SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 31, 1997
Commission File Number
000-23115
CTI INDUSTRIES CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 36-2848943
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
22160 North Pepper Road
Barrington, Illinois 60010
(Address of principal executive offices) (Zip Code)
(847) 382-1000
Registrant's telephone number, including area code
Securities registered pursuant to Sections 12(b) and 12(g) of the Act:
Name of each exchange
Title of Class on which registered:
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Common Stock, .065 par value NASDAQ SmallCap Market
To Include Exhibit 10.26
EXHIBIT 10.26
SUBSCRIPTION AND LOAN AGREEMENT
SUBSCRIPTION AND LOAN AGREEMENT made and entered into as of January 26,
1998 by and among CTI INDUSTRIES CORPORATION, a corporation organized under the
laws of the State of Delaware, U.S.A. ("CTI") and PULIDOS Y TERMINADOS FINOS
S.A. DE C.V., a corporation organized under the laws of Mexico (the "Company")
and Alpes Promotora Inmobiliaria S.A. de C.V., Juan Manuel Carrillo Coronado,
Pablo Gortazar de Oyarzabal, Francisco Hernandez Herrera, Jose A. Hernandez
Amaya, Enrique Mora Velasco, Rosa Maria Velasco, Enrique Mora Hernandez, Manuel
Mora Velasco, Ricardo Mora Velasco, Roberto Mora Velasco, Rosana Mora Velsaco,
Veronica Mora Velasco, Alejandra Mora Velasco, Claudia Mora Velasco and Maria
Guadalupe Mora Velasco (collectively the "Stockholders").
DECLARATIONS
I. Whereas the Company is engaged in manufacture and sale of latex
balloons;
II. Whereas the Company has authorized 1,928,364 shares, no par value,
which represent 100% of the capital stock of the Company.
III. Whereas the actual shareholders who enter into this Agreement have
1,060,600 no par value shares subscribed and fully paid. Those shares
represent actually 55% of the whole capital stock of the Company. These
shares are the only A shares authorized up to this moment to exercise
patrimonial and corporate rights of the Company.
IV. The Company has B shares in treasury which were previously authorized
but not paid. They were not paid but authorized by virtue of the
increase of capital stock by means of the shareholders' general meeting
which took place on May 2, 1997 (a copy of which action is attached
hereto as Exhibit A). The increase of capital stock is represented by
867,764 no par value shares ("B shares"). These shares will represent
45% of the remaining capital stock as soon as they are paid.
V. The parties desire to enter into an agreement pursuant to which CTI
will subscribe and pay for, and will purchase, and the Company will
issue and deliver to CTI, the 867,764 B shares, CTI will loan to the
Company the sum of US $850,000 secured by an interest in a trust
holding title to certain balloon manufacturing equipment and CTI will
lease to the Company certain balloon manufacturing equipment.
NOW THEREFORE, IT IS HEREBY AGREED, AS FOLLOWS:
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ARTICLE ONE
Transactions
1.1 Subscription
1.1.1 Subject to and on the terms and conditions hereinafter
provided, CTI does hereby agree to subscribe for and to purchase and
pay for, and the Company agrees to sell, issue and deliver to CTI,
effective on February 1, 1998, 867,764 B Shares of the Company, no par
value.
1.1.2 The Company has 867,764 B Shares in treasury. The
867,764 B Shares to be subscribed for and purchased hereunder were
authorized by the Shareholders General Meeting which took place on May
2, 1997, a copy of which is attached hereto as Exhibit A but were not
then subscribed and paid. Such B Shares, when issued and delivered to
CTI hereunder, will represent 45% of the capital stock of the Company.
1.1.3 The purchase price for the B Shares to be subscribed for
and purchased by CTI hereunder shall be US $800,000. The Company
acknowledges that CTI has loaned to the Company, for which notes are
outstanding, the sum of US $400,000 ("Pre-Closing Notes"). At the
Closing, CTI will pay the full amount of the purchase price for the B
Shares to be purchased hereunder as follows:
(a) The sum of US $400,000 by delivery to the Company,
and cancellation, of the Pre-Closing Notes;
(b) The sum of US $400,000 by check of CTI payable to the
Company in the amount of US $400,000.
1.2 Loan
1.2.1 Subject to and on the terms and conditions hereof, CTI
agrees, at Closing, to advance and loan to the Company, the sum of US
$850,000.
1.2.2 The terms of the loan shall be as follows:
(a) The loan shall be evidenced by a Secured
Promissory Note in the form attached hereto
as Exhibit B.
(b) The loan shall be for a term of 60 months.
At the expiration of the term the entire
principal balance, and all accrued interest,
on the loan shall be due and payable in
full. The principal amount of the loan
outstanding from time to time shall bear
interest at the rate of nine (9%) percent
per annum.
(c) Prior to the expiration of the term of the
loan, the Company shall
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make payments to the Company on the Secured
Promissory Note as follows:
(1) The Company shall pay to CTI an
amount equal to seven (7%) percent
of the Purchase Price of all
Products ordered by CTI from the
Company. Payment of such amount
shall be due at the time delivery is
provided for in the purchase order
of CTI for the Products. At CTI's
election, payment may be made of
such amount by deduction of the
amount due to CTI from the Company
from the invoice of the Company for
the Products purchased by CTI from
the Company. The designation and
quantity of Products ordered by CTI
from the Company at any time, or
from time to time, shall be within
the sole discretion of CTI.
Notwithstanding the other provisions
of this paragraph, the Company shall
pay to CTI on the last day of each
calender quarter during the term of
the Secured Promissory Note an
amount equal to the greater of (a)
US $30,000, less all amounts paid by
the Company to CTI under the Secured
Promissory Note during such calender
quarter or (b) if payments shall
have been made under the Notes
provided for in paragraph 5.1(h)
hereof, US $60,000, less all amounts
paid by the Company to CTI under the
Secured Promissory Note and the
Equipment Lease Agreement.
