EXHIBIT 10.8
SUBSCRIPTION AGREEMENT
THIS AGREEMENT is made and entered into this 20th day of June, 1997 by
and among CTI Industries Corporation, a Delaware corporation, having its
principal place of business at 22160 N. Pepper Road, Barrington, Illinois 60010
(the "Company") and the individual whose name and signature is set forth on the
signature page hereof ("Investor").
WHEREAS, the Company is offering to a limited number of accredited
Investors the purchase of unsecured subordinated promissory notes of the Company
in the aggregate principal amount of up to $950,000 and warrants to purchase
common stock of the Company at the price per share of $1.20 per share for an
aggregate purchase price in the principal amount of the unsecured subordinated
promissory notes.
NOW, THEREFORE, in consideration of the premises and of the terms,
covenants and conditions hereinafter contained, the parties hereto agree as
follows:
1. Subscription.
1.1 The undersigned Investor hereby subscribes for the purchase of (i)
a 10% Unsecured Subordinated Promissory Note of the Company, in the form
attached hereto as Exhibit A, (sometimes hereinafter referred to as the "Note"),
in the principal amount set forth on the signature page of this agreement and
(ii) a Warrant, in the form attached hereto as Exhibit B, to purchase Common
Stock of the Company at the purchase price per share of $1.20 for that number of
shares determined by dividing the principal amount of the Note issued hereunder
by the Warrant purchase price per share. The purchase price for the Note and the
Warrant issued hereunder shall be the principal amount of the Note to be issued
hereunder. With this Subscription Agreement, the Investor tenders to the Company
a check, payable to the Company, in the amount of the purchase price.
1.2 The Investor acknowledges that this Agreement shall not be binding
upon the Company unless and until the Company accepts this subscription and
executes this Agreement and that the Company reserves the right, in the sole
discretion of the Company, to accept or reject this subscription.
2. Representations and Warranties of the Company. The Company represents
and warrants to Investor as follows:
2.1 The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and is qualified to do
business and in good standing in the State of Illinois. Illinois and Delaware
are the only states where the nature of the
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assets and business of the Company require such qualification. CTI Balloons Ltd.
is a corporation duly organized and validly existing under the laws of the
United Kingdom and has its principal place of business in Rugby, United Kingdom.
The Company owns all of the issued and outstanding capital stock of CTI
Balloons, Ltd.
2.2 The Company is authorized to issue 8,000,000 shares of Common
Stock, par value $.075 per share, and 4,000,000 shares of Preferred Stock, par
value $.35 per share. There are presently issued and outstanding 3,467,322
shares of Common Stock or warrants to purchase Common Stock and 2,857,143 shares
of Preferred Stock.
2.3 The Board of Directors of the Company has proposed the adoption of,
and has submitted to the shareholders for approval, the 1997 CTI Industries
Corporation Stock Option Plan pursuant to which the Company may issue options to
purchase up to 300,000 shares of Common Stock of the Company.
2.4 The Company has entered into a letter of intent with Joseph Stevens
& Company, Inc., a copy of which has been provided to the Investor, pursuant to
which the Company may offer, in a public offering, shares of Common Stock and
warrants to purchase common stock of the Company. In connection with such
proposed public offering and in the event of its completion and consummation:
2.4.1 Joseph Stevens & Company, Inc. would receive options to purchase
shares of Common Stock of the Company as provided herein;
2.4.2 It is contemplated that the outstanding shares of
Preferred Stock of the Company will be converted to shares of Class B
Common Stock which will have certain voting rights but which will not
have dividend or other rights or preferences in relation to the Common
Stock of the Company;
2.4.3 It is contemplated that there will be a reverse split of
the outstanding Common Stock of the Company in the amount of
approximately one share for each 2.6 shares outstanding.
There can be no assurance that the contemplated public offering of the Common
Stock of the Company will be completed on the terms provided in such letter of
intent or on any other terms.
2.5 Except as provided in paragraphs 2.2, 2.3 and 2.4 hereof, (i) there
are no contracts, options or other agreements or understandings pursuant to
which the Company is or may be obligated to issue Common Stock or any other
security, (ii) there are no obligations of the Company outstanding which may be
converted into securities and (iii) there are no securities of the Company
issued or outstanding. All shares of Common Stock and Preferred Stock of the
Company presently issued and outstanding are duly authorized and validly issued,
fully paid and non-assessable. No holder of outstanding shares of the Common
Stock or Preferred Stock of the Company has any preemptive right or right of
first refusal with respect to the issuance by the Company of any of its stock.
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2.6 Investor has been provided with copies of the audited statement of
income and balance sheet of the Company as of October 31, 1996 and for the year
then ended and the unaudited statement of income and balance sheet of the
Company as of April 30, 1997 and for the six months then ended. Such financial
statements fairly present the financial condition of the Company as of the dates
thereof and the results of operation of the Company for the periods then ended.
2.7 This Agreement, the offering contemplated herein, the Note and the
Warrant have been duly authorized by the Board of Directors of the Company and
this Agreement, the Note and the Warrant, when executed and delivered on behalf
of the Company, shall constitute valid and binding obligations of the Company,
enforceable in accordance with their terms. The execution and performance of
this Agreement and the Note and Warrant to be issued hereunder will not violate,
with or without the giving of notice or the passage of time, any applicable law
or regulation and will not conflict with, or result in the breach of, any of the
terms, conditions or provisions of, or constitute a default under, any corporate
charter, bylaw, agreement or other instrument to which the Company is a party or
by which it, or any of its property, is bound.
2.8 Except as set forth in the audit letter of counsel to the Company
dated May 14, 1997, a copy of which has been provided to Investor, there are no
actions, suits, proceedings or investigations pending, threatened against or
affecting the Company, at law or in equity, or before any federal, state, or
municipal agency or any instrumentality which involves the likelihood of any
judgment of liability, not fully covered by insurance, against the Company or
which may result in any material adverse change in the business, operations,
properties, assets or condition, financial or otherwise, of the Company.
