creditor, and then only upon first entering into a subordination agreement with Senior Creditor whereby Junior Creditor's payment and other rights in respect of such guarantor, co-borrower or other obligor are subordinated in substantially the same manner as Junior Creditor's payment and other rights in respect of the Loan Parties are subordinated under this Agreement.  If, notwithstanding the foregoing, Junior Creditor fails to enter into such subordination agreement, all payment, lien and other rights of Junior Creditor with respect to such guarantor, co-borrower or other obligor shall nonetheless be subject, junior and subordinate to all payment, lien and other rights of Senior Creditor with respect to such guarantor, co-borrower or other obligor.
ARTICLE V
MISCELLANEOUS
5.1   Amendments; Waiver.   No waiver of any provision of this Agreement or consent to any departure by Junior Creditor herefrom shall in any event be effective unless the same shall be in writing and signed by Senior Creditor, and then such waiver or consent shall be effective only in the specific instance and the specific purpose for which given.
5.2   Severability .  If any provision of this Agreement or the application of any provision of this Agreement to any Party or circumstance is, to any extent, adjudged invalid or unenforceable, the application of the remainder of such provision to such Party or circumstance, the application of such provision to the other Party or other circumstances, and the application of the remainder of this Agreement shall not be affected thereby.
5.3   Addresses for Notices .  All demands, notices and other communications provided for under this Agreement shall be in writing and may be delivered or sent by fax, e-mail or other electronic means to the parties as follows:
8



If to Senior Creditor :

Koch Minerals, LLC
4111 E. 37th Street N.
Wichita, Kansas  67220
Attention:  Director of Business Development

with copies to (which shall not constitute notice):

Koch Minerals, LLC
4111 E. 37th Street N.
Wichita, Kansas  67220
Attention:  Chief Counsel

- and -
Stinson Leonard Street LLP
1201 Walnut Street
Suite 2900
Kansas City, Missouri 64106-2150
Attention:  Jack Bowling
Facsimile No.: 816-412-1038
Email:  jack.bowling@stinson.com


If to Junior Creditor :

Capstone Companies, Inc.
350 Jim Moran Boulevard
Deerfield Beach, Florida  33442
Attention: Stewart Wallach, Aimee Gaudet and Gerry McClinton
Email: swallach@capstoneindustries.com ; aimee@capstonecompaniesinc.com ; gmcclinton@capstoneindustries.com


5.4   Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Signatures transmitted by facsimile or electronic mail shall be deemed originals for purposes of this Agreement.
5.6   Governing Law .  This Agreement shall be governed by and construed and enforced in accordance with the Laws of the State of Delaware without regard to principles of conflicts of Law.
9



5.6   Waiver of Jury Trial . EACH OF THE PARTIES WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  EACH OF THE PARTIES HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
5.7   Jurisdiction and Venue .  Each of the Parties acknowledges and agrees that this Agreement involves at least $100,000, and that it has been entered into in express reliance on Section 2708 of the Delaware Code.  Each of the Parties hereby irrevocably and unconditionally, for itself and its property, submits to the exclusive jurisdiction of the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery shall be unavailable, the federal courts of the U.S. sitting in the State of Delaware), and any appellate court from any thereof, in any judicial proceeding brought against any of the Parties in connection with any controversy or claim arising out of or relating to this Agreement or any of the Credit Documents, or the breach hereof or thereof (each, a " Proceeding ") and agrees that all claims in respect of any such Proceeding may be heard and determined in any such court, and each of the Parties hereby irrevocably and unconditionally (a) agrees not to commence any such Proceeding or other action except in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), (b) agrees that any claim in respect of any such Proceeding may be heard and determined in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), and any appellate court from any thereof, (c) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such Proceeding in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), and (d) waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such Proceeding in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper).
10



5.8   Interpretation; Miscellaneous .
(a)
The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.  Any reference to any Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  Unless the context clearly indicates otherwise: (i) each definition herein includes the singular and the plural, (ii) each reference herein to any gender includes the masculine, feminine and neuter where appropriate, (iii) the words "include" and "including" and variations thereof shall not be deemed terms of limitation, but rather shall be deemed to be followed by the words "without limitation," (iv) the words "hereof," "herein," "hereto," "hereby," "hereunder" and derivative or similar words refer to this Agreement as an entirety and not solely to any particular provision of this Agreement, (v) each reference in this Agreement to a particular Article, Section, Exhibit or Schedule means an Article or Section of, or an Exhibit or Schedule to, this Agreement, unless another agreement is specified, (vi) unless otherwise specified, any definition of or reference to any agreement, instrument, document or Law herein shall be construed as referring to such agreement, instrument, document or Law as it may from time to time be amended, supplemented or otherwise modified, and (vii) unless otherwise specified, any references to "$" or "Dollars" shall mean U.S. Dollars.
(b)
The Section and other headings in this Agreement and any index at the beginning of this Agreement are for convenience of reference only and shall not limit or otherwise affect any of the terms of this Agreement.  Similarly, any page footers or headers or similar word processing, document or page identification numbers in this Agreement or any index or exhibit are for convenience of reference only and shall not limit or otherwise affect any of the terms of this Agreement, nor shall there be any requirement that any such footers or other numbers be consistent from page to page.  Defined terms used in this Agreement may be set forth in Section 1.1 or other Sections of this Agreement.  As used in this Agreement, the word "or" shall be disjunctive but not necessarily exclusive.  Any reference to a Person's "assets" or "property" or the like shall include any stock or other securities, including investment property and financial assets, in which such Person has an ownership or other interest.  Any recitals or preliminary statements above constitute an integral part of this Agreement.
[signature page(s) to follow]
11


IN WITNESS WHEREOF, Junior Creditor and Senior Creditor have executed and delivered this Agreement as of the date first above written.
KOCH MINERALS, LLC



By: /s/ Jason W Russell 6/24/16
     Name: Jason W Russell
     Title: Director – Technology
              and Business Development

CAPSTONE COMPANIES, INC.


By: /s/ James G. McClinton
     Name: James G McClinton
     Title: C.F.O.









Acknowledgment and Agreement

Each of the undersigned accepts and acknowledges receipt of a copy of the foregoing Subordination Agreement and consents to and agrees to be bound by all provisions thereof.  Each of the undersigned further acknowledges and agrees that the Subordination Agreement may be modified at any time or times without notice to or the consent of the undersigned and that none of the undersigned is an intended beneficiary of any of the rights, benefits or privileges granted to Senior Creditor or Junior Creditor.

Capitalized terms used in this Acknowledgment and Agreement without definition have the meanings given to them in the foregoing Subordination Agreement.

AC KINETICS, INC.