All payments made by the Company to
CTI under the Secured Promissory
Note shall be credited first against
all interest accrued and unpaid to
the date of the payment and the
balance, if any, shall be credited
to principal.
(2) For purposes of this paragraph:
(A) "Purchase Price" shall mean
the aggregate amount of the
purchase price for all
units of Products ordered
by CTI at any time;
(B) "Products" shall mean any
and all products presently
manufactured by the
Company, and any and all
products which the Company
may manufacture or sell
during the term of the
Secured Promissory Note.
(3) Once each calender quarter during
the term of the Note, within 15 days
after the last day of such quarter,
CTI shall
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provide to the Company a statement
setting forth all payments made by
the Company, separately, (a) during
the quarter and (b) from inception
of the note to the end of such
quarter, showing the allocation of
the payments to interest and
principal and the principal balance
remaining. Unless the Company shall
give notice to the Company of any
objection to, or disagreement with,
such report within 15 days after
receipt thereof, the payments and
allocations as set forth in the
report shall be binding on the
parties.
(c) The Secured Promissory Note shall be secured
by an assignment to the Company of a
beneficial interest in a bank trust. At the
time of the Closing, the Company shall
transfer all right, title and interest to a
bank satisfactory to CTI, in trust, in five
units of latex balloon manufacturing
equipment (such units to include two units
presently under lease to the Company from
BanOro) and the three units purchased by the
Company from Commercializadora Hecht S.A. de
C.V. The parties shall enter into a security
agreement, in form satisfactory to the CTI,
pursuant to which the beneficial interest in
such trust shall be assigned to CTI, as
security for the obligations of the Company
to CTI under the Secured Promissory Note.
The form of the security agreement, trust
and assignment are attached hereto as
Exhibits C, D and E.
(d) With respect to the Secured Promissory Note,
there shall be an Event of Default upon the
occurrence of any one or more of the
following events:
(1) The Company shall fail to make any
payment under the Secured Promissory
Note when due and within ten (10)
days after notice of such failure
shall have been given;
(2) The Company shall fail to perform or
observe any covenant, condition or
agreement under this Agreement, the
Secured Promissory Note, the
security agreement, trust agreement,
the Equipment Lease Agreement or the
Shareholders Agreement and such
failure shall continue for a period
of twenty (20) days after notice
thereof shall have been given to the
Company;
(3) Any representation or warranty made
by the Company herein or in any
certificate, agreement, statement or
document furnished by the Company in
connection with this Agreement,
including without limitation, any
financial information, shall prove
to be false or incorrect in any
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material respect;
(4) The commencement of any bankruptcy,
insolvency, arrangement,
reorganization, receivership,
liquidation or other similar
proceedings by or against the
Company or any of its properties or
business, or the appointment of a
trustee, receiver, liquidator or
custodian for the Company or any of
its properties or business, or the
making by the Company of a general
assignment or deed of trust for the
benefit of its creditors.
1.3 Lease
1.3.1 Reference is made to that certain Agreement among the
Company and CTI dated September 8, 1995, as amended ("1995 Agreement").
The parties agree that, at the time of Closing, the 1995 Agreement is
amended so that the purchase of two units of balloon manufacturing
equipment ("CTI Machines") provided for in paragraph 2 thereof is
canceled and terminated and all right, title and interest in the CTI
Machines shall thereupon be held solely by CTI. As the result of the
provisions hereof, the Company shall not be obligated to pay to CTI the
purchase price for the CTI Machines as provided in paragraph 2 of the
1995 Agreement.
1.3.2 At the time of Closing, CTI and the Company shall enter
into an Equipment Lease Agreement, a copy of which is attached hereto
as Exhibit F, pursuant to which CTI shall lease to the Company the CTI
Machines. The term of the Equipment Lease Agreement shall be a period
of 84 months from February 1, 1998.
1.3.3 The lease payments due to CTI from the Company pursuant
to the Equipment Lease Agreement shall be as follows:
(a) The Company shall pay to CTI an amount equal
to five (5%) percent of the Purchase Price
of all Products ordered by CTI from the
Company. Payment of such amount shall be due
at the time delivery is provided for in the
purchase order of CTI for the Products. At
CTI's election, payment may be made of such
amount by deduction of the amount due to CTI
from the Company from the invoice of the
Company for the Products purchased by CTI
from the Company. The designation and
quantity of Products ordered by CTI from the
Company at any time, or from time to time,
shall be within the sole discretion of CTI.
(b) For purposes of this paragraph:
(1) "Purchase Price" shall mean the
aggregate amount of the purchase
price for all units of Products
ordered by CTI at
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any time;
(2) "Products" shall mean any and all
products presently manufactured by
the Company, and any and all
products which the Company may
manufacture or sell during the term
of the Equipment Lease Agreement.
(c) Nothwithstanding any other provision hereof,
at the date of the last payment due to CTI
under the Equipment Lease Agreement, the
Company shall pay to CTI an amount equal to
US $540,593 less the aggregate amount of the
payments previously made to CTI by the
Company under the Equipment Lease Agreement.