3. Representations, Warranties and Acknowledgments of Investor. The Investor
represents and warrants to the Company, and acknowledges and agrees, as follows:
3.1 Investor has been associated with the Company for a number of years
and has full and detailed knowledge and information concerning the business,
condition and prospects of the Company. Investor has reviewed this Agreement and
all documents referred to herein and, in entering into this transaction, is not
relying on information other than that contained in this Agreement or referred
to herein or in any statement or document provided to Investor and executed by
an officer of the Company.
3.2 Investor has had a reasonable opportunity to ask questions of and
receive answers from the Company concerning the Company and the offering by it
if the Notes and Warrants herein and all such questions, if any, have been
answered to the full satisfaction of the undersigned.
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3.3 The Investor has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks involved in an investment in the Note and Warrant which are a highly
speculative investment involving a high degree of risk and that the Investor
could lose his or her entire investment.
3.4 The Investor understands that (a) the Note, the Warrant and any
shares of Common Stock of the Company issued by reason of the exercise of the
Warrant (hereinafter sometimes referred to as the "Securities"), have not been
registered under the Securities Act of 1933, as amended (the "Act") or the
securities law of any state, based on exemptions from such registration
requirements for non-public offerings and (b) the Securities are and will be
"restricted securities" as said term is defined in Rule 144 of the Rules
promulgated under the Act; (c) in the event that the Company does proceed with a
public offering of its Common Stock as provided in paragraph 2.4 hereof, the
Investor will be required to execute an agreement with the underwriter pursuant
to which the Investor will not be permitted to sell any shares of Common Stock
received upon the exercise of the Warrant for a period of 18 months from the
effective date of the public offering; (d) the Securities may not be sold or
otherwise transferred unless they have first been registered under the Act and
all applicable state securities laws, or unless exemptions from such
registration provisions are available with respect to such resale or transfer;
(e) the Company is under no obligation to register any of the Securities or to
take any action to make any exemption from any such registration provisions
available; (f) the Securities will bear a legend to the effect that the transfer
of the securities represented thereby is subject to the provisions hereof; and
(g) stop transfer instructions will be placed on the records of the Company or
with the transfer agent for the Note, the Warrant and any shares of Common Stock
of the Company issued by reason of the exercise of the Warrant.
3.5 The Investor is acquiring the Note and Warrant, and any shares of
Common Stock received by reason of exercise of the Warrant, solely for the
account of Investor, for investment purposes only, and not with a view to the
resale or distribution thereof. Investor further represents that his or her
financial condition is such that he or she is not under any present necessity or
constraint to dispose of such securities to satisfy any existing or contemplated
debt or undertaking. Investor (I) has not offered or sold any of the Securities
within the meaning of the Act, (ii) does not have in mind the sale of any of the
Securities either currently or after the passage of a fixed or determinable
period of time or upon the occurrence or non-occurrence of any predetermined
event or circumstance, (iii) has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing for
or which is likely to compel a disposition of any of the Securities and (iv) is
not aware of any circumstance presently in existence which is likely in the
future to promote a disposition of the Securities.
3.6 The Investor will not sell or otherwise transfer any of the
Securities, or any interest therein, unless and until (a) such Securities first
shall have been registered under the Act and all applicable state securities
laws or (b) the Investor first shall have delivered to the Company a written
opinion of counsel, which counsel and opinion (in form and substance) shall be
reasonably satisfactory to the Company, to the effect that the proposed sale or
transfer is exempt from the registration provisions of the Act and all
applicable state securities laws.
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3.7 The Investor (a) is a natural person, is at least 21 years of age
and is under no legal disability to contract, (b) is a resident of the State
specified on the signature page hereof and has no present intention of changing
his residence from such State, and (c) has full power and authority to execute
and deliver this Agreement and to perform the obligations of the Investor
hereunder. This Agreement is a legally binding obligation of the Investor in
accordance with its terms.
3.8 The Investor is an "accredited investor" as such term is defined in
Regulation D of the Rules and Regulations promulgated under the Act.
3.9 Investor acknowledges and understands that:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE
BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY
ADEQUACY OF THE INFORMATION PROVIDED HEREIN. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
4. Indemnity. The Investor agrees to indemnify the Company, and each of its
officers, directors, employees and agents, and hold them harmless from and
against any and all losses, damages, liabilities, costs and expenses which any
of them may sustain or incur in connection with the breach by Investor of any
representation, warranty or covenant made by the Investor herein.
5. Notices. All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be (i) delivered personally, (ii)
mailed, postage prepaid, or (iii) telecopied and a copy mailed to the parties,
as follows:
If to the Company Mr. Stephen M. Merrick
Chief Executive Officer
CTI Industries Corporation
22160 North Pepper Road
Barrington, IL 60010
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If to Investor: At the address shown on the
signature page hereof
Any notice mailed or telecopied in accordance with the provisions hereof shall
be deemed received on the third day following the date of mailing or
transmission. Either party hereto may change the address to which notices to
such party may be given hereunder by serving a proper notice of such change of
address to the other party.
6. Entire Agreement. This Agreement and the Note and Warrant constitutes the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all prior written or oral negotiations, representations,
understandings, commitments, contracts or agreements with respect to the subject
matter hereof. This Agreement and the Note and Warrant may not be modified
except by written instrument signed by the parties hereto.
7. Severability. Whenever possible, each paragraph of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law. If
any paragraph of this Agreement shall be unenforceable or invalid under
applicable law, such paragraph shall be ineffective only to the extent and
duration of such unenforceability or invalidity and the remaining substance of
such paragraph and the remaining paragraphs of this Agreement shall in such
event continue to be binding and in full force and effect.
8. Waivers. No failure by any party to exercise any of such party's rights
hereunder or to insist upon strict compliance with respect to any obligation
hereunder, and no custom or practice of the parties at variance with the terms
hereof, shall constitute a waiver by any party to demand exact compliance with
the terms hereof. Waiver by and party of any particular default by any other
party shall not affect or impair such party's rights in respect to any
subsequent default of the same or of a different nature, nor shall any delay or
omission of any party to exercise any right arising from any default by any
other party affect or impair such party's rights as to such default or any
subsequent default.