By: /s/ Neil Singer
      Name: Neil Singer
      Title:   President


NLO HOLDCO, LLC


By: /s/ Neil Singer
      Name: Neil Singer
      Title:   Manager



ACK NLO, LLC

By: NLO HOLDCO, LLC


By: /s/ Neil Singer
      Name: Neil Singer
      Title:   Member


Exhibit A

(see attached copy of Junior Note)
 
 
 
]
 








SECURITIES PURCHASE AGREEMENT
by and among
NEIL SINGER,
AC KINETICS, INC.
and
CAPSTONE COMPANIES, INC.
Dated effective as of June 27, 2016
 
 


TABLE OF CONTENTS
   
Page
ARTICLE 1 PURCHASE
4
1.1
Purchase of Securities
4
1.2
Purchase Price and Payment
4
1.3
Termination of Rights as Stockholder
4
ARTICLE 2 CLOSING, DELIVERIES AND OTHER ACTIONS
4
2.1
Time and Place of the Closing
4
2.2
Deliveries by the Stockholder
5
2.3
Deliveries by the Company and the Purchaser
5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES RELATED TO THE STOCKHOLDER
5
3.1
Title to the Securities
5
3.2
Authority, Validity, Effect and No Conflict
6
3.3
Consents
6
3.4
Receipt of Information
7
3.5
No Future Participation
7
3.6
No Other Company Securities
7
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE COMPANY
7
4.1
Authority, Validity and Enforceability
7
4.2
No Conflict
8
4.3
Consents
8
4.4
Status; Investment Purpose
8
ARTICLE 5 ADDITIONAL AGREEMENTS
8
5.1
Further Assurances
8
5.2
Press Release, Announcements and Disclosure
8
5.3
Waiver, Release and Assignment.
9
5.4
Withholding
10
ARTICLE 6 DEFINITIONS
10
6.1
Definitions
10
ARTICLE 7 MISCELLANEOUS
14
7.1
Assignment
14
7.2
Headings
14
7.3
Integration, Modification and Waiver
14
7.4
Construction
14
7.5
Severability
15
7.6
Notices
15
7.7
Governing Law
16
7.8
Jurisdiction and Venue
16
7.9
Waiver of Jury Trial
16
7.10
No Third Party Beneficiaries
17
7.11
Counterparts
17

ii


LIST OF EXHIBITS

Exhibit A Form of Option Agreement
Exhibit B Form of Subordination Agreement
Exhibit C Form of Note
1



LIST OF SCHEDULES

Schedule 3.4 Koch Transaction Documents and Asset Transfers Documents
2



SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this " Agreement "), effective this 27 day of June, 2016 (the " Closing Date "), is by and among AC Kinetics, Inc., a Delaware corporation (the " Company "), Neil Singer, an individual (the "Purchaser"), and Capstone Companies, Inc., a Florida corporation   (the " Stockholder ").  The Stockholder, the Company and the Purchaser are sometimes individually referred to as a " Party ," and collectively as the " Parties ."
RECITALS
A.   The Stockholder owns all of the issued and outstanding shares of Series A Preferred Stock, par value $0.001 per share, of the Company (the " Securities ");
B.   The Purchaser, together with his wife, Lydia Singer, owns 1,000 shares of the Class A Common Stock, par value $0.001 per share, of the Company;
C.   At the Closing (as defined below), the Stockholder wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Stockholder, all of the Securities in exchange for the making by the Purchaser to the order of the Stockholder that certain Note (as defined below), subject to the terms and conditions set forth herein;
D.   Purchaser is simultaneously entering into other similar transactions with other stockholders of the Company such that, following the Closing and the closing of such other transactions, Purchaser, together with his wife, will own all of the equity securities of the Company;
E.   Following the Closing, but prior to the occurrence of the Koch Transactions (as defined below), (1) the Purchaser shall assign the Note to NLO Holdco, LLC, a Delaware limited liability company (" NLO "), together with certain of his other assets and certain of his other liabilities, in exchange for certain membership interests of NLO, and (2) immediately following such assignment, each of the Company and NLO shall assign all or substantially all of its respective assets and certain of its respective liabilities (including, with respect to NLO, the Note) to ACK NLO, LLC, a Delaware limited liability company (" Newco "), in exchange for all of the membership interests of Newco (collectively, the " Asset Transfers ");
F.   Stockholder desires to make that certain waiver, release and assignment set forth herein to Purchaser and the Company, and Purchaser, as owner of all equity securities of the Company (together with his wife), would not enter into this Agreement but for such waiver, release and assignment to Purchaser and the Company;
G.   As additional consideration for such waiver, release and assignment from Stockholder, the Company hereby agrees to pay to Stockholder an amount equal to $10 (the " Additional Consideration ");
H.   Newco is contemplating entering into certain agreements with Koch Minerals, LLC and its Affiliates (" Koch ") following the Asset Transfers, including a credit agreement relating to the proposed extension of credit to Newco by Koch, and the related proposed option agreement pursuant to which Koch would be granted the option to purchase the assets of Newco (the " Koch Transactions ");
3



I.   The Stockholder and Koch would enter into that certain Subordination Agreement in the form attached hereto as Exhibit A (the " Subordination Agreement "), to be agreed and acknowledged by ACK, NLO and Newco, whereby the Stockholder shall, effective with the Koch Transactions, subordinate its rights as an ultimate creditor of Newco with respect to the Note and otherwise to those of Koch;
J.   Also in connection with the transactions contemplated hereby, the Stockholder and Involve LLC, an Affiliate of the Purchaser (" Involve ") will enter into that certain Option Agreement, in the form attached hereto as Exhibit A (the " Option Agreement "), whereby Involve will grant the Stockholder an Option to repurchase shares of the Stockholder owned by Involve; and
K.   The Parties acknowledge and agree that Koch would not pursue or enter into the Koch Transactions without the Parties and their respective Affiliates entering into and performing their respective obligations under this Agreement and the Ancillary Agreements.
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1
PURCHASE
1.1   Purchase of Securities .  Subject to the terms and conditions of this Agreement, concurrent with the execution hereof, the Purchaser will purchase from the Stockholder, and the Stockholder will sell, transfer, assign, convey and deliver to the Purchaser, or cause to be sold, transferred, conveyed, assigned and delivered to the Purchaser, free and clear of all Liens (other than any Liens existing under securities Laws), all right, title and interest in, to and under the Securities.  Following the Closing, the Purchaser shall assign the Securities to the Company and the Company shall cancel the Securities.
1.2   Purchase Price and Payment .  The total consideration payable by the Purchaser to or for the account of the Stockholder in consideration for the transactions contemplated hereby shall be a note in the form attached hereto as Exhibit C in the original principal amount of $1,500,000 (the " Note ").  Following the Closing, the Purchaser shall (a) assign all of his right, title and interest under the Note to NLO and (b) cause NLO to assign all of its right, title and interest under the Note to Newco (the " Note Assignments ").  Following the Note Assignments, the Stockholder acknowledges and agrees that Neil Singer, in his individual capacity, shall have no liability to the Stockholder for any outstanding obligations of the Borrower (as such term is defined therein) under the Note.
1.3   Termination of Rights as Stockholder .  Upon receipt of the Note and following the transactions contemplated by Section 1.1 , the Securities shall cease to be outstanding for any and all purposes, and the Stockholder shall no longer have any rights as an equityholder of the Company, including any rights that the Stockholder may have had under the Company's Certificate of Incorporation or otherwise.
ARTICLE 2
CLOSING, DELIVERIES AND OTHER ACTIONS
2.1   Time and Place of the Closing .  On the Closing Date, the closing of the transactions contemplated hereby (the " Closing ") will take place at the offices of the Company located at 20 Bedford Road, Armonk, New York 10504.
4