1.4 Pre-Closing Notes.
1.4.1 The parties acknowledge that the CTI has advanced and
loaned to the Company the aggregate amount of US $400,000 and that the
Company has issued and delivered to the Company four Promissory Notes
therefore, each in the principal amount of US $100,000 ("Pre-Closing
Notes"). The Pre-Closing Notes shall bear interest from and after
November 30, 1997 at the rate of 18% per annum. In the event that a
closing shall occur hereunder, payment of the principal amount of the
Pre-Closing Notes shall be made by cancellation of the same as part of
the purchase price for the B Shares as provided in paragraph 1.1
hereof. If the Closing hereunder shall not occur, and for so long as
there shall be no Event of Default under the Pre-Closing Notes, payment
of the Pre-Closing Notes shall be made from time to time in the amount
of the purchase price of goods ordered by CTI from the Company. At the
election of CTI, payment on the Pre- Closing Notes may be made by
deduction from the purchase price of goods purchased by CTI from the
Company and delivered to CTI, all or any portion of such purchase
price. Payments under the Pre-Closing Notes shall be credited first to
accrued interest thereon and then to principal.
1.4.2 An Event of Default with respect to the Pre-Closing
Notes shall occur if any payment due under the Pre-Closing Notes shall
not be made when due and within ten (10) days after notice of such
non-payment shall have been given to the Company or if the Company
shall fail or refuse to perform its obligations with respect to the
Closing hereunder. In the event of an Event of Default, the entire
principal balance and all accrued interest on the Pre-Closing Notes
immediately shall become due and payable. In the event of an Event of
Default with respect to the Pre-Closing Notes, the Company shall be
obligated to pay all of CTI's costs of collection, including a
reasonable sum for its attorneys fees.
1.5 Closing Date. The parties agree that the Closing shall take place
on January 26, 1998, provided that if CTI's closing conditions as set forth in
Article 5 hereof have not occurred or been satisfied, or have been waived, as of
such date, the Closing shall be extended until such conditions have been
occurred, or been satisfied or waived. Notwithstanding the above, if the
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conditions have not occurred, been satisfied or waived by February 28, 1998, CTI
shall have the right to terminate this Agreement and not to proceed with the
Closing and to require payment of the Pre-Closing Notes in accordance with its
terms and the terms provided herein.
1.6 Closing Deliveries. At the Closing, the certificates,
documents and other contracts described herein, as specified below, will be
delivered:
1.6.1 The Company shall deliver to CTI:
(1) Certificates evidencing 867,764 B Shares of
the Company duly executed and dated as of
February 1, 1998;
(2) The Secured Promissory Note duly executed by
the Company;
(3) Each of the following agreements duly
executed by the Company and all shareholders
of the Company as indicated: Security
Agreement, Bank Trust Agreement, Equipment
Lease Agreement and Shareholders Agreement;
(4) A copy of the minutes of the Shareholders
General Action of May 2, 1997, duly
certified by the Secretary of the Company
that such action was duly, validly and
properly taken at the shareholders meeting
of the Company on May 2, 1997 and that such
meeting was properly called and convened;
(5) Certified copies of minutes of the directors
and shareholders of the Company authorizing
and approving this Agreement and each of the
agreements provided for herein, and the
execution, delivery and performance of each
of them;
(6) A copy of the Corporate Charter as provided
herein duly executed by the Company with
evidence of the proper filing thereof with
the appropriate governmental authority;
(7) Copies of the duly executed notes to Juan
Manuel Carrillo Coronado, Alpes and Pavi as
provided in paragraph 5.1(h) hereof and
copies of the Subordination Agreements
executed by each of such persons;
(8) A bill of sale or other proper documentation
executed by BanOro transferring title to the
leased units of balloon manufacturing
equipment to the Company;
(9) A copy of an executed release or statement
by BanOro acknowledging full payment of the
lease and loan of the Company
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with BanOro and any and all other
obligations of the Company to BanOro;
(10) A copy of a duly entered order of court
having jurisdiction terminating for all
purposes the suspension of payment
proceedings related to the Company.
(11) Documents in form acceptable to the Company
evidencing title in the Company of the CTI
Balloon Machines.
1.6.2 CTI shall deliver to the Company:
(1) Checks of CTI payable to the Company in the
aggregate amount of US $1,250,000;
(2) The canceled Pre-Closing Notes;
(3) Copies of the resolutions of the Board of
Directors of CTI, certified by the Secretary
of CTI, authorizing this Agreement and the
transactions provided for herein.
1.7 Further Assurances. At or after the Closing, and without further
consideration, the Stockholders and the Company shall execute and deliver to CTI
such further instruments of conveyance and transfer and such other documents as
CTI may reasonably request to more effectively consummate the transactions
provided for herein.
1.8 Language. This Agreement has been prepared and signed initially in
an English version, and a Spanish version will be prepared, with the intent of
providing an identical agreement in the Spanish language, and signed by all
parties also. Both versions of the Agreement shall be the effective agreement
among the parties; provided that, in the event of a conflict between the
versions, the Spanish version shall control.
ARTICLE TWO
Representations and Warranties of the Company and the Stockholders
The Company and each of the Stockholders, jointly and severally, hereby
represent and warrant to CTI as follows:
2.1 Organization. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of Mexico and has full corporate
power to own its properties and to conduct its business as presently conducted.
The Company is duly, authorized, qualified or licensed to do business in Mexico
or abroad or other jurisdiction in which its assets are located or in which its
business or operations as presently conducted make such qualification necessary.
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2.2 Authority. The Company has granted all requisite power and
authority to execute, deliver and perform this Agreement and all other documents
and instruments contemplated by this Agreement to its representatives Juan
Manuel Carrillo Coronado and Enrique Mora Velasco. The Stockholders have all
requisite power and authority to execute, deliver, and perform this Agreement
and all other documents and instruments contemplated by this Agreement. The
execution, delivery and performance of this Agreement and related documents by
the Company and the Stockholders have been authorized by all necessary action,
corporate or otherwise. The obligations undertaken hereunder by the Company and
the Stockholders are legal, valid and binding obligations.
2.3 Corporate Records. The Company and the Stockholders have delivered
to CTI true, correct and complete copies of the certificate of incorporation,
bylaws, minutes books and stock record books of the Company. The minute books of
the Company contain complete and accurate minutes or consents reflecting all
actions taken by the directors (including any committees) and security holders
of the Company.