9. Benefit and Assignment. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, personal
representatives and successors in interest. This Agreement and any rights or
obligations hereunder may not be assigned by any party hereto.
10. Governing Law; Actions. This Agreement shall be governed by and shall be
interpreted and enforced in accordance with, the laws of the State of Illinois.
The Investor (a) agrees that any legal suit, action or proceeding arising out of
or related to this Agreement shall be instituted exclusively in Illinois Circuit
Courts, County of Cook, or in the United States District Court for the Northern
District of Illinois, each and any of which shall apply Illinois law, without
reference to its conflicts of laws rules and principles, (b) waives any
objection Investor may have now or hereafter to the venue of any such suit,
action or proceeding, and (c) irrevocably consents to the
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jurisdiction of the Illinois Circuit Courts, County of Cook, and the United
States District Court for the Northern District of Illinois in any such suit,
action or proceeding. The Investor further agrees to accept and acknowledge
service of any and all process which may be served in any such suit, action or
proceeding in the Illinois Circuit Courts, County of Cook or the United States
District Court for the Northern District of Illinois.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Investor has executed this Subscription Agreement
this ____ day of June, 1997.
INVESTOR:
________________________________________
(Signature)
________________________________________
(Print Name)
________________________________________
________________________________________
(Address)
Social Security #____________________
Principal Amount of Note
Subscribed For:
________________________________________
ACCEPTANCE OF SUBSCRIPTION:
CTI INDUSTRIES CORPORATION
By:________________________________________
________________________________________
Title
Date:______________________________________
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EXHIBIT A TO
EXHIBIT 10.8
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. NO INTEREST IN THIS NOTE MAY BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER SAID ACT AND WHERE THE HOLDER HAS FURNISHED TO THE
COMPANY AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
THAT AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE.
CTI INDUSTRIES CORPORATION
10% UNSECURED SUBORDINATED
PROMISSORY NOTE
$__________________________ As of June , 1997
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned, CTI Industries Corporation, a
Delaware corporation (the "Payor"), having its executive office and principal
place of business 22160 N. Pepper Road, Barrington, IL 60010, hereby promises to
________________________________________ (the "Payee"), having an address at
________________________________________ on June 30, 1999 (the "Maturity Date"),
at the Payee's address set forth hereinabove or, at such other place as the
Payee shall hereafter specify in writing, the principal sum of
___________________________________, ($__________), in legal tender of the
United States of America. This Note may be prepaid, in whole or in part, at the
option of the Company at any time without premium or penalty.
This Note is part of an issue of notes (the "Notes") being issued in
the principal amount of up to aggregate of $950,000 together with warrants to
purchase Common Stock of the Company.
This Note is unsecured and shall rank pari passu with all other Notes.
1. Interest and Payment
1.1 The unpaid principal amount hereof outstanding from time
to time shall bear simple interest from the date hereof at the rate of
10% per annum until the first to occur of
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the Maturity Date or the date on which the entire principal balance
hereof shall have been paid.
1.2 Interest shall accrue and be payable on a calendar
quarterly basis on each September 30, December 31, March 31, and June
30 during which any portion of the principal amount of this Note shall
be outstanding.
1.3 If payment of the principal amount hereof and interest
accrued thereon, is not made on or before the Maturity Date, interest
shall thereafter accrue and be payable at an interest rate equal to the
lessor of (i) the prime rate plus 8% or (ii) the maximum rate permitted
by law. For purposes of this Note, "prime rate" shall mean the prime
rate, as adjusted from time to time, as established and reported by the
First National Bank of Chicago, in Chicago, Illinois, from time to time
or, if such rate is no longer reported by such bank, then the rate
established by any comparable bank as its prime rate, from time to
time.
2. Replacement of Note.
2.1. In case this Note is mutilated, destroyed, lost or
stolen, the Payor shall, at its sole expense, execute, register and
deliver, a new Note, in exchange and substitution for this Note, if
mutilated, or in lieu of and substitution for this Note, if destroyed,
lost or stolen. In the case of destruction, loss or theft, the Payee
shall furnish to the Payor indemnity reasonably satisfactory to the
Payor, and in any such case, and in the case of mutilation, the Payee
shall also furnish to the Payor evidence to its reasonable satisfaction
of the mutilation, destruction, loss or theft of this Note and of the
ownership thereof. Any replacement Note so issued shall be in the same
outstanding principal amount as this Note and dated the date to which
interest shall have been paid on this Note, or if no interest shall
have yet been paid, dated the date of this Note.
2.2. Every Note issued pursuant to the provisions of Section
2.1 hereof in substitution for this Note shall constitute an additional
contractual obligation of the Payor, whether or not this Note shall be
found at any time, or be enforceable by anyone.