2.2   Deliveries by the Stockholder .  At the Closing, the Stockholder shall deliver, or cause to be delivered, to the Purchaser the following items:
(a)
stock certificates evidencing the Securities duly endorsed in blank or accompanied by an instrument of transfer duly executed by the Stockholder, transferring the Securities to the Purchaser free and clear of all Liens (other than Liens existing under securities Laws), dated as of the Closing Date;
(b)
the Option Agreement, duly executed by the Stockholder;
(c)
the Subordination Agreement duly executed by the Stockholder and dated as of the Closing Date; and
(d)
a termination agreement (the " Termination Agreement ") terminating all contracts between Stockholder and the Company other than those specifically identified therein, duly executed by the Stockholder and any other parties to the Contracts listed on the schedules thereto necessary to make such Termination Agreement valid with respect to such Contract and dated as of the Closing Date.
2.3   Deliveries by the Company and the Purchaser .  At the Closing, the Company and the Purchaser shall deliver, or cause to be delivered, to the Stockholder the following items:
(a)
the Option Agreement, duly executed by Involve and dated as of the Closing Date;
(b)
an acknowledgment of the Subordination Agreement, duly executed by ACK, NLO and Newco and dated as of the Closing Date;
(c)
the Termination Agreement, duly executed by the Company and any other parties to the Contracts listed on the schedules thereto necessary to make such Termination Agreement valid with respect to such Contract and dated as of the Closing Date;
(d)
the Additional Consideration; and
(e)
the Note, duly executed by the Purchaser and dated as of the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES RELATED TO THE STOCKHOLDER
The Stockholder represents and warrants to the Purchaser and the Company as follows:
3.1   Title to the Securities; Exemption from Registration .
(a)
As of the Closing, the Stockholder shall own, and shall deliver to the Purchaser, the Securities, free and clear of any and all Liens (other than Liens existing under securities Laws).
5



(b)
The Stockholder acquired the Securities solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof, and the Stockholder has held the Securities for a period of at least six (6) months.  The Securities have not been and will not be registered under the Securities Act of 1933, as amended, which term, as used herein, includes the rules and regulations of the Securities and Exchange Commission thereunder (the " Securities Act ") and may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any state securities laws, as applicable. Subject to the accuracy of the representations and warranties of the Purchaser set forth in this Agreement, it is not necessary in connection with the sale of the Securities to the Purchaser to register the Securities under the Securities Act or any state securities laws, as the Securities are eligible for resale pursuant to an applicable exemption from registration under the Securities Act and state securities laws and regulations, as applicable.
3.2   Authority, Validity, Effect and No Conflict .
(a)
The Stockholder is a Florida corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its formation.
(b)
Each of the Stockholder and its Affiliates, as applicable, has all requisite power and authority to enter into and perform its respective obligations under this Agreement and any Ancillary Agreement to which such entity is a party and to consummate the transactions contemplated hereby and thereby.  This Agreement and any such Ancillary Agreements have been duly approved by all requisite action and have been duly executed and delivered by the Stockholder and/or such Affiliates, as applicable, pursuant to all necessary authorization and are the legal, valid and binding obligations of the Stockholder and/or such Affiliates, as applicable, enforceable against the Stockholder and/or such Affiliates, as applicable, in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar Laws and principles of equity affecting creditors' rights and remedies generally (the " General Enforceability Exceptions ").
(c)
Neither the execution of this Agreement or the Ancillary Agreements by the Stockholder and/or its Affiliates, as applicable, nor the performance by the Stockholder and/or such Affiliates, as applicable, of its obligations hereunder or thereunder will (i) violate or conflict with the organizational or governing documents of the Stockholder and/or such Affiliates, as applicable, or any Law, Permit or Order, (ii) violate, conflict with or result in a breach or termination of, or otherwise give any Person additional rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of any note, deed, mortgage, or other Contract to which the Stockholder and/or such Affiliates, as applicable, is a party or by which any of its assets or properties are bound or (iii) result in the creation or imposition of any Lien with respect to, or otherwise have an adverse effect upon, the Securities.
3.3   Consents .  No Consent is required in connection with the execution and delivery by Stockholder and/or its Affiliates, as applicable, of this Agreement or the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby.
6



3.4   Receipt of Information .  The Stockholder has received all the information it considers necessary or appropriate for deciding whether to dispose of the Securities, including information pertaining to NLO, Newco, the Asset Transfers and the Koch Transactions. The Stockholder has had an opportunity to ask questions and receive answers from the Purchaser and the Company regarding the terms and conditions of the Purchaser's purchase of the Securities and the business and financial condition of the Purchaser and the Company, as well as NLO, Newco, the Asset Transfers and the Koch Transactions, including drafts of those transaction documents set forth on Schedule 3.4 , and to obtain additional information (to the extent the Purchaser or the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to it or to which it had access. The Stockholder has not received, and is not relying on, any representations or warranties from the Purchaser or the Company, express or implied, other than as provided herein.
3.5   No Future Participation .  The Stockholder acknowledges that the Stockholder will have no future participation in any Company gains, losses, profits or distributions with respect to the Securities.  The Stockholder acknowledges that the Stockholder is voluntarily forfeiting any opportunity to share in any increase in value from the equity of the Company.
3.6   No Other Company Securities   Other than the Securities, the Stockholder does not own, beneficially or of record, any equity or debt securities of the Company.  Following the Closing, the Stockholder will not own, beneficially or of record, any securities of the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE COMPANY
The Purchaser and the Company hereby represent and warrant to the Stockholder as follows:
4.1   Authority, Validity and Enforceability .
(a)
The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware.
(b)
The Purchaser is an individual with due capacity, and the Company and its and the Purchaser's respective Affiliates have the requisite power and authority to enter into and perform their respective obligations under this Agreement and any Ancillary Agreement to which such Person is a party and to consummate the transactions contemplated hereby and thereby.  This Agreement and any such Ancillary Agreements have been duly approved by all requisite action and have been duly executed and delivered by the Purchaser, the Company and/or such Affiliates, as applicable, pursuant to all necessary authorization, as applicable, and are the legal, valid and binding obligations of the Purchaser, the Company and/or such Affiliates, as applicable, enforceable against them in accordance with their terms, subject to the General Enforceability Exceptions.
7



4.2   No Conflict .  Neither the execution of this Agreement or the Ancillary Agreements by the Purchaser, the Company and/or their respective Affiliates, as applicable, nor the performance by the Purchaser, the Company and/or such Affiliates, as applicable, of their respective obligations hereunder or thereunder will (a) violate or conflict with the organizational or governing documents of the Company and/or such Affiliates, as applicable, or any Law, Permit or Order, (b) violate, conflict with or result in a breach or termination of, or otherwise give any Person additional rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of any note, deed, mortgage, or other Contract to which the Purchaser, the Company and/or such Affiliates, as applicable, is a party or by which any of its assets or properties are bound or (c) result in the creation or imposition of any Lien with respect to, or otherwise have an adverse effect upon, the assets of the Purchaser.
4.3   Consents .  No Consent is required in connection with the execution and delivery by the Purchaser, the Company, or their respective Affiliates, as applicable, of this Agreement or the Ancillary Agreements to which such Person is a party or the consummation of the transactions contemplated hereby or thereby.
4.4   Status; Investment Purpose .  The Purchaser has such knowledge, skill and experience in business, financial and investment matters that he is capable of evaluating the merits and risks of purchasing the Securities, has considered the suitability of purchasing the Securities and is able to bear the risks associated with such purchase.  The Purchaser is acquiring the Securities solely for his own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof.  The Purchaser acknowledges that the Securities are "restricted securities" and, as such, are not registered under the Securities Act or any state securities laws or regulations, and that the Securities may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1   Further Assurances .  From and after the Closing Date, at the request of the Purchaser, the Stockholder shall execute and deliver to the Purchaser, or cause to be executed and delivered on behalf of the Stockholder to the Purchaser, such instruments and other documents as the Purchaser may reasonably request in order to implement the transactions contemplated by this Agreement and the Ancillary Agreements, including all further materials, documents and instruments of conveyance, transfer or assignment to effect, record or verify the transfer to, and vesting in the Purchaser of, the Stockholder's right, title and interest in and to the Securities, free and clear of all Liens (other than Liens existing under securities Laws), in accordance with the terms of this Agreement.
5.2   Press Release, Announcements and Disclosure .  The Stockholder shall not, and shall cause its managers, directors, officers, employees, equity holders, former equity holders, agents or representatives not to, disclose any information or issue any press release or other announcement, including any announcement to employees, customers, suppliers or others having dealings with the Stockholder or any of its Affiliates, relating to the Purchaser, the Company, Koch, their respective Affiliates, the Purchaser or the Company's respective businesses (including the Intellectual Property owned, held or used by the Purchaser, the Company or their respective Affiliates), the subject matter of this Agreement or any Ancillary Agreement or the transactions contemplated hereby or thereby, including the Koch Transactions and the Asset Transfers, without the prior written consent of the Purchaser;
8