2.4 Capitalization. The Company currently has an authorized capital
stock of 1,928,364 shares of which 1,060,600 are A shares and 867,764 are B
shares. There are no outstanding options, warrants, convertible securities or
other rights, agreements, arrangements, or commitments obligating the Company,
any Stockholder or any other Person (as defined below) to issue or sell any
securities or ownership interests in the Company. There are no stockholders'
agreements, voting agreements, voting trusts, or similar agreements binding on
any Stockholder or applicable to any of the Shares. The "B" Shares when issued
to CTI hereunder shall represent 45% of the then outstanding shares of capital
stock of the Company.
2.5 Title to the Shares. The Shares are duly issued treasury shares in
accordance with Article 216 of the General Law of Business Organizations ("Ley
General de Socladades Mercantiles"). The B Shares are free and clear of any
lien, pledge, security interest, liability, charge or other encumbrance or claim
of any Person (a "Lien"). Upon issuance of the certificates for the B Shares at
the Closing, CTI will acquire the entire legal and beneficial interest, in all
of the B Shares, free and clear of any Liens.
2.6 No Violation. Neither the execution or the delivery of this
Agreement and its attachments nor the consummation of the transactions
contemplated by this Agreement including without limitation the subscription of
the Shares by CTI will conflict with or result in the breach of any term or
provision of, or violate, or constitute a default under, or result in the
creation of any Lien on the Company's assets pursuant to, or relieve any third
party of any obligation to the Company, give any third party the right to
terminate or accelerate any obligation under or increase the rights of any
person under or increase the liabilities or obligation of the Company under, any
charter provision, bylaws, Material Agreement (as defined in Section 2.18),
Permit (as defined in 2.13), order, law or regulation to which the Company or
any of the Stockholders is a party or by which the Company, any of the
Stockholders, or any of their respective assets is in any way bound or
obligated, except for violations or beaches that would not have a material
adverse effect on the Company or its assets. For purposes of this Agreement, the
term "Material Adverse Effect" shall mean such effect as would (I) cause the
Company not to be able to operate
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immediately after Closing in the business, currently conducted, or contemplated
by CTI, absent any expenditure that is not specifically provided for herein, or
(ii) preclude the consummation of any transaction contemplated herein.
2.7 Financial Statements. Attached as Schedule 2.7 is a true and
complete copy of the unaudited balance sheet, statement of income, and cash
flows of the Company ( the "Financial Statements") for the five months ending
and as of November 30, 1997 (the Balance Sheet Date"). The Financial Statements
present fairly the financial condition of the Company at the dates specified and
the results of its operations for the periods specified and have been prepared
in accordance with Mexican Generally Accepted Accounting Principles ("MGAAP")
consistently applied, subject in the case of the unaudited statements to changes
resulting from normal period-end adjustments for recurring accruals (which will
not have a material adverse effect on the financial condition of the Company)
and to the absence of footnote disclosure and other presentation items. The
Financial Statements do not contain any items of a special or nonrecurring
nature, except as expressly stated in the Financial Statements. The Financial
Statements have been prepared from the books and records of the Company, which
accurately and fairly reflect all the transactions of acquisitions and
dispositions of assets by, and incurrence of liabilities by the Company.
2.8 Absence of Undisclosed Liabilities. The Company will have no direct
or indirect debts, obligations or liabilities of any nature, whether absolute or
contingent, accrued or unaccrued, asserted or unasserted, known or unknown, or
otherwise and whether due or to become due, (collectively "Liabilities"), except
for (I) liabilities specifically identified in the Financial Statements as
"current liabilities" in accordance with MGAAP and that are not related to
indebtedness for borrowed money, (ii) obligations to be performed in the
ordinary course of business since the Balance Sheet Date, and (iii) obligations
set forth in Schedule 2.8.
2.9 Absence of Material Adverse Change. Since the Balance Sheet Date,
except as specifically contemplated by this Agreement, there has not been: (a)
any material adverse change in the condition (financial or otherwise), results
of operations, business, prospects, assets, or Liabilities of the Company or
with respect to the manner in which the Company conducts its business or
operations; (b) any payment or transfer of assets (including without limitation
any dividend, stock repurchase, or other distribution or any repayment of
indebtedness ) to any of the Stockholders or their respective affiliates; (c)
any breach or default (or event that with notice or lapse of time would
constitute a breach or default), termination, or threatened termination under
any Material Agreement; (d) any material theft, damage, destruction, casualty
loss, condemnation, or eminent domain proceeding affecting the Company's assets,
whether or not covered by insurance; (e) any sale, assignment, or transfer of
any of the assets of the Company, except in the ordinary course of business and
consistent with past practices; (f) any waiver by the Company of any rights
related to the Company's business, operations, or assets, except in the ordinary
course of business; (g) any other transaction, agreement, or commitment entered
into by the Company or any of the Stockholders affecting the Company's business,
operations or assets, except in the ordinary course of business and consistent
with past practices; or (h) any agreement or understanding to do or resulting in
any of the foregoing.
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2.10 Taxes. Except as set forth in Schedule 2.10, all required federal,
state, local, and other tax returns, notices, and reports (including without
limitation income, property, sales, use, franchise, withholding, social security
tax returns) relating to or involving transactions with the Company have been
accurately prepared and duly and timely filed, and all taxes required to be paid
with respect to the periods covered by any such returns have been timely paid.