3. Events of Default. If any of the following conditions, events or
acts shall occur, this Note shall become immediately due and payable:
3.1. The dissolution of the Payor or any vote in favor thereof
by the Board of Directors and stockholders of the Company; or
3.2. The Payor's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a
voluntary or involuntary petition under any provision of the Federal
Bankruptcy Code or amendments thereto or any other federal or state
statute affording relief to debtors; or there shall be commenced
against the Payor any such proceeding or filed against the Payor any
such application or petition which proceeding, application or petition
is not dismissed or withdrawn within sixty (60) days of commencement or
filing as the case may be; or
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3.3. The failure by the Payor to make any payment of any
amount of principal on, or accrued interest under, this Note, or any of
the Notes as and when the same shall become due and payable; or
3.4. The sale by the Payor of all or substantially all of its
assets (other than the sale of inventory in the ordinary course of
business), or the merger or consolidation by the Payor with or into
another corporation, except for mergers or consolidations where the
Payor is the surviving entity or where the surviving entity expressly
accepts and assumes all of the obligations of the Payor under all of
the Notes; or
3.5. The commencement of a proceeding to foreclose the
security interest or lien in any property or assets to satisfy the
security interest or lien therein of any secured creditor of the Payor
whose debt is in excess of $100,000; or
3.6. The entry of a final judgment for the payment of money in
excess of $100,000 by a court of competent jurisdiction against the
Payor, which judgment the Payor shall not discharge (or provide for
such discharge) in accordance with its terms within sixty (60) days of
the date of entry thereof, or procure a stay of execution thereof
within sixty (60) days from the date of entry thereof and, within such
sixty (60) day period, or such longer period during which execution of
such judgment shall have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal; or
3.7. Any attachment or levy, or the issuance of any note of
eviction against the assets or properties of the Payor involving an
amount in excess of $100,000 which attachment, levy or issuance is not
dismissed, bonded, or otherwise terminated within sixty (60) days of
the effectiveness of such attachment, levy or issuance; or
3.8. The default in the due observance or performance of any
material covenant, condition or agreement on the part of the Payor to
be observed or performed pursuant to the terms of this Note and such
default shall continue uncured for thirty (30) days after written
notice thereof, specifying such default, shall have been given to the
Payor by the holder of the Note; then, in any such event and at any
time thereafter (and, in the case of an event described in Subsection
3.5 or a default in payment of accrued interest and/or principal as
described in Subsection 3.3, upon 30 days written notice), while such
event is continuing, the Payee shall have the right to declare an event
of default hereunder ("Event of Default"), provided that upon the
occurrence of an event described in Subsections 3.1 or 3.2 such event
shall be deemed to be an Event of Default hereunder whether or not the
Payee makes such a declaration (an "Automatic Default"), and the
indebtedness evidenced by this Note shall immediately upon such
declaration or Automatic Default become due and payable, both as to
principal and interest, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived,
notwithstanding anything contained herein to the contrary.
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4. If any one or more defaults shall occur and be continuing, the Payee
may proceed to protect and enforce such Payee's rights either by suit in equity
or by action at law, or both, whether for the specific performance of any
covenant, condition or agreement contained in this Note or in any agreement or
document referred to herein or in aid of the exercise of any power granted in
this Note or in any agreement or document referred to herein, or proceed to
enforce the payment of this Note or to enforce any other legal or equitable
right of the Payee of this Note. No right or remedy herein or in any other
agreement or instrument conferred upon the holder of this Note is intended to be
exclusive of any other right or remedy, and each and every such right or remedy
shall be cumulative and shall be in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or otherwise.
5. Unconditional Obligation; Fees; Waivers; Other.
5.1. The obligations to make the payments provided for in this
Note are absolute and unconditional and not subject to any defense,
set-off, counterclaim, rescission, recoupment or adjustment whatsoever.
5.2. No forbearance, indulgence, delay or failure to exercise
any right or remedy with respect to this Note shall operate as a
waiver, nor as an acquiescence in any default, nor shall any single or
partial exercise of any right or remedy preclude any other or further
exercise thereof or the exercise of any other right or remedy.
5.3. This Note may not be modified except by a writing duly
executed by the Payor and the Payee.
5.4. The Payor hereby expressly waives demand and presentment
for payment, notice of nonpayment, notice of dishonor, protest, notice
of protest, bringing of suit, and dili gence in taking any action to
collect amounts called for hereunder, and shall be directly and
primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence, act or
omission with respect to the collection of any amount called for
hereunder or in connection with any right, lien, interest or property
at any and all times which the Payee had or is existing as security for
any amount called for hereunder.
5.5. The Payor shall bear all of its expenses, including
attorneys' fees incurred in connection with the preparation of this
Note.
6. Subordination. The payment of principal and interest on this Note
shall be subordinate in payment and right of payment to the payment or provision
for payment in full of all other indebtedness existing as of now or hereafter
incurred by the Payor.
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7. Restrictions on Transfer. By its acceptance of this Note, the Payee
acknowledges that this Note is subject to the provisions of Payee's Subscription
Agreement submitted to the Payor subscribing for this Note, this Note has not
been registered under the securities laws of the United States of America or any
state thereof and Payee represents that this Note has been acquired for
investment and no interest in this Note may be offered for sale, sold, delivered
after sale, transferred, pledged, or hypothecated in the absence of registration
and qualification of this Note under applicable federal and state securities
laws or an opinion of counsel reasonably satisfactory to the Payor that such
registration and qualification are not required. In addition, this Note may only
be transferred to a person deemed to be an "accredited investor" as such term is
defined under Rule 501(a) of Regulation D promulgated under the Securities Act
of 1933, as amended.
8. Miscellaneous.
8.1. The headings of the various paragraphs of this Note are
for convenience of reference only and shall in no way modify any of the
terms or provisions of this Note.
8.2. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given when
personally delivered, delivered by Federal Express or other national
overnight courier, three days after mailing if sent by registered or
certified mail, return receipt requested, postage prepaid, or on the
date of delivery if delivered by telecopy, receipt confirmed, provided
that a confirmation copy is sent on the next business day by registered
or certified mail, return receipt requested and postage prepaid, to the
address of the intended recipient set forth in the preamble to this
Note or at such other address as the intended recipient shall have
hereafter given to the other party hereto pursuant to the provisions
hereof.
8.3. This Note and the obligations of the Payor and the rights
of the Payee shall be governed by and construed in accordance with the
laws of the State of Illinois, without regard to its conflicts of laws
rules or principles, with respect to contracts made and to be fully
performed therein.
8.4. Any legal suit, action or proceeding arising out of or
relating to this Note will be instituted exclusively in the Circuit
Court of Cook County, Illinois, or in the United States District Court
for the Northern District of Illinois, each and any of which shall
apply Illinois law without reference to its conflicts of laws
principles or rules. The Payor and the Payee (by accepting this Note)
each waives any objection which the Payor or the Payee may have now or
hereafter to the venue of any such suit, action or proceeding, and
irrevocably consents to the jurisdiction of the Illinois Circuit
Courts, County of Cook and the United States District Court for the
Northern District of Illinois in any such suit, action or proceeding.