 
provided , however , nothing in this Section 5.2 will preclude the Stockholder or agent or representative thereof from making any disclosures required under applicable Law or required in conjunction with the filing of any Tax Return or other document required to be filed in connection with obtaining, delivering or filing Consents required under this Agreement from, to or with any Governmental Authority.
5.3   Waiver, Release and Assignment .
(a)
The Stockholder on behalf of itself and each of its Affiliates and each of their respective heirs, administrators, executors, officers, directors, employees, stockholders, partners, managers, members, agents and representatives, and the successors and assigns of each (individually, a " Releasor ", collectively, the " Releasors "), FULLY AND FINALLY RELEASES, ACQUITS AND FOREVER DISCHARGES, AND COVENANTS NOT TO SUE, the Purchaser, the Company and their respective Affiliates (including Convolve, Inc., Newco and NLO), as well as Koch, (and, to the extent they would be liable in respect of their position with the foregoing, each of the present and former officers, directors, stockholders, members, partners, managers, representatives, employees, agents, Affiliates, subsidiaries, predecessors, successors, assigns, beneficiaries, heirs, executors, insurers, personal representatives and attorneys of the foregoing) (the " Released Parties ") from or for any and all Actions, Liens, Contracts, offers, Liabilities and compensation of any kind or nature whatsoever, KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, FORESEEN OR UNFORESEEN, KNOWN OR UNKNOWN, DISCLOSED OR UNDISCLOSED, MATURED OR UNMATURED, FIXED OR CONTINGENT, PAST, PRESENT OR FUTURE, IN LAW OR IN EQUITY (" Released Matters "), which Releasors presently have, have ever had or may hereafter have against the Released Parties arising contemporaneously with or prior to the Closing Date or on account of or arising out of any matter, cause or event occurring contemporaneously with or prior to the Closing Date, as well as the Note Assignments, Asset Transfers or Koch Transactions, including (i) any claims related to ownership in or of, or in any portion or aspect of Intellectual Property that is owned, held or used by the Purchaser or the Company and (ii) any claims related to that certain Royalty Agreement, dated as of January 15, 2013, by and between the Company and the Stockholder, that certain letter agreement, dated as of January 15, 2013, by and between the Company and the Stockholder, or any other agreements to which the Stockholder and/or any Affiliate thereof, on the one hand, and the Company, the Purchaser and/or any Affiliate thereof, on the other hand, is a party; provided, however , that nothing contained herein operates to release any obligations of the Company, the Purchaser or their respective Affiliates, as applicable, arising under this Agreement or the Ancillary Agreements. In compliance with any Law which requires a specific release of unknown claims or benefits, the Stockholder acknowledges that this release includes a release of unknown claims (except claims of fraud), and hereby expressly waives and relinquishes any and all such claims, rights or benefits that such may have which are unknown at the effective time of this release. Each Party understands and agrees that if, hereafter, it discovers facts different from or in addition to those that it now knows or believe to be true, that the waivers and releases granted hereby will be and remain effective in all respects notwithstanding such different or additional facts or the discovery of such facts except in the case of claims of fraud.  The Releasor hereby waives any claims or rights in and to the Intellectual Property that is owned, held or used by the Purchaser or the Company.
(b)
The Stockholder further agrees not to institute any Action, and will not cooperate or assist in any such Action, against the Released Parties, or any of them, pursuing any Released Matter released pursuant to Section 5.3(a) .
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(c)
The Stockholder shall indemnify, defend and hold harmless the Released Parties from any Liabilities incurred or suffered by any of such Persons based upon, arising out of, or otherwise related to a breach of Section 5.2 or this Section 5.3 by any Releasor.
(d)
The Stockholder represents that it has not assigned any Released Matter or potential Released Matter against the Released Parties to any other Person.
(e)
It is understood and agreed that the Purchaser and the Company (on behalf of themselves and the other Released Parties) do not admit any Liability regarding the matters released hereby.
(f)
To the extent that the Stockholder in fact possesses any right, title or interest in any degree or any portion or aspect of NLO IP respecting technology for AC induction motor control, the Stockholder hereby assigns and transfers all such right, title and interest to the Company.  To the extent that the Stockholder in fact possesses any right, title or interest in any degree or in any portion or aspect of NLO IP other than that respecting technology for AC induction motor control, the Stockholder hereby assigns and transfers all such right, title and interest to the Purchaser.
5.4   Withholding .  The Stockholder shall indemnify, defend and hold harmless the Purchaser against any and all Taxes (and any and all related Liabilities) incurred by or asserted against the Purchaser by the IRS or any other Governmental Authority as a result of the Purchaser's failure to deduct and withhold the proper amount of Tax from the Note for any reason.
ARTICLE 6
DEFINITIONS
6.1   Definitions .  For purposes of this Agreement, the following terms have the meanings specified or referenced in this Section 6.1 :
" Action " means any claim, cause of action, complaint, demand, action, litigation, suit, legal proceeding or hearing, audit, assessment, investigation, interference, opposition, reexamination, inter partes review, post grant review, opposition, nullification, supplemental examination, concurrent use, controversy, cancellation, administrative enforcement proceeding or arbitration or mediation proceeding before or under the direction of any Governmental Authority.
" Additional Consideration " has the meaning set forth in the Recitals.
" Affiliate " means with respect to any Person, a Person that directly or indirectly controls, is controlled by, or is under common control with, such Person.  The term "control" as used in this definition (including the terms "controlled by" or "under common control with") means, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of voting securities, membership interests, by contract or otherwise.  When applied to any Person that is an individual, the term " Affiliate " also includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, of such Person.
" Agreement " has the meaning set forth in the Preamble.
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" Ancillary Agreements " means the Note, the Subordination Agreement, the Option Agreement, the Termination Agreement and each agreement, document, instrument or certificate contemplated by this Agreement or any other Ancillary Agreement or to be executed or delivered by the Company, the Purchaser, the Stockholder or their respective Affiliates in connection with the consummation of the transactions contemplated by this Agreement, as indicated by the context in which such term is used.
" Asset Transfers " has the meaning set forth in the Recitals.
" Business Day " means any day except Saturday, Sunday or a day on which banking institutions in the State of New York are required by Law to be closed.
" Closing Date " has the meaning set forth in the Preamble.
" Closing " has the meaning set forth in Section 2.1 .
" Code " means the Internal Revenue Code of 1986, as amended.
" Company " has the meaning set forth in the Preamble.
" Consent " means any consent, approval, authorization, qualification, waiver, registration or notification required to be obtained from, filed with or delivered to a Person.
" Contracts " means all contracts, agreements (including employment agreements and non-competition agreements), leases (whether real or personal property), Licenses, commitments, understandings, courses of dealings or performance, instruments, guarantees, bids, orders and proposals, whether oral or written.
" Exhibit " means any exhibit to this Agreement.
" GAAP " means accounting principles generally accepted in the U.S. as in effect from time to time, consistently applied.
" General Enforceability Exceptions " has the meaning set forth in Section 3.2(a) .
" Governmental Authority " means any government or political subdivision or regulatory authority, whether federal, state, local or foreign, or any agency or instrumentality of any such government or political subdivision or regulatory authority, or any federal, state, local or foreign court or arbitrator or mediator.
" Intellectual Property means any and all of the following, and all rights in, arising out of, or associated therewith, in any jurisdiction throughout the world, whether protected, created or arising under any applicable Law, License or other Contract, or otherwise: (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), products, processes, prototypes, articles of manufacture, compositions of matter, know-how and other things and information, all improvements thereto, and all patent disclosures and patents (including patent applications), including all utility models, provisional applications, continuations, divisionals, and continuations-in-part thereof and patents issuing thereon, along with all reissues, reexaminations, inter partes review proceedings, post grant review proceedings, opposition, nullification, supplemental examination proceedings and extensions thereof; (b) all copyrights, copyrightable subject matter and works of authorship (whether or not embodied in any tangible form, including instruction manuals, schematics, diagrams, drawings, product specifications,
11