No tax deficiency has been proposed or assessed against the Company, and the
Company has not executed any waiver of any statute of limitations on the
assessment or collection of any tax. No tax audit, action, suit, proceeding,
investigation, or claim is now pending or, to the knowledge of the Company or
any of the Stockholders, threatened against the Company, and no issue or
question has been raised (and is currently pending ) by any taxing authority in
connection with the Company's tax returns or reports. The Company has withheld
or collected from each payment to its employees the full amount of all taxes
required to be withheld or collected therefrom and has paid all such taxes to
the proper tax receiving officers or authorized depositories. Neither the
Stockholders nor the Company has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of taxes of
the Company or for which the Company may be liable.
2.11 Litigation. Except as described in Schedule 2.11 hereto, there are
no pending, or to the knowledge of the Company or the Stockholders, threatened
lawsuits, administrative proceedings, or reviews, or formal or informal
complaints or investigations by any individual, corporation, partnership,
Governmental Body, or other entity ( a "Person") against or relating to the
Company or any of its directors, employees, or agents (in their capacities as
such) or to which any assets of the Company are subject. The Company is not
subject to or bound by any currently existing judgment, order, writ, injunction,
or decree.
2.12 Compliance with Laws. The Company is currently complying with, and
has at all times complied with, and the use, operation, and maintenance of its
assets comply with and have at all times complied with, and neither the Company
nor its assets nor the use, operation, or maintenance of its assets is in
violation or contravention of, any applicable statute, law, ordinance, decree,
order, rule, or regulation of any Governmental Body, except for violations that
would not have a material adverse effect on the Company or its assets.
2.13 Permits. The Company owns and possesses for each appropriate
Governmental Body all right, title, and interest in all permits, licenses,
authorizations, approvals, quality certifications, franchises, all rights
(individually, "Permit", collectively "Permits") issued by an Governmental Body
necessary to conduct its business, except where the failure to obtain a Permit
would not have a material adverse effect on the Company or its assets. Each of
such Permits is described in Schedule 2.13 hereto. No loss or expiration of any
such Permit is pending, or to the knowledge of the Company or the Stockholders,
threatened or enforceable, other than expiration in accordance with the terms of
Permits that may be renewed in the ordinary course of business without lapsing.
2.14 Environmental Matters. The Company is not in violation of any
environmental law that could have a material adverse effect on the Company, its
assets or its business.
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2.15 Employee Matters. The consummation of the transactions
contemplated by this Agreement and attachments hereto will not accelerate the
time of payment or vesting or increase the amount of compensation due to any
director, officer or employee (present or former) of the Company. The Company
has never experienced, and neither the Company nor the Stockholders know or have
reasonable grounds to know of any basis for, any strike, labor trouble, work
stoppage, slowdown or other interference with or impairment of the business of
the Company.
2.16 Title to Assets. Set forth in Schedule 2.16 hereto is a complete
list (including the street address, where applicable) of (I) all real property
currently owned by the Company; (ii) all real property currently leased or
otherwise used by the Company, (iii) all real property formerly owned leased or
otherwise used by the Company, indicating the nature of any facilities or
operations of the Company on such property and the date and manner of
disposition; (iv) each vehicle owned or leased by the Company, and (v) each
asset owned or leased by the Company with a book value or fair market value
greater than U.S. $5,000. The Company has good and marketable title to all of
its assets, including without limitation, the assets listed on Schedule 2.16
(other than those described in (iii) above), the assets reflected on the
Financial Statements and all assets used by the Company in the conduct of its
business (except for assets disposed of since the Balance Sheet Date in the
ordinary course of business for fair value to Persons that are not affiliates of
the Company or any of the Stockholders and consistent with past practices and
except for assets held under leases or licenses disclosed pursuant to Section
2.18); and all such assets are owned free and clear of any Liens, except for (A)
minor imperfections of title and encumbrances that do not materially detract
from or interfere with the use or value of such properties; and (B) liens
securing liabilities of the Company reflected on the Financial Statements.
2.17 Condition of Properties. Except as set forth in Schedule 2.17, all
facilities, machinery, equipment, fixture, vehicles, and other tangible property
owned, leased or used by the Company are in good operating condition and repair,
normal wear and tear excepted, are reasonably fit and usable for the purposes
for which they are being used, will not likely require major overhaul or repair
in the foreseeable future, are adequate and sufficient for the Company's
business, and conform with all applicable laws, rules and regulations, except as
would not have a material adverse effect on the Company or its assets. The
Company maintains policies of insurance issued by insurers of recognized
responsibility insuring the Company and its assets and business against such
losses and risks, and in such amounts, as are customary in the case of
corporations of established reputation engaged in the same or similar businesses
and similarly situated.
2.18 Material Agreements.
(I) Schedule 2.18 lists each agreement (whether written or
oral and including all amendments) to which a Company is a party or a
beneficiary or by which the Company or any of its assets is bound
(collectively the "Material Agreements"), including without limitation
(A) any real estate leases; (B) any agreement that is material to the
business, operations or prospects of the Company; (C) any agreement
evidencing, securing, or otherwise relating to any indebtedness for
which the Company is liable; (D)
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any capital or operating leases or conditional sales agreements
relating to vehicles, equipment or other assets of the Company; (E) any
supply or manufacturing agreements or arrangements pursuant to which
the Company is entitled or obligated to require any assets from a third
party; (F) any insurance policies; (G) any employment, consulting,
non-competition, separation, collective bargaining, union or labor
agreements or arrangements; (H) any agreement with or for the benefit
of any of the Stockholders, any director, officer or employee of the
Company or any affiliate or family member of such Person, and (I) any
other agreement or arrangement pursuant to which the Company could be
required to make or entitle to receive aggregate payments in excess of
U.S.
$5,000.