The Payor and Payee (by accepting this Note) each further agree to
accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the Illinois Circuit
Courts, County of Cook or in the United States District Court for the
Northern District of Illinois
.
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8.5. This Note shall bind the Payor and its successors and
assigns.
8.6 Except in the ordinary course of business (which includes,
but is not limited to, borrowing monies), Payor will not borrow any
additional amounts without the written consent of a majority of the
holders of Notes; such majority to be determined not by reference to
the number of holders of the Notes but by reference to the then
outstanding principal amount of the Notes.
CTI INDUSTRIES CORPORATION
By: ___________________________
Howard W. Schwan, President
ATTEST:
_______________________ , Secretary
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EXHIBIT B TO
EXHIBIT 10.8
The securities represented by this Warrant have not
been registered under the Securities Act of 1933, and
thus may not be transferred unless registered under
that Act or unless an exemption from registration is
available.
Warrant dated June 30, 1997, to purchase _________
Shares of Common Stock on or before June 30, 2002.
STOCK PURCHASE WARRANT
TO PURCHASE COMMON STOCK OF
CTI INDUSTRIES CORPORATION
This certifies that, for value received, , or his assigns, is entitled
to subscribe for and purchase from CTI INDUSTRIES CORPORATION, a Delaware
corporation (hereinafter called the "Company"), at a price of One Dollar Twenty
cents ($1.20) per share (subject to adjustment as set forth in paragraph 3
below) and at any time after the date hereof to and including June 30, 2002,
(subject to adjustment as set forth in paragraph 3 below) fully paid and
non-assessable shares of the Company's common stock, par value $.075 per share
(hereinafter referred to as the "Common Stock").
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise; Issuance of Certificates; Payment for Shares. The rights
represented by this Warrant may be exercised by the holder hereof at any time
within the period specified above, in whole or in part (but not as to a
fractional share of Common Stock), by the surrender of this Warrant (properly
endorsed if required) at the principal office of the Company (or such other
office of the Company as it may designate by notice in writing to the holder
hereof at the address of such holder appearing on the books of the Company) (a)
specifying the number of shares of Common Stock being purchased and (b)
accompanied by a check payable to the Company for the purchase price for such
shares. The Company agrees that the shares so purchased shall be deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Certificates for the shares so
purchased shall be delivered to the holder hereof within a reasonable time, not
exceeding ten days, after the rights represented by this Warrant shall have been
so exercised, and, unless this Warrant has expired, a new Warrant of like tenor,
representing the right to purchase the number of shares, if any, with respect to
which this Warrant shall not then have been exercised, shall also be delivered
to the holder hereof within such time.
1
2. Shares to be Fully Paid; Reservation of Shares. The Company
covenants and agrees:
(a) that all shares of Common Stock which may be issued upon
exercise of the rights represented by this Warrant will, upon issuance,
be fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof;
(b) without limiting the generality of the foregoing, that the
Company will from time to time take all such action as may be required
to assure that the par value, if any, per share of Common Stock is at
all times equal to or less than the then effective Warrant Purchase
Price (as hereinafter defined) per share of Common Stock issuable
pursuant to this Warrant;
(c) that, during the period within which the rights
represented by this Warrant may be exercised, the Company will at all
times have authorized, and reserved for the purpose of issue or
transfer upon exercise of the rights evidenced by this Warrant, a
sufficient number of shares of Common Stock to provide for the full
exercise of the rights represented by this Warrant;
(d) that the Company will take all such action as may be
necessary to assure that the Common Stock issuable upon the exercise
hereof may be so issued without violation of any applicable law or
regulation; and
(e) that the Company will not take any action which would
result in any adjustment of the Warrant Purchase Price if (I) the total
number of shares of Common Stock issuable after such action upon
exercise of this Warrant, together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon exercise
of all Options (as hereinafter defined) and upon conversion of all
Convertible Securities (as hereinafter defined) then outstanding, would
exceed (ii) the total number of shares of Common Stock then authorized
by the Company's Articles of Incorporation (all such issued and
issuable Common Stock being called the "Potentially Outstanding Common
Stock").
In the event any stock or securities of the Company other than Common Stock are
issuable upon the exercise hereof, the Company will take or refrain from taking
any action referred to in clauses (a) through (e) of this paragraph 2 as though
such clauses apply, equally, to such other stock or securities then issuable
upon the exercise hereof.
3. Warrant Purchase Price. The provisions set forth in paragraphs
1 and 2 above are, however, subject to the following:
3.1 Adjustment of Warrant Purchase Price; Resulting Adjustment
of Number of Purchasable Shares. The initial Warrant Purchase Price of
One Dollar Twenty Cents ($1.20) per share of Common Stock shall be
subject to adjustment from time to time as hereinafter provided (such
price or such price as last adjusted pursuant to the terms
2
hereof, as the case may be, is herein called the "Warrant Purchase
Price"). Upon each adjustment of the Warrant Purchase Price, the holder
of this Warrant shall thereafter be entitled to purchase, at the
Warrant Purchase Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Warrant Purchase
Price in effect immediately prior to such adjustment by the number of
shares of Common Stock purchasable pursuant hereto immediately prior to
such adjustment and dividing the product thereof by the Warrant
Purchase Price resulting from such adjustment.
3.2 Adjustment of Warrant Purchase Price Upon Issuance of
Stock. If and whenever after the date hereof the Company shall issue or
sell any shares of its Common Stock for a consideration per share less
than the Warrant Purchase Price in effect immediately prior to the time
of such issue or sale (except if such issue or sale shall be made
pursuant to the exercise of Options or Convertible Securities, as
defined below, outstanding on the date hereof), then, forthwith upon
such issue or sale, the Warrant Purchase Price shall be reduced to the
price, calculated to the nearest cent, determined by dividing (a) the
sum of (I) the number of shares of Common Stock outstanding immediately
prior to such issue or sale multiplied by the then existing Warrant
Purchase Price and (ii) the consideration, if any, received by the
Company upon such issue or sale, by (b) the total number of shares of
Common Stock outstanding immediately after such issue or sale. No
adjustment of the Warrant Purchase Price, however, shall be made in an
amount less than $0.01 per share, but any such lesser adjustment shall
be carried forward and shall be made at the time and together with the
next subsequent adjustment which together with all adjustments so
carried forward shall amount to $0.01 per share or more.