laboratory notebooks, samples, studies and summaries), and all mask work, database and design rights, whether or not registered or published, all registrations and recordations thereof and all applications and registrations in connection therewith, along with all reversions, extensions and renewals thereof; (c) trade or service marks, logos, trade names, corporate names, including the name of the Company, rights in telephone numbers and trade dress rights, together with all translations, adaptations, derivations and combinations thereof and including the goodwill associated with any of the foregoing, along with all applications, registrations, renewals and extensions thereof; (d) confidential and proprietary information, including trade secrets and know-how (including ideas, research and development, formulae, algorithms, routines, compositions, engineering processes and techniques, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals); (e) all internet domain names and registrations and renewals thereof; (f) all Software and web sites; (g) registrations and applications for registration of each of the foregoing and all equivalent, similar or corresponding rights throughout the world; (h) all advertising and promotional materials and product labels; (i) all other intellectual property and other proprietary rights, and (j) all copies and tangible embodiments thereof (in whatever form or medium).
" Involve " has the meaning set forth in the Recitals.
" IRS " means the Internal Revenue Service.
" Koch Transactions " has the meaning set forth in the Recitals.
" Law " means any foreign, federal, state or local law, statute, code, ordinance, regulation, judicial decision, rule, Order, executive order or other requirement.
" Liability " or " Liabilities " means any liabilities, Taxes, adverse claims, indebtedness, fines and penalties or other obligations, whether accrued, fixed, due or to become due, absolute or contingent, matured or unmatured, determined or determinable, known or unknown, unliquidated or otherwise, regardless of when asserted.
" License " means any license, sublicense, Contract, covenant not to sue or permission.
" Liens " means any hypothecation, mortgage, assignment, lease, license or other right of possession, deed of trust, encumbrance, real property title defect, infringement, interference, charge, claim, community property interest, easement, right of way, covenant, servitude, condition, equitable interest, lien, option, pledge, security interest, purchase rights, right of first refusal, tag along right or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.
" Newco " has the meaning set forth in the Recitals.
" NLO " has the meaning set forth in the Recitals.
" NLO IP " means Intellectual Property that provides the foundation for, and may be developed specifically to further, commercial applications utilizing non-linear optimization algorithms, techniques, theories or methodologies.
" Note Assignments " has the meaning set forth in Section 1.2 .
" Option Agreement " has the meaning set forth in the Recitals.
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" Order " means any order, judgment, injunction, award, decree, ruling, charge, writ, assessment, arbitration award or other requirement of any Governmental Authority.
" Party " and " Parties " have the respective meanings set forth in the Preamble.
" Permits " means any License, permit, product registration, approval, certificate, authorization, certificate of occupancy, authority, qualification or similar document or authority that has been issued or granted by any Person.
" Person " means any individual, sole proprietorship, partnership, corporation, limited liability company, unincorporated society or association, trust, Governmental Authority or other entity.
" Proceeding " has the meaning set forth in Section 7.8 .
" Purchaser " has the meaning set forth in the Preamble.
" Released Matters " has the meaning set forth in Section 5.3(a) .
" Released Parties " has the meaning set forth in Section 5.3(a) .
" Releasor " and " Releasors " have the meanings set forth in Section 5.3(a) .
" Software " means all computer software, programs and code, including assemblers, applets, compilers, source code, object code, executable code, net lists, development tools, design tools, user interfaces and data, databases in any form or format, however fixed, and all related documentation.
" Securities " has the meaning set forth in the Recitals.
" Securities Act " has the meaning set forth in Section 3.1(b) .
" Stockholder " has the meaning set forth in the Preamble.
" Subordination Agreement " has the meaning set forth in the Recitals.
" Tax " means (a) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, License, withholding, payroll, employment, withholding, excise, severance, stamp, occupation, premium, personal property, real property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, as well as any Liabilities under any state abandonment or unclaimed property, escheat or similar Laws, together with any interest, penalty, addition to tax or additional amount imposed by any Law or Taxing Authority, whether disputed or not, (b) any Liability for the payment of any amounts of any of the foregoing types as a result of being a member of an affiliated, consolidated, combined or unitary group, or being a party to any agreement or arrangement whereby Liability for payment of such amounts was determined or taken into account with reference to the Liability of any other Person and (c) any Liability for the payment of any amounts of the foregoing types as a result of being a transferee or successor under applicable Law, or a party to any agreements or arrangements (whether or not written) or with respect to the payment of any amounts of any of the foregoing types as a result of any express or implied obligation to indemnify any other Person.
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" Tax Return " means any return, declaration, report, information return or other document (including schedules or any related or supporting information) filed or required to be filed with any Governmental Authority, including any return, attachment or schedule of an affiliated, consolidated, combined or unitary group, in connection with the determination, assessment or collection of any Tax or the administration of any Laws relating to any Tax.
" Taxing Authority " means any Governmental Authority responsible for the administration, collection or imposition of any Tax.
" Termination Agreement " has the meaning set forth in Section 2.2(d) .
" U.S. " means the United States of America.
ARTICLE 7
MISCELLANEOUS
7.1   Assignment .  Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned by any Party without the prior written consent of the other Parties; provided , however , that (a) the Purchaser and the Company may each assign this Agreement and any or all rights or obligations hereunder (including their respective rights to seek indemnification hereunder) without consent to (i) any Affiliate or Affiliates of such Party (including, in each case, NLO and Newco) or any Person or Persons to which such Party or any of its Affiliates sells, transfers, assigns or delegates all or any portion of its equity securities or its assets or business or (b) in the event that the Purchaser assigns this Agreement to NLO, NLO may assign this Agreement to Newco.  Upon any such permitted assignment, the references in this Agreement to the Purchaser or the Company shall also apply to any such assignees unless the context otherwise requires.
7.2   Headings .  The headings contained in this Agreement are included for purposes of convenience only and do not affect the meaning or interpretation of this Agreement.
7.3   Integration, Modification and Waiver .  This Agreement, together with the Exhibits delivered hereunder and (when executed) the Ancillary Agreements, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior understandings of the Parties.  No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the Purchaser, the Company and the Stockholder.  No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a continuing waiver.  No waiver shall be binding unless executed in writing by the Party making the waiver.
7.4   Construction .  The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.  Any reference to any Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  Unless the context clearly indicates otherwise: (a) each definition herein includes the singular and the plural, (b) each reference herein to any gender includes the masculine, feminine and neuter where appropriate, (c) the words "include" and "including" and variations thereof shall not be deemed terms of limitation, but rather shall be deemed to be followed by the words "without limitation," (d) the words "hereof," "herein," "hereto," "hereby," "hereunder" and derivative or similar words refer to this Agreement as an entirety and not solely to any particular provision of this Agreement, (e) each reference in this Agreement to a particular Article, Section or Exhibit means an Article or Section
14