(ii) The Stockholders and the Company have delivered to CTI a
copy of each Material Agreement. Except as described in Schedule 2.18
(A) each Material Agreement is valid, binding, and in full force in
effect and enforceable in accordance with its terms; (B) the Company
has performed all its obligations under each Material Agreement, and
there exists no breach or default (or event that with notice of lapse
of the time would constitute a breach or default) under any Material
Agreement; (C) there has been no termination or notice of default or
any threatened termination under any Material Agreement and (D) no
consent of any Person is required in connection with the transactions
contemplated by this Agreement in order to preserve the rights of the
Company under or to prevent any disadvantage to the Company in respect
of any Material Agreement.
2.19 Intellectual Property Rights. Except as set forth in Schedule 2.19
there are not other registered patents, trademarks, service marks, trade names,
and copyrights, and applications for, and licenses (to or from the Company) with
respect to, any of the foregoing (collectively "Registered Intellectual
Property"), owned by the Company or with respect to which the Company has any
rights.
2.20 Subsidiaries and Investments. Except as set forth in Schedule in
2.20 the Company does not own any direct or indirect equity or debt interest in
any other Person, including, without limitation, any interest in a partnership
or joint venture (other than with CTF International), and the Company is not
obligated or committed to acquire any such interest.
2.21 Competing Interests. None of the Company, Stockholders, nor any
director, officer, relatives, or affiliate of any of such Persons owns, directly
or indirectly, an interest in any Person that is a competitor for the same
business, customer, or supplier of the Company or that otherwise has business
dealings with the Company other than Comercializadora Hecht SA de CV and CTF
International SA de CV.
2.22 Illegal or Unauthorized Payments; Political Contributions. Neither
the Company, nor any of its officers, directors, employees, agents, or other
representatives or, to the knowledge of the Company or the Stockholders, any
other Person with which the Company is or has been affiliated or associated, has
directly or indirectly, made or authorized any payment, contribution, or gift of
money, property, or services, whether or not in contravention of
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<PAGE>
applicable law, (a) as a kickback or bribe to any Person or (b) to any political
organization, or the holder of or any aspirant to any elective or appointive
public office, except for person political contributions not involving the
direct or indirect use of funds of the Company. The Company has not violated any
federal or state antitrust statutes, rules or regulations, including without
limitation those relating to unfair competition, price fixing, bid rigging, or
collusion.
2.23 Governmental Consents. Schedule 2.23 sets forth all consents,
approvals, orders or authorizations of, or registrations, qualifications,
designations, declarations, or filing with Governmental Body that is required on
the part of the Company or any of the Stockholders in connection with the
transactions contemplated by this Agreement or attachments hereto.
2.24 No Misrepresentations; Adverse Information. The Company and the
Stockholders have disclosed to CTI all facts and information known to them that
would be material to a purchase of the Convertible Notes. Neither the Company
nor the Stockholders have received any appraisal, report, or other similar
information relating to the value or condition of the Company or any of its
assets. The representations, warranties and statements made by the Company and
the Stockholders in or pursuant to this Agreement (including the Schedules to
this Agreement) are true, complete, and correct in all material respects and do
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make any such representation, warranty, or statement,
under the circumstances in which it is made, not misleading. Neither the Company
nor the Stockholders have any information or knowledge of any change
contemplated in any applicable law, ordinances or restrictions, or any judicial
or administrative action, which would have a material adverse effect upon the
business or assets of the Company, or its value.
ARTICLE THREE
Representations and Warranties of CTI
CTI represents and warrants to the Company as follows:
3.1 Organization. CTI is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware, U.S.A.
3.2 Authority. CTI has all requisite power and authority to execute,
deliver, and perform under this Agreement. The execution, delivery, and
performance of this Agreement by CTI has been duly authorized by all necessary
action, corporate or otherwise, on the part of CTI. This Agreement has been duly
executed and delivered by CTI and is a legal, valid, and binding agreement of
CTI enforceable against CTI in accordance with its terms.
3.3 No Violation. The execution, delivery, and performance of this
Agreement by CTI will not conflict with or result in the breach of any term or
provision of, or violate or constitute a default under, any charter provision or
bylaw or under any material agreement, instrument, order, law, or regulation
which CTI is a party or by which CTI is any way bound or obligated
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ARTICLE FOUR
Covenants and Agreements
4.1 Release of the Stockholders. Each of the Stockholders, for
themselves and their respective heirs, executors, administrators, successors,
and assigns, hereby fully and unconditionally release and forever discharge and
hold harmless each of the Company, CTI and their respective employees, officers,
directors, successors, and assigns from any and all claims, demands losses,
costs, expenses (including reasonable attorneys' fees and expenses),
obligations, liabilities, and damages of every kind and nature whatsoever,
whether or not now existing or known, relating in any way, directly or
indirectly, to the Company, that such Stockholder may now have or may hereafter
claim to have against the Company, CTI or any of such employees, officers,
directors, successors, or assigns; provided that the foregoing release will not
affect any obligations of CTI to the Stockholders under this Subscription and
Loan Agreement or the attachments thereto nor will it affect any current
obligation of the Company to the Stockholders as shown on the Financial
Statements.
4.2 Publicity. CTI and the Company will cooperate with each other in
the development and distribution of all news releases and other public
disclosures relating to the transactions contemplated by this Agreement. Neither
CTI on the one hand, nor the Stockholders or the Company, on the other hand,
will issue or make, or allow to have issued or made, any press release or public
announcement concerning the transactions contemplated by this Agreement without
the advance approval in writing of the form and substance thereof by the other
parties, unless otherwise required by applicable legal or stock exchange
requirements.
4.3 Transaction Costs. The Company will pay all attorneys',
accountants', finders', brokers', investment banking and other fees, costs, and
expenses incurred by the Company or the Stockholders prior to the Closing, or by
the Stockholders after the Closing in connection with the preparation,
negotiation, execution, and performance of this Agreement and attachments hereto
or any of the transactions contemplated by this Agreement and attachments
hereto. CTI will pay all attorneys', accountants', finders', brokers',
investment banking and other fees, costs and expenses that it incurs in
connection with the preparation, negotiation, execution and performance of this
Agreement or any of the transactions contemplated by this Agreement.
