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COMMON STOCK PUT AGREEMENT
 
COMMON STOCK PUT AGREEMENT (this “Agreement”), dated as of September 30, 2014,
between Twinlab Consolidated Holdings, Inc., a Nevada corporation (“TCH”), and
Capstone Financial Group, Inc., a Nevada corporation (“Capstone”).
 
RECITALS:
 
WHEREAS, in consideration for the put rights granted herein TCH has issued
Capstone a Series A Warrant, dated as of September 30, 2014 (the “Series A
Warrant”) and a Series B Warrant, dated as of September 30, 2014 (the “Series B
Warrant” and with the Series A Warrant, the “Warrants”), which Warrants provide
Capstone the right to purchase shares of TCH’s common stock, par value $0.001
per share (“Common Stock”), at a price $0.76 per share over a period of 36
months in accordance with the terms and conditions of the Warrants;
 
WHEREAS, in consideration of the issuance of the Series A Warrant and the Series
B Warrant Capstone intends by this Agreement to exercise the Series A Warrant at
the rate of no less than 1,461,988 shares of Common Stock per month for a period
of 36 months; and
 
WHEREAS, this Agreement is intended to create such rights and to set forth the
terms and conditions under which TCH shall cause Capstone to exercise its rights
to purchase shares of Common Stock pursuant to the Series A Warrant at the rate
of no less than 1,461,988 shares of Common Stock per month.
 
In consideration of the mutual covenants and agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties agree
as follows:
 
 
ARTICLE I
 
 

 
 
INTENT TO EXERCISE
 
Section 1.1 Intent to Exercise.  Capstone intends to exercise the Series A
Warrant, in accordance with the terms and conditions of the Series A Warrant, at
a rate of no less than 1,461,988 shares of Common Stock (the “Minimum Amount”)
per month over the 36 month life of the Series A Warrant (the “Minimum Rate”)
until the Series A Warrant has been fully exercised, with the first exercise
being no later than November 15, 2014 (the “Initial Exercise Date”) and the
remaining exercises on the 15th day of each month thereafter unless the 15th of
any given month is not a business day, in which case the particular exercise
shall be on the next business day after the 15th of such month (each, a
“Periodic Exercise Date”).  The foregoing notwithstanding, nothing contained
herein shall prevent Capstone from exercising the Series A Warrant to purchase
more than the Minimum Amount in any given month.  To the degree that Capstone
exercises the Series A Warrant to purchase more than the Minimum Amount in any
given month, all Common Stock so purchased shall be accounted for in calculating
whether in subsequent months Capstone has maintained the Minimum Rate.  By way
of example, if Capstone exercised the Series A Warrant to acquire 2,923,976
shares of Common Stock (2 times the Minimum Amount) by the Initial Exercise
Date, then even if Capstone did not make an additional purchase by the next
Periodic Exercise Date (i.e., during Month 2) Capstone would still be deemed to
have maintained the Minimum Rate because as of the close of Month 2 it would
have acquired Common Stock at a rate equal to the Minimum Amount per month for
each of the first 2 months of the life of the Series A Warrant.  Likewise, in
the foregoing example, Capstone would be required to exercise the Series A
Warrant to purchase no less than the Minimum Amount by the Month 3 Periodic
Exercise Date in order to maintain the Minimum Rate as of the Month 3 Periodic
Exercise Date.
 

796004v3
 
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PUT RIGHTS
 
Section 1.2 The Put.  (a) In the event that Capstone does not exercise the
Series A Warrant on the Initial Exercise Date or any subsequent Periodic
Exercise Date such that as of the applicable Exercise Date, Capstone’s
cumulative purchases of Common Stock pursuant to the Series A Warrant shall not
have been at a rate that is equal to or in excess of the Minimum Rate, then TCH
shall have the right to notify Capstone not earlier than 30 days and not later
than 40 days after the applicable Exercise Date of TCH’s exercise of its put
rights hereunder (the “Put Notice”).  Upon receipt of the Put Notice, Capstone
shall be required to exercise the Series A Warrant to (i) purchase the Minimum
Amount by a date identified in the Put Notice that is no earlier than 10 days
after and no later than 30 days after the date of the Put Notice (the “Put
Date”), or if Capstone has previously exercised the Series A Warrant to purchase
shares in excess of the Minimum Rate, then such lesser amount of Common Stock as
would, if purchased as of the applicable Exercise Date, have made Capstone’s
purchases of Common Stock pursuant to the Series A Warrant as of such Exercise
Date equal to the Minimum Rate (the “Initial Mandatory Purchase”), and
(ii) purchase by a date that is no later than each subsequent Periodic Exercise
Date an amount of Common Stock such that as of each such Periodic Exercise Date,
Capstone’s cumulative purchases of Common Stock pursuant to the Series A Warrant
through that date shall have been at a rate that is no less than the Minimum
Rate (the “Periodic Mandatory Purchases”).
 