of, or an Exhibit to, this Agreement, unless another agreement is specified, (f) unless otherwise specified, any definition of or reference to any Contract, instrument, document or Law herein shall be construed as referring to such Contract, instrument, document or Law as it may from time to time be amended, supplemented or otherwise modified, (g) any accounting term not defined herein shall have the meaning ascribed to it under GAAP and (h) all references to "$" or "Dollars" shall mean U.S. Dollars.
7.5   Severability .  If any provision of this Agreement or the application of any provision of this Agreement to any Party or circumstance is, to any extent, adjudged invalid or unenforceable, the application of the remainder of such provision to such Party or circumstance, the application of such provision to other Parties or circumstances, and the application of the remainder of this Agreement shall not be affected thereby.
7.6   Notices .  All notices and other communications required or permitted under this Agreement must be in writing and shall be deemed to have been duly given and delivered (a) when delivered in person, (b) when sent by electronic mail transmission (with read receipt confirmed), (c) one Business Day after having been dispatched by a nationally recognized overnight courier service or (d) upon tender by the U.S. Post Office after being sent by registered or certified mail, return receipt requested, postage prepaid, to the appropriate Party at the following address:
If to the Stockholder:
Capstone Companies, Inc.
350 Jim Moran Boulevard
Deerfield Beach, Florida  33442
Attention: Stewart Wallach, Aimee Gaudet and Gerry McClinton
Email: swallach@capstoneindustries.com ; aimee@capstonecompaniesinc.com ; gmcclinton@capstoneindustries.com

If to the Company:
AC Kinetics, Inc.
20 Bedford Road
Armonk, New York 10504
Attention: Neil Singer, PhD
Email: nsing@ackinetics.com

If to the Purchaser:
Neil Singer
1 Quarter Mile Road
Armonk, New York 10504
Email: nsing@ackinetics.com

with a copy to (which will not constitute notice):
Sherman Wells Sylvester & Stamelman LLP
210 Park Avenue, Suite 200
Florham Park, New Jersey 07932
Attention: Andrew J. Stamelman, Esq.
Email: astamelman@shermanwells.com
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Any Party may change its address, electronic mail address or facsimile number for the purposes of this Section 7.6 by giving notice to the other Parties as provided in this Agreement.
7.7   Governing Law .  This Agreement shall be governed by and construed and enforced in accordance with the Laws of the State of Delaware without regard to principles of conflicts of Law.
7.8   Jurisdiction and Venue .  Each of the Parties acknowledges and agrees that this Agreement involves at least $100,000, and that it has been entered into in express reliance on Section 2708 of the Delaware Code.  Each of the Parties hereby irrevocably and unconditionally, for itself and its property, submits to the exclusive jurisdiction of the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery shall be unavailable, the federal courts of the U.S. sitting in the State of Delaware), and any appellate court from any thereof, in any judicial proceeding brought against any of the Parties in connection with any controversy or claim arising out of or relating to this Agreement or the Ancillary Agreements, or the breach hereof or thereof (each, a " Proceeding ") and agrees that all claims in respect of any such Proceeding may be heard and determined in any such court, and each of the Parties hereby irrevocably and unconditionally (a) agrees not to commence any such Proceeding or other Action except in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), (b) agrees that any claim in respect of any such Proceeding may be heard and determined in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), and any appellate court from any thereof, (c) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such Proceeding in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), and (d) waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such Proceeding in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper).
7.9   Waiver of Jury Trial .  EACH OF THE PARTIES WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  EACH OF THE PARTIES HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
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7.10   No Third Party Beneficiaries .  Except as otherwise set forth in this Section 7.10 , this Agreement is for the sole benefit of the Parties and the Released Parties and their respective successors and permitted assigns and nothing herein express or implied shall give or be construed to give to any Person, other than the Parties and the Released Parties and such respective successors and permitted assigns, any legal or equitable right or remedy of any nature whatsoever hereunder.  Notwithstanding the foregoing, (a) this Agreement is an integral part of the Koch Transactions, (b) Koch would not enter into the Koch Transactions but for the entry into, and performance of their respective obligations under, this Agreement and the Ancillary Agreements by the Parties and their Affiliates and (c) the Parties hereby designate Koch as third-party beneficiaries of this Agreement and the Ancillary Agreements having the right to enforce all provisions of this Agreement and the Ancillary Agreements against each Party, its Affiliates, and their successors and assigns.
7.11   Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Signatures transmitted by facsimile or electronic mail shall be deemed originals for purposes of this Agreement.
[Remainder of Page Intentionally Left Blank]



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IN WITNESS WHEREOF, the Company has caused its duly authorized representative to execute this Agreement effective as of the day and year first above written.
AC KINETICS, INC.
a Delaware corporation

By: /s/ Neil Singer
Name: Neil Singer
Title: President


IN WITNESS WHEREOF, the Stockholder has executed this Agreement effective as of the day and year first above written.
CAPSTONE COMPANIES, INC.
a Florida corporation

By: /s/ James G. McClinton
Name: James G. McClinton
Title: C.F.O.


IN WITNESS WHEREOF, the Purchaser has executed this Agreement effective as of the day and year first above written.

/s/ Neil Singer
Neil Singer, individually






EXHIBIT A
FORM OF OPTION AGREEMENT

See attached.




EXHIBIT B
FORM OF SUBORDINATION AGREEMENT

See attached.



EXHIBIT C
FORM OF NOTE

See attached.