4.4 Nondisclosure. Each of the Stockholders acknowledges and agrees
that all customer, prospects, and marketing lists, sales data, intellectual
property, proprietary information, and trade secrets of the Company
(collectively, "Confidential Information") are valuable, special, and unique
assets and are and will be owned exclusively by the Company. Each of the
Stockholders agrees to treat the Confidential Information as confidential and
not disclose any Confidential Information to any Person or make use of any
Confidential Information for such Stockholder's own purposes or for the benefit
of any other Person (other than the Company).
4.5 Use of Proceeds. The Company shall use the proceeds of the payments
made to it by CTI hereunder solely as follows:
15
<PAGE>
4.5.1 US $815,000 paid to BanOro in full and final payment and
satisfaction of all indebtedness of the Company to BanOro, including
without limitation under any and all existing notes, leases or other
contracts, commitments or evidences of indebtedness. In connection with
such payment, the Company shall receive from BanOro (a) a full and
complete release of any and all liabilities, claims and obligations of
the Company to BanOro or any of its affiliates and (b) a bill of sale
or other appropriate document transferring to the Company title to the
two units of balloon manufacturing equipment presently leased by BanOro
to the Company, free and clear of any and all liens, claims or
encumbrances.
4.5.2 US $150,000 to Juan Manuel Carrillo Coronado in partial
payment of the outstanding obligations of the Company to him;
4.5.3 US $253,362 to Commercializadora Hecht S.A. de C.V. as
full and final payment for the three St. Louis balloon manufacturing
machines accompanied by a bill of sale or other document executed and
delivered by Hecht transferring title to such items of equipment to the
Company free and clear of any and all liens, claims or encumbrances;
4.5.4 The balance (US $31,638) for general corporate operating
purposes consistent with the budget approved by the parties.
4.6 Accountants. The Company shall have retained prior to Closing, and
shall retain and utilize, Coopers & Lybrand as the independent auditors for the
Company unless CTI shall otherwise provide its written consent.
4.7 Budget. Prior to the Closing, the Company and CTI shall agree on a
budget for the operations of the Company for fiscal 1998.
4.9 Sale of Balloons. The Company agrees that the terms of the 1995
Agreement, as amended, respecting the sale of balloons to CTI shall remain in
full force and effect and that, for the ten year term provided in the 1995
Agreement, as amended, the Company shall sell balloons exclusively to CTI for
resale in the United States and all of the following countries in Europe: United
Kingdom, Ireland, Netherlands, Belgium, Germany, Denmark, Austria, Switzerland,
Italy, Spain, Portugal, Sweden, France, Greece, Norway and Finland; provided
however, that, if during any quarter in which any of the principal amount of the
Secured Promissory Note shall be outstanding (a) the aggregate amount of the
purchases of balloons by CTI from the Company shall be less than US $425,000,
(b) no payments shall be made by the Company with respect to the notes provided
for in paragraph 5.1(h) hereof, and (c) CTI shall not waive, for such quarter,
the payment of the minimum amount of $30,000, then for a period of one year from
the last day of such quarter, the Company shall be entitled to sell balloons
directly to customers situated in the designated countries of Europe.
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<PAGE>
ARTICLE FIVE
Closing Conditions
5.1 Conditions to Obligations of CTI. The obligations of CTI under this
Agreement are subject to the satisfaction at or prior to the Closing of the
following conditions, but compliance with any such condition may be waived by
CTI in writing:
(a) An order shall have been entered terminating the pending
suspension of payments proceedings involving the Company.
(b) All obligations of the Company to BanOro, and any of its
affiliates (including without limitation under the outstanding loan and
lease of the Company with BanOro) shall have been satisfied or paid in
full with the payment to BanOro of the sum of US $815,000.
(c) All representations and warranties of the Company and the
Stockholders contained in this Agreement and the attachments thereto
must be true and correct in all material respects at and as of the
Closing with the same effect as though such representations and
warranties were made at and as of the Closing.
(d) The Company and the Stockholders must have performed and
complied with all the covenants and the agreements and satisfied the
conditions required by this Agreement to be performed, complied with or
satisfied by them at or prior to the Closing, including without
limitation, the delivery of all items required to be delivered by them
pursuant to Section 1.6.
(e) The Company, and the Stockholders where required, shall
have executed and delivered to the Company the Secured Promissory Note,
the Security Agreement, the Bank Trust Agreement, the Equipment Lease
Agreement.
(f) The Company and all Shareholders shall have executed and
delivered to the Company the Shareholders Agreement a copy of which is
attached hereto as Exhibit G;
(g) The corporate charter of the Company shall have been
amended, and such amendments duly executed and filed, in the form
attached hereto as Exhibit H.
(h) The Company shall have issued and delivered to Juan Manuel
Carrillo Coronado, Alpes and Pavi promissory notes in the form attached
hereto as Exhibit I in the aggregate principal amounts of (I) to JMCC,
US $445,779.69, (ii) Alpes, US $35,964.30 and (iii) US $303,070.01.
Each of JMCC, Alpes and Pavi shall have executed and delivered to the
Company and CTI forms of Subordination Agreement in the form attached
hereto as Exhibit J and each shall have executed and delivered to CTI
and the Company an acknowledgment and agreement that, except as set
forth in such notes and the payment to be made to JMCC at the Closing,
the Company is not indebted to any of them, any of their affiliates or
any member of the family of JMCC in any amount.