(b) Following delivery of the Put Notice by TCH, Capstone’s failure to make the
Initial Mandatory Purchase by the Put Date shall be an “Event of Default”
hereunder.
 
(c) Following the delivery of the Put Notice by TCH, Capstone’s failure to make
when due any Periodic Mandatory Purchase in accordance with clause (a) above
shall be a breach of this Agreement, and if such breach is not cured by Capstone
within 10 days of receipt of written notice by TCH of the breach, then such
uncured breach shall be deemed an Event of Default.
 
(d) Upon the occurrence of an Event of Default pursuant to either clause (b) or
(c) above, (i) Capstone’s right to purchase all shares of Common Stock remaining
unpurchased under the Series A Warrant shall be converted into an obligation,
accelerated and immediately due and (ii) the Series B Warrant shall immediately
terminate as to any shares of Common Stock remaining exercisable under the
Series B Warrant.
 
(e) Notwithstanding anything to be contrary contained in the Series A Warrant,
in the event TCH has invoked its right pursuant to the Put Notice to require
Capstone to exercise the Series A Warrant, the purchase price per share of
Common Stock thereunder shall be $0.775 per share (the “Put Price”).
 
(f) In the event that TCH has so converted and accelerated Capstone’s
obligations to purchase the shares of Common Stock remaining unexercised under
the Series A Warrant, Capstone shall have the right to surrender issued and
outstanding shares of Common Stock to TCH to be credited towards Capstone’s
obligations hereunder, which surrendered shares shall be valued at $0.76 per
share of Common Stock.
 

 
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Section 1.3 Effect of Stock Split, etc. If TCH, by stock split, stock dividend,
reverse split, reclassification of shares, or otherwise, changes as a whole the
outstanding Common Stock into a different number or class of shares, then: (1)
the number and/or class of shares as so changed shall, for the purposes of this
Agreement, replace the shares outstanding immediately prior to the change; and
(2) the Put Price in effect, and the number of shares purchasable under this
Agreement, immediately prior to the date upon which the change becomes
effective, shall be proportionately adjusted (the price to the nearest cent).
 
Section 1.4 Notice of Adjustment. On the happening of an event requiring an
adjustment of the Put Price per share, TCH shall forthwith give written notice
to Capstone stating the adjusted Put Price per share and the adjusted number and
kind of securities or other property purchasable hereunder resulting from the
event and setting forth reasonable detail of the method of calculation and the
facts upon which the calculation is based. The Board of Directors of TCH, acting
in good faith, shall determine the calculation.
 
 
ARTICLE II
 
 

 
 
REPRESENTATIONS AND WARRANTIES OF TCH
 
TCH represents and warrants to Capstone as follows:
 
Section 2.1 Corporate Organization. TCH is a corporation duly incorporated,
validly existing and subsisting under the laws of Nevada. Each TCH Subsidiary is
a corporation duly incorporated, validly existing and in good standing under the
laws of its respective state of incorporation. TCH and each of its Subsidiaries
has all requisite power and authority to own, operate and lease its properties
and to conduct its business as currently conducted. TCH and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which its ownership or leasing of property or
the conduct of its business requires such licensing or qualification, except to
the extent that the failure to be so qualified or licensed would not have a
Material Adverse Effect. As used in this Agreement, “Material Adverse Effect”
means any event, circumstance or development which individually or in the
aggregate could have a material adverse effect on the business, properties,
operations, condition (financial or otherwise), assets, liabilities, tradability
of the Common Stock, earnings or results of operations of TCH and its
Subsidiaries taken as a whole or on the transactions contemplated hereby.
 