For purposes of this paragraph 3.2, the following paragraphs
3.3 to 3.15, inclusive, subject to the exception set forth above, shall
also be applicable:
3.3 Issuance of Rights or Options. In case at any time the
Company shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any rights to subscribe for or to purchase, or
any options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such
rights or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such
Convertible Securities (determined as provided in the following
sentence) shall be less than the Warrant Purchase Price in effect
immediately prior to the time of granting of such Options, then the
maximum number of shares of Common Stock issuable upon the exercise of
all such Option or upon conversion or exchange of the total maximum
amount of such Convertible Securities shall be deemed to have been
issued for such price per share as of the date of the granting of such
Options and thereafter shall be deemed to be outstanding. The price per
share for which Common Stock is issuable, as referred to in the
preceding sentence, shall be determined by dividing (a) the sum of (I)
the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus (ii) the minimum
aggregate amount of
3
additional consideration payable to the Company upon the exercise of
all such Options, plus (iii) in the case of all such Options that
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of all
such Convertible Securities (to the extent not counted under the
immediately preceding clause (ii) and upon the conversion or exchange
of all such Convertible Securities into Common Stock, by (b) the total
maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities. The consideration received or receivable by the Company
shall in each case be determined in accordance with paragraph 3.7
below. Except a otherwise provided in paragraph 3.5 below, no
adjustment of the Warrant Purchase Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
3.4 Issuance of Convertible Securities. In case the Company
shall in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined as provided in the
following sentence) shall be less than the Warrant Purchase Price in
effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion
or exchange of all such Convertible Securities shall be deemed to have
been issued for such price per share as of the date of the issue or
sale of such Convertible Securities and thereafter shall be deemed to
be outstanding, provided that (a) except as otherwise provided in
paragraph 3.5 below, no adjustment of the Warrant Purchase Price shall
be made upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities, and (b) if any such issue or
sale of such Convertible Securities is made upon exercise of any
Options for which adjustments of the Warrant Purchase Price have been
or are to be made pursuant to other provisions of this paragraph 3, no
further adjustment of the Warrant Purchase Price shall be made by
reason of such issue or sale. The price per share for which Common
Stock is issuable, as referred to in the preceding sentence, shall be
determined by dividing (I) the sum of (A) the total amount received or
receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus (B) the minimum aggregate amount of
additional consideration, if any, payable upon the conversion or
exchange of such Convertible Securities into Common Stock, by (ii) the
total maximum number of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities. The
consideration received or receivable by the Company shall in each case
be determined in accordance with paragraph 3.7 below.
3.5 Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in paragraph 3.3 above and still
outstanding, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
paragraph 3.3 or 3.4 above and still outstanding, or the rate at which
any such Convertible Securities
4
are convertible into or exchangeable for Common Stock shall change at
any time (other than under or by reason of provisions designed to
protect against dilution), the Warrant Purchase Price in effect at the
time of such event shall forthwith be readjusted to the Warrant
Purchase Price which would have been in effect at such time had such
Options or Convertible Securities provided for such changed purchase
price, additional consideration, or conversion rate, as the case may
be, at the time initially granted, issued, or sold. On the expiration
of any Option referred to in paragraph 3.3 above prior to the exercise
thereof or the termination of any right to convert or exchange any
Convertible Securities referred to in paragraph 3.3 or 3.4 above prior
to the exercise of such right, the Warrant Purchase Price then in
effect hereunder shall forthwith be increased to the Warrant Purchase
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination, never
been issued, and the Common Stock issuable thereunder shall no longer
be deemed to be outstanding for the purposes of any calculation under
paragraph 3.3 or 3.4 above.
3.6 Determination of Consideration Upon Dividend or Other
Distribution. In case the Company shall declare a dividend or make any
other distribution upon any stock of the Company payable in Common
Stock, Options or Convertible Securities, any Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold
without consideration.