Schedule 3.4
KOCH TRANSACTION DOCUMENTS
1.
Credit Agreement, by and between ACK NLO, LLC and Koch Minerals, LLC.
2.
Promissory Note from ACK NLO, LLC in favor of Koch Minerals, LLC.
3.
Guarantees of NLO Holdco, LLC and AC Kinetics, Inc. of ACK NLO, LLC's obligations under the Credit Agreement in favor of Koch Minerals, LLC.
4.
Pledge Agreements of NLO Holdco, LLC and AC Kinetics, Inc. in favor of Koch Minerals, LLC.
5.
Security Agreement, by and between ACK NLO, LLC and Koch Minerals, LLC.
6.
Option Agreement, by and among Koch Minerals, LLC, ACK NLO, LLC, AC Kinetics, Inc., NLO Holdco, LLC, Neil Singer, individually and in his capacity as Seller Parties' Representative, Lydia Singer, Stuart Landow and Gold Eagle Consulting, Inc., and related Disclosure Schedules.
7.
Technology Escrow Agreement, by and among EscrowTech International, Koch Minerals, LLC, and ACK NLO, LLC.
8.
Form of Asset Purchase Agreement, by and among Koch Minerals, LLC, an affiliate of Koch Minerals, LLC and Neil Singer, individually and as Seller Parties' Representative, and related Disclosure Schedules.
9.
Deferred Purchase Price Letter Agreement, by and among Koch Minerals, LLC and Neil Singer.
10.
Services Agreement, by and among AC Kinetics, Inc., NLO Holdco, LLC, Stuart Landow and Gold Eagle Consulting, Inc.
11.
Contribution Agreement, by and among Neil Singer, Lydia Singer, Stuart Landow and Gold Eagle Consulting, Inc.

ASSET TRANSFERS DOCUMENTS
1.
Limited Liability Company Agreement of ACK NLO, LLC
2.
Assignment Agreements by each of Neil Singer and Stuart Landow individually and Gold Eagle Consulting, Inc. in favor of NLO Holdco, LLC.
3.
Disclaimer and Assignment Agreement by each of Stuart Landow individually and Gold Eagle Consulting, Inc. in favor of AC Kinetics, Inc.
4.
Disclaimer and Assignment Agreement by Kenneth Pasch individually in favor of Neil Singer.
5.
Contribution Agreements by each of AC Kinetics, Inc. and NLO Holdco, LLC in favor of ACK NLO, LLC.
6.
Restrictive Covenant Agreements between ACK NLO, LLC and each of Neil Singer, Stuart Landow and Kenneth Pasch.
7.
Valuation of the Fair Market Value of VSD and NLO Proprietary Algorithms by IncreMental Advantage, LLC, dated March 16, 2016.
 








TERMINATION AGREEMENT
by and between
AC KINETICS, INC.


and
CAPSTONE COMPANIES, INC.
Dated effective as of June 27, 2016









LIST OF EXHIBITS


Exhibit A   Surviving Contracts
Exhibit B   Terminated Contracts


TERMINATION AGREEMENT

This Termination Agreement, effective this 27 day of June, 2016 (the " Agreement "), is by and between AC Kinetics, Inc., a Delaware corporation (the " Company "), and Capstone Companies, Inc., a Florida corporation   (the " Stockholder ").  The Stockholder and the Company are sometimes individually referred to as a " Party ," and collectively, the " Parties ."  Capitalized terms used but not defined herein shall have the meanings set forth in the Purchase Agreement (as defined below).

RECITALS

A.   The Stockholder owns all of the issued and outstanding shares of Series A Preferred Stock, par value $0.001 per share, of the Company (the " Securities ");
B.   Neil Singer (the " Purchaser "), together with his wife, Lydia Singer, owns 1,000 shares of the Class A Common Stock, par value $0.001 per share, of the Company;
C.   The Company, the Stockholder and the Purchaser are concurrently entering into that certain Securities Purchase Agreement (the " Purchase Agreement ") whereby the Purchaser shall purchase all of the Securities in exchange for the making by the Purchaser to the order of the Stockholder that certain Note (as defined below), subject to the terms and conditions set forth herein;
D.   Following the Closing (as defined below), but prior to the occurrence of the Koch Transactions (as defined below), (1) the Purchaser shall assign the Note to NLO Holdco, LLC, a Delaware limited liability company (" NLO "), together with certain of his other assets and certain of his other liabilities, in exchange for certain membership interests of NLO, and (2) immediately following such assignment, each of the Company and NLO shall assign all or substantially all of its respective assets and certain of its respective liabilities (including, with respect to NLO, the Note) to ACK NLO, LLC, a Delaware limited liability company (" Newco "), in exchange for all of the membership interests of Newco in percentages determined by an independent appraisal of the relative values of the assets and liabilities to be contributed by each of the Company and NLO to Newco (collectively, the " Asset Transfers "), and, except as otherwise set forth in the operating agreement of Newco, all allocations and distributions of Newco will be apportioned between the Company and NLO in accordance with their respective membership interests in Newco;
E.   Newco is contemplating entering into certain agreements with Koch Minerals, LLC and its Affiliates (" Koch ") following the Asset Transfers, including a credit agreement relating to the proposed extension of credit to Newco by Koch, and the related proposed option agreement pursuant to which Koch would be granted the option to purchase the assets of Newco (the " Koch Transactions ");
F.   In connection with the Koch Transactions, the Stockholder and Koch would enter a Subordination Agreement (the " Subordination Agreement "), to be agreed and acknowledged by ACK, NLO and Newco, whereby the Stockholder shall, effective with the Koch Transactions, subordinate its rights as an ultimate creditor of Newco with respect to the Note and otherwise to those of Koch;
G.   In connection with and as consideration for the Purchase Agreement, the Subordination Agreement, the Note and the Asset Transfers, the Parties hereto desire to terminate the Terminated Contracts (as defined below) on the terms and subject to the conditions set forth herein; and
H.   The Parties acknowledge and agree that Koch would not pursue or enter into the Koch Transactions without the Parties and their respective Affiliates entering into and performing their respective obligations under this Agreement.
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NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1.   Termination of the Terminated Contracts . Subject to the terms and conditions of this Agreement, each Terminated Contract is hereby terminated as of the date first written above (the " Termination Date "). From and after the Termination Date, the Agreement will be of no further force or effect, and the rights and obligations of each of the Parties thereunder (and any other party thereto) shall terminate and be null and void, effective as of the Termination Date, except for any rights and obligations of the parties thereto that are expressly designated to survive the termination of such Terminated Contract as set forth on Exhibit B attached hereto, subject to the terms and conditions of this Agreement.  For purposes of this Agreement, " Terminated Contracts " means all Contracts between the Stockholder and the Company or their respective Affiliates, as applicable, including those set forth on Exhibit B attached hereto, other than the Surviving Contracts.  " Surviving Contracts " means the Contracts between the Stockholder and the Company or their respective Affiliates, as applicable, set forth on Exhibit A attached hereto, except for any rights and obligations of the parties thereto that are expressly designated to terminate as set forth on Exhibit A attached hereto, subject to the terms and conditions of this Agreement.
2.   Miscellaneous .
(a)   Assignment . Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned by any Party without the prior written consent of the other Parties; provided , however , that the Company may assign this Agreement and any or all rights or obligations hereunder without consent to any Affiliate or Affiliates of the Company (including Newco) or any Person or Persons to which the Company or any of its Affiliates sells, transfers, assigns or delegates all or any portion of its equity securities or its assets or business.  Upon any such permitted assignment, the references in this Agreement to the Company shall also apply to any such assignees unless the context otherwise requires.
(b)   Headings .  The headings contained in this Agreement are included for purposes of convenience only and do not affect the meaning or interpretation of this Agreement.
(c)   Integration, Modification and Waiver .  This Agreement, together with the Exhibits delivered hereunder, the Purchase Agreement, any surviving provisions of the Terminated Contracts pursuant to Section 1 , and (when executed) the Ancillary Agreements, constitute the entire agreement between the Parties with respect to the subject matter hereof (specifically the Terminated Contracts) and supersedes all prior understandings of the Parties with respect thereto.  No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the Company and the Stockholder.  No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a continuing waiver.  No waiver shall be binding unless executed in writing by the Party making the waiver.
(d)   Construction .  The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.  Any reference to any Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  Unless the context clearly indicates
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otherwise: (a) each definition herein includes the singular and the plural, (b) each reference herein to any gender includes the masculine, feminine and neuter where appropriate, (c) the words "include" and "including" and variations thereof shall not be deemed terms of limitation, but rather shall be deemed to be followed by the words "without limitation," (d) the words "hereof," "herein," "hereto," "hereby," "hereunder" and derivative or similar words refer to this Agreement as an entirety and not solely to any particular provision of this Agreement, (e) each reference in this Agreement to a particular Article, Section or Exhibit means an Article or Section of, or an Exhibit to, this Agreement, unless another agreement is specified, (f) unless otherwise specified, any definition of or reference to any Contract, instrument, document or Law herein shall be construed as referring to such Contract, instrument, document or Law as it may from time to time be amended, supplemented or otherwise modified, (g) any accounting term not defined herein shall have the meaning ascribed to it under GAAP and (h) all references to "$" or "Dollars" shall mean U.S. Dollars.
(e)   Severability .  If any provision of this Agreement or the application of any provision of this Agreement to any Party or circumstance is, to any extent, adjudged invalid or unenforceable, the application of the remainder of such provision to such Party or circumstance, the application of such provision to other Parties or circumstances, and the application of the remainder of this Agreement shall not be affected thereby.
(f)   Notices .  All notices and other communications required or permitted under this Agreement must be in writing and shall be deemed to have been duly given and delivered (i) when delivered in person, (ii) when sent by electronic mail transmission (with read receipt confirmed), (iii) one Business Day after having been dispatched by a nationally recognized overnight courier service or (iv) upon tender by the U.S. Post Office after being sent by registered or certified mail, return receipt requested, postage prepaid, to the appropriate Party at the following address:
If to the Stockholder:
Capstone Companies, Inc.
350 Jim Moran Boulevard
Deerfield Beach, Florida  33442
Attention: Stewart Wallach, Aimee Gaudet and Gerry McClinton
Email: swallach@capstoneindustries.com ; aimee@capstonecompaniesinc.com ; gmcclinton@capstoneindustries.com