Section 2.2 Authorization. TCH has all requisite power and full legal right to
execute and deliver this Agreement and the Series A Warrant, the Series B
Warrant and the Registration Rights Agreement (collectively, the “Ancillary
Agreements”), and to perform all of its obligations hereunder and thereunder in
accordance with the respective terms hereof and thereof. This Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby have
been duly approved and authorized by all requisite corporate action on the part
of TCH, and this Agreement has been duly executed and delivered by TCH and
constitutes, and each of the Ancillary Agreements, when executed and delivered
by TCH, will constitute, a legal, valid, and binding obligation of TCH,
enforceable against it in accordance with its respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to the
enforcement of creditors’ rights and remedies or by other equitable principles
of general application. The execution, delivery, and performance by TCH of this
Agreement and the Ancillary Agreements in accordance with their respective
terms, and the consummation by TCH of the transactions contemplated hereby or
thereby, will not result (with or without the giving of notice or the lapse of
time or both) in any conflict, violation, breach, or default, or the creation of
any Lien, or the termination, acceleration, vesting, or modification of any
right or obligation, under or in respect of (x) the Certificate of Incorporation
or By-laws of TCH and its Subsidiaries, (y) any judgment, decree, order,
statute, rule or regulation binding on or applicable to TCH or its Subsidiaries,
or (z) any agreement or instrument to which TCH or any of its Subsidiaries is a
party or by which it or any of its assets is or are bound.
 

 
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Section 2.3 No Undisclosed or Contingent Liabilities. Except as set forth in the
SEC Reports, neither TCH nor its Subsidiaries has any liabilities or obligations
of any nature (whether absolute, accrued, contingent or otherwise and whether
due or to become due) which are not fully reflected or reserved against on the
balance sheet as of June 30, 2014 in accordance with GAAP, except for
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the date thereof.
 
Section 2.4 No Violation. Neither the execution and delivery of this Agreement
or any of the Ancillary Agreements by TCH nor the performance by TCH of its
obligations hereunder or thereunder will: (i) conflict with or result in any
breach of any provision of its or its Subsidiaries’ respective Certificate of
Incorporation or By-laws, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default or give rise to
any Lien on TCH’s or its Subsidiaries’ properties or assets or any right of
termination, cancellation or acceleration under any of the terms or conditions
of any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation to which TCH or any of its Subsidiaries is a party or by which it
or any of their respective material properties or assets may be bound, or
require the consent of any person, (iii) violate any statute, law, rule,
regulation, writ, injunction, judgment, order or decree of any court,
administrative agency or governmental authority binding on TCH, it Subsidiaries
or any of their respective properties or assets, or (iv) violate any provision
(including those requiring the furnishing of notice prior to the taking of
specific actions) of the rules of any marketplace on which the Common Stock of
TCH is listed or quoted.
 
Section 2.5 Compliance with Applicable Law. TCH and each of its Subsidiaries is
currently in compliance with all applicable laws (whether statutory or
otherwise), rules, regulations, orders, ordinances, judgments, decrees, writs,
requirements and injunctions of all governmental authorities, agencies, courts,
and administrative tribunals, except for such noncompliance that, individually
and in the aggregate, would not have a Material Adverse Effect.
 
Section 2.6 Governmental Consents. Except for the filing of any forms required
under the federal securities laws and any filings required under state “blue
sky” laws, no consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority is required to be
made or obtained by TCH in connection with the execution and delivery of this
Agreement or any of the Ancillary Agreements by TCH or the performance by TCH of
its obligations hereunder and thereunder, or the continued conduct by TCH of its
present business after the date hereof.
 
 
ARTICLE III
 
 

 
 
REPRESENTATIONS AND WARRANTIES OF CAPSTONE
 
Section 3.1 Representations and Warranties. Capstone represents that (each of
which representations and warranties are true as of the date hereof, as of the
Initial Exercise Date and as of each Periodic Exercise Date):
 

 
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(a) Capstone is a corporation duly incorporated, validly existing and in good
standing under the laws of Nevada. Capstone has all requisite power and
authority to own, operate and lease its properties and to conduct its business
as currently conducted.  Capstone is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification.
 