3.7 Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the
amount received by the Company therefor, without deduction therefrom of
any expenses incurred or any reasonable underwriting commissions or
concessions paid or allowed by the Company (or deducted from amounts
received by the Company) in connection therewith. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the consideration
other than cash received by the Company shall be deemed to be the fair
value of such consideration as determined reasonably and in good faith
by the Board of Directors of the Company, without deduction of any
expenses incurred or any reasonable underwriting commissions or
concessions paid or allowed by the Company (or deducted from amounts
received by the Company) in connection therewith. The amount of
consideration deemed to be received by the Company pursuant to issuance
and/or sale, pursuant to an established compensation plan of the
Company, to directors, officers or employees of the Company or any
subsidiary of the Company in connection with their employment of shares
of Common stock, Options or Convertible Securities, shall be increased
by the amount of any tax benefit realized by the Company as a result of
such issuance and/or sale, the amount of such tax benefit being the
amount by which the federal and/or state income or other tax liability
of the Company shall be reduced by reason of any deduction or credit in
respect of such issuance and/or sale. In case any Common Stock, Options
or Convertible Securities shall be issued in connection with any merger
or consolidation in which the Company is the surviving corporation
(other than any
5
consolidation or merger in which the previously outstanding shares of
Common Stock of the Company shall be changed into or exchanged for the
stock or other securities of another corporation), the amount of
consideration received therefor shall be deemed to be the fair value as
determined reasonably and in good faith by the Board of Directors of
the Company of such portion of the assets and business of the
non-surviving corporation as such Board may determined to be
attributable to such shares of Common Stock, Options or Convertible
Securities, as the case may be. In the event of any consolidation or
merger of the Company in which the Company is not the surviving
corporation or in which the previously outstanding shares of Common
Stock of the Company shall be changed into or exchanged for the stock
or other securities of another corporation, or in the event of any sale
of all or substantially all of the assets of the Company for stock or
other securities of any corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock computed on the
basis of the actual exchange ratio on which the transaction was
predicated and for a consideration equal to the fair market value on
the date of such transaction of all such stock or securities of the
other corporation, and if such calculation results in adjustment of the
Warrant Purchase Price, the determination of the number of shares of
Common Stock issuable upon exercise of the Warrants immediately prior
to such merger, consolidation or sale, for purposes of paragraph 3.13
below, shall be made after giving effect to such adjustment of the
Warrant Purchase Price. In case any shares of Common Stock shall be
issued (or issuable) pursuant to any Options for the purchase of the
same, the consideration deemed to be received (or receivable) therefor
shall be deemed to be the total amount, if any, received (or total
minimum amount receivable) by the Company as consideration for the
granting of such Options, plus the aggregate amount of additional
consideration paid (or minimum amount payable) to the Company upon the
exercise of such Options. In case any shares of Common Stock shall be
issued (or issuable) upon the conversion or exchange of any Convertible
Securities, the consideration deemed to be received (or receivable)
therefor shall be deemed to be the total amount received (or total
minimum amount receivable) by the Company as consideration for the
granting of any Options to subscribe to or purchase such Convertible
Securities, plus the total amount of additional consideration paid (or
minimum amount payable) to the Company as consideration for the issue
or sale of such Convertible Securities, plus the total amount of
additional consideration, if any, paid (or minimum amount payable) to
the Company upon the conversion or exchange thereof.
3.8 Record Date. In case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution payable in Common Stock,
Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common
stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution.
3.9 Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common stock for the
purposes of this paragraph 3.
6
3.10 Liquidating Dividends. The Company will not declare a
dividend upon Common Stock payable otherwise than out of consolidated
earnings or consolidated earned surplus, determined in accordance with
generally accepted accounting principles, including the making of
appropriate deductions for minority interests, if any, in subsidiaries,
and otherwise than in Common Stock, unless the holder of this Warrant
shall have consented to such dividend in writing.
3.11 Subdivision or Combination of Stock. In case at any time
the Company shall in any manner subdivide its outstanding shares of
Common stock into a greater number of shares or combine such shares of
Common Stock into a smaller number of shares, then the Warrant Purchase
Price in effect immediately subsequent to such subdivision or
combination shall be equal tot he product of (a) the Warrant Purchase
Price in effect immediately prior to such subdivision or combination
multiplied by (b) a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately prior to such
subdivision or combination and the denominator of which is the number
of shares of Common Stock outstanding immediately thereafter.
3.12 Reorganization, Reclassification, Consolidation, Merger
or Sale. If any reorganization or reclassification of the capital stock
of the Company, or any consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of the
Company's assets to another corporation shall be effected in such a way
that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock,
then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions shall be
made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions
specified in this Warrant and in lieu of the shares of Common Stock of
the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such shares of stock,
securities, or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby had such
reorganization, reclassification, consolidation, merger or sale not
taken place, and in any such case appropriate provision shall be made
with respect to the rights and interests of the holder of this Warrant
to the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Warrant Purchase Price and of the
number of shares purchasable and receivable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of the rights represented hereby
(including an immediate adjustment, by reason of such consolidation or
merger, of the Warrant Purchase Price to the value for the Common Stock
reflected by the terms of such consolidation or merger if the value so
reflected is less than the Warrant Purchase Price in effect immediately
prior to such consolidation or merger). In the event of a merger or
consolidation of the Company with or into another corporation as a
result of which the number of shares of common stock of the surviving
corporation greater or lesser than the number of shares of Common Stock
of the Company outstanding
7
immediately prior to such merger or consolidation are issuable to
holders of Common Stock of the Company, then the Warrant Purchase Price
in effect immediately prior to such merger or consolidation shall be
adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock of the Company.
The Company shall not effect any such consolidation, merger, or sale,
unless prior to the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger of
the corporation into or for the securities of which the previously
outstanding stock of the Company shall be exchanged in connection with
such consolidation or merger, or the corporation purchasing such
assets, as the case may be, shall assume, by written instrument
executed and mailed or delivered to the holder hereof at the last
address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such shares of stock, securities,
or assets as, in accordance with the foregoing provisions, such holder
may be entitled to purchase. If a purchase, tender, or exchange offer
is made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock of the Company, the Company shall
not effect any consolidation, merger, or sale with the Person having
made such offer or with any Affiliate of such Person unless, prior to
the consummation of such consolidation, merger, or sale, the holder of
this Warrant shall have been given a reasonable opportunity to then
elect to receive either the stock, securities, or assets then issuable
upon the exercise of this Warrant. As used herein, the term "Person"
shall mean and include an individual, a partnership, a corporation, a
trust, a joint venture, an unincorporated organization, and a
government or any department or agency thereof, and an "Affiliate" of
any controlling, controlled by, or under direct or indirect common
control with, such other Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power
to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by
contract, or otherwise. The provisions of this paragraph 3.3 governing
the substitution of another corporation for the Company shall similarly
apply to successive instances in which the corporation then deemed to
be the Company hereunder shall either sell all or substantially all of
its properties and assets to any other corporation, shall consolidate
with or merge into any other corporation, or shall be the surviving
corporation of the merger into it of any other corporation as a result
of which the holders of any of its stock or other securities shall be
deemed to have become the holders of, or shall become entitled to, the
stock or other securities of any corporation other than the corporation
at the time deemed to be the Company hereunder.