If to the Company:
AC Kinetics, Inc.
20 Bedford Road
Armonk, New York 10504
Attention: Neil Singer, PhD
Email: nsing@ackinetics.com

with a copy to (which will not constitute notice):
Sherman Wells Sylvester & Stamelman LLP
210 Park Avenue, Suite 200
Florham Park, New Jersey 07932
Attention: Andrew J. Stamelman, Esq.
Email: astamelman@shermanwells.com
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Any Party may change its address, electronic mail address or facsimile number for the purposes of this Section 2(f) by giving notice to the other Parties as provided in this Agreement.

(g)   Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the Laws of the State of Delaware without regard to principles of conflicts of Law.
(h)   Jurisdiction and Venue .  Each of the Parties acknowledges and agrees that this Agreement involves at least $100,000, and that it has been entered into in express reliance on Section 2708 of the Delaware Code.  Each of the Parties hereby irrevocably and unconditionally, for itself and its property, submits to the exclusive jurisdiction of the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery shall be unavailable, the federal courts of the U.S. sitting in the State of Delaware), and any appellate court from any thereof, in any judicial proceeding brought against any of the Parties in connection with any controversy or claim arising out of or relating to this Agreement, the Purchase Agreement or the Ancillary Agreements, or the breach hereof or thereof (each, a " Proceeding ") and agrees that all claims in respect of any such Proceeding may be heard and determined in any such court, and each of the Parties hereby irrevocably and unconditionally (i) agrees not to commence any such Proceeding or other Action except in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), (ii) agrees that any claim in respect of any such Proceeding may be heard and determined in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), and any appellate court from any thereof, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such Proceeding in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper), and (iv) waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such Proceeding in the Delaware Court of Chancery (and if jurisdiction in the Delaware Court of Chancery is unavailable, the U.S. federal courts sitting in the State of Delaware, and if jurisdiction in any of the foregoing courts is unavailable, any U.S. federal or state court in which jurisdiction and venue are proper.
(i)   Waiver of Jury Trial .  EACH OF THE PARTIES WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  EACH OF THE PARTIES HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY
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(j)   No Third Party Beneficiaries .  Except as otherwise set forth in this Section 2(j) , this Agreement is for the sole benefit of the Parties and their respective successors and permitted assigns and nothing herein express or implied shall give or be construed to give to any Person, other than the Parties and such respective successors and permitted assigns, any legal or equitable right or remedy of any nature whatsoever hereunder.  Notwithstanding the foregoing, (i) this Agreement is an integral part of the Koch Transactions, (ii) Koch would not enter into the Koch Transactions but for the entry into, and the performance of their respective obligations under, this Agreement by the Parties and their Affiliates and (iii) the Parties hereby designate Koch as third-party beneficiaries of this Agreement having the right to enforce all provisions of this Agreement against each Party, its Affiliates, and their successors and assigns.
(k)   Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Signatures transmitted by facsimile or electronic mail shall be deemed originals for purposes of this Agreement.

[SIGNATURE PAGES FOLLOW.]



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IN WITNESS WHEREOF, the Company has caused its duly authorized representative to execute this Agreement effective as of the day and year first above written.

AC KINETICS, INC.
a Delaware corporation

By: /s/ Neil Singer
Name: Neil Singer
Title: President


IN WITNESS WHEREOF, the Stockholder has executed this Agreement effective as of the day and year first above written.
CAPSTONE COMPANIES, INC.
a Florida corporation

By: /s/ James G. McClinton
Name: James G. McClinton
Title: C.F.O.


EXHIBIT A
SURVIVING CONTRACTS
1.
Termination Agreement, dated effective as of June 27, 2016, by and between AC Kinetics, Inc. and Capstone Companies, Inc.
2.
Securities Purchase Agreement, dated effective as of June 27, 2016, by and among Neil Singer, AC Kinetics, Inc. and Capstone Companies, Inc.
3.
Option Agreement, effective as of June 27, 2016 by and between Involve LLC and Capstone Companies, Inc.
4.
Subordination Agreement, made as of June 27, 2016 to be effective as of the Effective Date (as defined therein), by and between Koch Minerals, LLC and Capstone Companies, Inc. and acknowledged and agreed to by each of AC Kinetics, Inc., NLO Holdco, LLC and ACK NLO, LLC.
5.
Note, dated June 27, 2016, from Neil Singer, in favor of Capstone Companies, Inc.
6.
Letter Agreement re: Confidentiality Agreement, dated February 3, 2016, by and among AC Kinetics, Inc., Capstone Companies, Inc. and Koch Minerals, LLC.


EXHIBIT B
TERMINATED CONTRACTS
1.
Letter Agreement, dated January 15, 2013, by and between AC Kinetics, Inc. and Capstone Companies, Inc.
2.
Royalty Agreement, dated January 15, 2013, by and between AC Kinetics, Inc. and Capstone Companies, Inc.