(b) It has all requisite power and full legal right to execute and deliver this
Agreement and the Ancillary Agreements and to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
Ancillary Agreements, and the performance by it of its obligations hereunder and
thereunder, have been duly approved and authorized by all requisite corporate
action on the part of Capstone. This Agreement and each of the Ancillary
Agreements has been duly executed and delivered by Capstone and constitute its
valid and binding obligations, enforceable against it in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to
the enforcement of creditors’ rights and remedies or by other equitable
principles of general application.  The execution, delivery, and performance by
Capstone of this Agreement and the Ancillary Agreements in accordance with their
respective terms, and the consummation by Capstone of the transactions
contemplated hereby or thereby, will not result (with or without the giving of
notice or the lapse of time or both) in any conflict, violation, breach, or
default, or the creation of any Lien, or the termination, acceleration, vesting,
or modification of any right or obligation, under or in respect of (x) the
Certificate of Incorporation or By-laws of Capstone, (y) any judgment, decree,
order, statute, rule or regulation binding on or applicable to Capstone, or (z)
any agreement or instrument to which Capstone is a party or by which it or any
of its assets is or are bound.
 
(c) Capstone will purchase any securities in connection herewith pursuant to the
Warrants for its own account for investment only and not with a present view to
the distribution thereof.
 
(d) It has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of the investment contemplated
by this Agreement and making an informed investment decision with respect
thereto.
 
(e) It has had the opportunity to ask questions and receive answers concerning
the terms and conditions of the offering of securities purchased in connection
herewith pursuant to the Warrants, as well as the opportunity to obtain
additional information necessary to verify the accuracy of information furnished
in connection with such offerings that TCH possesses or can acquire without
unreasonable effort or expense.
 
(f) There are no claims for investment banking fees, brokerage commissions,
finder’s fees or similar compensation (other than professional fees to attorneys
and accountants) in connection with the transactions contemplated by this
Agreement or any of the Ancillary Agreements based on any arrangement or
agreement made by or on behalf of Capstone.
 

 
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It has adequate means of providing for its current financial needs and
foreseeable contingencies and has no need for liquidity of the investment in the
Warrants for an indefinite period of time.
 
(g) It is aware that entering into this Agreement and investment in the Common
Stock involves a number of very significant risks.
 
(h) It is an “accredited investor” as that term is defined in Regulation D under
the Securities Act.
 
 
ARTICLE IV
 
 

 
 
DEFINITIONS
 
Section 4.1 Certain Defined Terms. For purposes of this Agreement, the following
terms shall have the meanings set forth in this Section 5:
 
“GAAP” means generally accepted accounting principles in the United States that
are (i) consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, (ii) applied on a basis
consistent with prior periods, and (iii) such that, insofar as the use of
accounting principles is pertinent, a certified public accountant could deliver
an unqualified opinion with respect to financial statements in which such
principles have been properly applied.
 
“Person” or “person” (regardless of whether capitalized) means any natural
person, entity, or association, including without limitation any corporation,
partnership, limited liability company, government (or agency or subdivision
thereof), trust, joint venture or proprietorship.
 
“SEC” means the Securities and Exchange Commission.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 
“Subsidiary” or “Subsidiaries” means, with respect to any person, any
corporation a majority (by number of votes) of the outstanding shares of any
class or classes of which are at the time owned by such person or by a
Subsidiary of such person, if the holders of the shares of such class or classes
(a) are ordinarily, in the absence of contingencies, entitled to vote for the
election of a majority of the directors (or persons performing similar
functions) of the issuer thereof, even though the right so to vote has been
suspended by the happening of such a contingency, or (b) are at the time
entitled, as such holders, to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof,
whether or not the right so to vote exists by reason of the happening of a
contingency.
 
 
ARTICLE V
 
 

 
 
MISCELLANEOUS
 

 
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Waivers and Consents. For the purposes of this Agreement and all agreements
executed pursuant hereto, no course of dealing between TCH and Capstone and no
delay on the part of any party hereto in exercising any rights hereunder or
thereunder shall operate as a waiver of the rights hereof or thereof. No
provision hereof may be waived except by a written instrument signed by the
party so waiving such provision.
 
Section 5.1 Amendment and Modification. This Agreement shall not be amended or
modified, except by an instrument in writing signed by TCH or Capstone.
 
Section 5.2 Governing Law; Jurisdiction; Venue etc. This Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of New York, without giving effect to the principles of conflicts of law
thereof. The state and federal courts of the State of New York located in New
York shall have exclusive jurisdiction to hear and determine any claims or
disputes between Capstone and TCH pertaining directly or indirectly to this
Agreement and all documents, instruments and agreements executed pursuant
hereto, or to any matter arising therefrom (unless otherwise expressly provided
for therein); the exclusive choice of forum set forth in this Section 6.3 shall
not be deemed to preclude the enforcement of any judgment obtained in such forum
or the taking of any action to enforce the same in any other appropriate
jurisdiction. All of the parties hereto waive all rights to trial by jury in any
action or proceeding instituted by any party against any other party arising out
of, on or by reason of this Agreement or the documents and transactions
contemplated herein.
 