3.13 Duty to Make Fair Adjustments in Certain Cases. If any
event occurs as to which, in the opinion of the Board of Directors of
the Company, the other provisions of this paragraph 3 are not strictly
applicable or, if strictly applicable, would not fairly protect the
purchase rights of this Warrant in accordance with the essential intent
and principles hereof, the Board of Directors shall make such
adjustments in the Warrant Purchase Price as it deems necessary to
protect such purchase rights as aforesaid, but in no event shall any
such adjustment have the effect of increasing the Warrant Purchase
Price as otherwise determined pursuant to this paragraph 3.
8
3.14 Notice of Adjustment. The Company shall give to the
holder of this Warrant prompt written notice of every adjustment of the
Warrant Purchase Price, by first class mail, postage prepaid, addressed
to the address of such holder as shown on the books of the Company,
which notice shall state the Warrant Purchase Price resulting from such
adjustment and the increase or decrease, if any, in the number of
shares purchasable at such price upon the exercise of this Warrant, and
shall set forth in reasonable detail the method of calculation and the
facts upon which such calculation was based.
3.15 Other Notices. In case at any time:
(a) the Company shall declare any cash dividend upon
its Common Stock payable at a rate in excess of the rate of
the last cash dividend theretofore paid;
(b) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend or
other distribution (other than regular cash dividends) to the
holders of its Common Stock;
(c) the Company shall offer for subscription to the
holders of any of its Common Stock any additional shares of
stock of any class or other rights;
(d) there shall be any capital reorganization of the
Company or any reclassification of its capital stock or any
consolidation or merger of the Company with, or sale of all or
substantially all of its assets to, another corporation; or
(e) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give, by
first class mail, postage prepaid, addressed to the holder of this
Warrant at the address of such holder as shown on the books of the
Company, (i) at least 20 days' prior written notice of the date on
which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation
or winding up, and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation
or winding up, at least 20 days prior written notice of the date when
the same shall take place. Any notice required by clause (i) shall also
specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled
thereto, and any notice required by clause (ii) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be.
9
4. Issue Tax. The issuance of certificates for shares of Common Stock
upon the exercise of this Warrant shall be made without charge to the holder of
this Warrant for any issuance tax in respect thereof.
5. Closing of Books. The Company will at no time close its transfer
books against the transfer of this Warrant or of any shares of Common Stock
issued or issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant.
6. No Voting Rights. This Warrant shall not entitle the holder hereof
to any voting rights or other rights as a stockholder of the Company.
7. Warrants Transferable. Subject to the restrictions referred to in
the legend set forth on the face of this Warrant, this Warrant and all rights
hereunder are transferable to any person, in whole or in part, without charge to
the holder hereof, at the office of the Company referred to in paragraph 1
above, by the holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant properly endorsed. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that this Warrant,
when endorsed in blank, shall be deemed negotiable, and that the holder hereof,
when this Warrant shall have been so endorsed, may be treated by the Company and
all other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding. Until such transfer on such books, however, the
Company may treat the registered holder hereof as the owner for all purposes.
8. Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon its surrender by the holder hereof at the office of the
Company referred to in paragraph 1 above, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of Shares which may be subscribed for and purchased hereunder, each of such new
Warrants to represent the right to subscribe for and purchase such number of
shares as shall be designated by said holder hereof at the time of such
surrender.
9. Descriptive Headings and Governing Law. The descriptive headings of
the several paragraphs of this Warrant are inserted for convenience of reference
only and do not constitute a part of this Warrant. This Warrant is being
delivered and is intended to be performed in the State of Illinois and shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of such State.
10. Certain Covenants of the Company. So long as this Warrant remains
outstanding, in whole or in part, the Company will, unless the holder of this
Warrant otherwise consents in writing:
(a) within 60 days after the end of each of the first three
quarterly fiscal periods in each fiscal year of the Company, deliver to
the holder of this Warrant (i) a consolidated balance sheet of the
Company and its subsidiaries, if any, as at the end of such period, and
(ii) consolidated statements of income and of surplus of the Company
and its subsidiaries, if any, for such period and (in the case of the
second and third such
10
quarterly periods) for the period from the beginning of the current
fiscal year to the end of such quarterly period, setting forth in each
case in comparative form the consolidated figures for the corresponding
periods of the previous fiscal year, all in reasonable detail and
certified as prepared in accordance with generally accepted accounting
principles consistently applied, subject to exchanges resulting from
year-end audit adjustments, by the principal financial officer of the
Company; and
(b) within 90 days after the end of each fiscal year of the
Company, deliver to the holder of this Warrant (i) a consolidated
balance sheet of the Company and its subsidiaries, if any, as at the
end of such year, and (ii) consolidated statements of income and of
surplus of the Company and its subsidiaries, if any, for such year,
setting forth in each case in comparative form the consolidated figures
for the previous fiscal year, all in reasonable detail and accompanied
by an opinion thereon of independent public accountants, which opinion
shall state that such financial statements have been prepared in
accordance with generally accepted accounting principles consistently
applied and that the audit by such accountants in connection with such
financial statements has been made in accordance with generally
accepted auditing standards; and
(c) as soon as practicable, notify the holder of this Warrant
in writing of any potentially material adverse development concerning
the Company; and permit such holder of his representative to examine
the books and records of the company at any time during regular
business hours and make copies of any portions thereof desired to be
copied by such holder or his representative.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers under its corporate seal and this Warrant to be
dated this ______ day of ____________, 1997.
CTI INDUSTRIES CORPORATION
By:_____________________________________
President
(CORPORATE SEAL)
Attest:
_____________________________________
Secretary
11
SUBSCRIPTION AGREEMENT
Dated: ______________, 199__
To: CTI Industries Corporation
22160 N. Pepper Road
Barrington, Illinois
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to subscribe for and purchase shares of the Common Stock
covered by such Warrant, and makes payment herewith in full therefor at the
price per share provided by such Warrant.
Signature___________________________
Address_____________________________
____________________________________
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
all of the rights of the undersigned under the within Warrant, with respect to
the number of shares of Common stock set forth below, unto:
Name of Assignee Address Number of Shares
Dated: __________________, 199__
Signature___________________________
Witness_____________________________
13