Section 5.3 Headings. The descriptive headings in this Agreement have been
inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction or interpretation of any provision thereof or hereof.
 
Section 5.4 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which when so executed and delivered shall be
taken to be an original; but such counterparts shall together constitute but one
and the same document.
 
Section 5.5 Notices and Demands. Any notice or demand which is required or
provided to be given under this Agreement shall be deemed to have been
sufficiently given and received for all purposes when delivered by hand on a
business day, one (1) business day after being sent by nationally recognized
overnight courier on any day, or five (5) business days after being sent by
certified or registered mail, postage and charges prepaid, return receipt
requested, to the following addresses:
 

 
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If to TCH:
Twinlab Consolidated Holdings, Inc.
632 Broadway, Suite 201
New York, NY 10012
Attn:           Thomas A. Tolworthy
Twinlab Consolidated Holdings, Inc.
632 Broadway, Suite 201
New York, NY 10012
Attention: General Counsel
 
with a copy to (which shall not constitute notice to TCH):
Wilk Auslander LLP
1515 Broadway
New York, New York 10036
E-mail: jfrank@wilkauslander.com
Attention: Joel I. Frank, Esq.
If to Capstone:
Capstone Financial Group, Inc.
2600 Michelson Drive, Suite 700
Irvine, California 92612
Attn: Darin Pastor
With a copy to (which shall not constitute notice to Capstone):
Stoecklein Law Group, LLP
401 West A Street, Suite 1150
San Diego, CA 92101
Attn: Donald J. Stoecklein, Esq.

Section 5.6 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement, provided, however, that no such
severability shall be effective if it materially changes the economic benefit of
this Agreement to any party.
 
Section 5.7 Integration. This Agreement, including the Ancillary Agreements and
instruments referred to herein or therein, constitutes the entire agreement, and
supersedes any other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
 
Section 5.8 Publicity. TCH and Capstone shall have the right to approve before
issuance of any press releases or any other public statements is sought to be
made by the other with respect to the transactions contemplated hereby, except
for any disclosures required in connection with obtaining any consents to the
transactions contemplated by this Agreement. Notwithstanding the foregoing, TCH
shall have the right to issue any press release or other public statement in
connection with the transaction contemplated hereby, excluding the identity of
Capstone, without the prior consent of Capstone, but may disclose the identity
of Capstone upon prior written consent of Capstone, which shall not be
unreasonably withheld. TCH shall also have the right to file this Agreement and
the Ancillary Agreements with the SEC under the Securities Act or the Exchange
Act if required by such acts or regulations thereunder.
 

 
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Section 5.9 Expenses. TCH and Capstone will each bear their own costs and
expenses and those of their respective advisors related to the transactions
herein contemplated.
 
Section 5.10 Assignment. Neither TCH nor Capstone may assign this Agreement or
its rights and obligations hereunder.
 
Section 5.11 Equitable Relief. Each of the parties acknowledges that any breach
by such party of its obligations under this Agreement would cause substantial
and irreparable damage to the other party and that money damages would be an
inadequate remedy therefor. Accordingly, each party agrees that the other party
will be entitled to an injunction, specific performance and/or other equitable
relief to prevent the breach of such obligations.
 
Section 5.12 Usage. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
All terms defined in this Agreement in their singular or plural forms have
correlative meanings when used herein in their plural or singular forms,
respectively.
 
Section 5.13 Facsimile or Electronic Signatures. A facsimile signature on this
Agreement or an original signature delivered by facsimile or an electronic
signature or an original signature delivered by electronic transmission in the
form of a .pdf, .tif, .jpeg or similar attachment to electronic mail shall be
considered the same as an original.
 

 
[Signature page follows]
 

 
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the day and year first above written.
 

TWINLAB CONSOLIDATED HOLDINGS, INC.

By: /S/ Thomas A. Tolworthy         
Name: Thomas A. Tolworthy
Title: President and Chief Executive Officer

 

CAPSTONE FINANCIAL GROUP, INC.

 

By: /S/ Darin R. Pastor            
Name: Darin R. Pastor
Title: Chief Executive Officer

 

 

 
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