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(I) There must be no pending or threatened litigation in any
court or any proceeding before or by an Governmental Body against any
of the Stockholders, the Company or CTI to restrain or prohibit or
obtain damages or other relief with respect to this Agreement or the
attachments hereto or the consummation of the transactions contemplated
by this Agreement or the attachments thereto.
(j) All necessary contractual and governmental consents will
be obtained to comply with the applicable laws and regulations.
(k) The satisfactory completion of due diligence audit by
counsel of CTI.
(l) The Stockholders must have delivered to CTI a legal
opinion of their counsel dated on or before the date of Closing in the
form of Exhibit J and addressing such other matters as CTI reasonably
requests.
(m) All documents and proceedings related to the Closing must
be satisfactory in form and substance to CTI.
5.2 Conditions to Obligations of Stockholders and the Company. The
obligation of the Stockholders and the Company under this Agreement are subject
to the satisfaction at or prior to Closing of the following conditions, but
compliance with any such conditions may be waived by the Stockholders and the
Company in writing:
(a) All representations and warranties of CTI contained in
this Agreement must be true and correct in all material respects at and
as of the Closing with the same effect as though such representations
and warranties were made at and as of the Closing.
(b) CTI must have performed and complied with the covenants
and agreements and satisfied the conditions required by this Agreement
to be performed, complied with, or satisfied by it or prior to the
Closing, including without limitation, the delivery of all items
required to be delivered by CTI pursuant to Section 1.6.
(c) All necessary governmental consents, approvals, orders,
and authorizations must have been obtained and all necessary
governmental notices have been given with respect to this Agreement and
attachments thereto and the transactions contemplated by this Agreement
and its attachments.
ARTICLE SIX
Indemnification
6.1 Indemnification of CTI. The Company and the Stockholders jointly
and severally, will indemnify and hold CTI, its subsidiaries, and their
respective affiliates, directors, officers, employees, and agents ("the CTI
Parties") harmless from any and all liabilities, obligations, claims,
contingencies, damages, costs, diminution in value of the B Shares, and
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expenses, including all court costs and reasonable attorneys' fees (the
"Claims"), that any CTI Party may suffer or incur as a result of or relating to:
(a) the breach or inaccuracy, or any alleged breach or
inaccuracy, of any of the representations, warranties, covenants, or
agreements made by the Company or the Stockholders in this Agreement or
any attachment or pursuant to this Agreement or any attachment; and
(b) any lawsuit, claim, or proceeding of any nature existing
at or prior to the Closing, or arising out of any act or transaction of
the Stockholders or the Company occurring prior to the Closing, or
arising out of facts or circumstances that existed at or prior to the
Closing that is related to the Company, its assets or the operation of
its business.
6.2 Defense of Claims. Except as set forth below, if any lawsuit or
enforcement action is filed against any CTI Party entitled to the benefit of
indemnity hereunder, written notice thereof describing such lawsuit or
enforcement action in reasonable detail and indicating the estimated amount of
the reasonably foreseeable Claims (which estimate shall in no way limit the
amount of indemnification the CTI Party is entitled to receive hereunder), shall
be given to the Stockholders as promptly as practicable (and in any event within
three days, after the service of the citation or summons); provided that the
failure of any CTI Party to give timely notice shall not affect is rights to
indemnification hereunder except to the extent that the Stockholders demonstrate
that the CTI Party's failure to so notify the Stockholders with such ten (10)
day period increased the Claims with respect to which the CTI Party is otherwise
entitled to indemnification. Upon receipt of such notice, the Stockholders shall
have the right, but not the obligation, to undertake the defense of or, with the
consent of the CTI Party (which consent may not be unreasonably withheld), to
settle or compromise such claim. If the Stockholders elect to defend any such
asserted liability and to assume all obligations contained in Section 6.1 to
indemnify the CTI Party, then the Stockholders shall so notice the CTI Party and
shall be entitled if they so elect, to take control of the defense and
investigation of such lawsuit or action and to employ and engage attorneys of
their own choice to handle and defend the same, at the Stockholders' sole cost,
risk and expense, and such CTI Party shall cooperate in all reasonable respects,
at the Stockholders' sole cost, risk and expense, with the Stockholders and such
attorneys in the investigation trial, and defense of such lawsuit or action and
any appeal arising therefrom; provided however, that the CTI Party may, at its
own cost and expense, participate in such investigation, trial and the defense
of such lawsuit or action and any appeal arising therefrom. If the Stockholders
promptly notify the CTI Party that they intend to defend the claim and to assume
all obligations contained in Section 6.1 to indemnify the CTI Party, the CTI
Party shall not pay, settle or compromise such claim without the Stockholders'
consent (which consent shall not be unreasonably withheld). If the Stockholders
elect not to defend the Claim of the CTI Party, The CTI Party may, but shall not
be obligated to, undertake the defense of or, with the consent of Stockholder
(which consent may not be unreasonably withheld), settle or compromise such
claim, on behalf, for the account, and at the risk, of the Stockholders.
6.3 Survival. All representations and warranties made in or
pursuant to this
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Agreement will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement, and will be
unaffected by any notice, investigation, or knowledge to the contrary. All
statements contained in any Schedule, certificate, attachments hereto, or other
writing delivered in connection with this Agreement or the transactions
contemplated by this Agreement will constitute representations and warranties
under this Agreement. Each party agrees that no other party to this Agreement
will be under any duty, express or implied, to make any investigation of any
representation or warranty made by any other party to this Agreement, and that
no failure to so investigate will be considered negligent or unreasonable. All
Statements contained in any schedule, certificate, or other writing delivered in
connection with this Agreement or the transactions contemplated by this
Agreement will constitute representations and warranties under this Agreement.
ARTICLE SEVEN
Noncompetition Agreement
7.1 Noncompetition. Each of the Stockholders hereby agree to refrain
for a period of two years after the Closing (the "Non-Compete Period"), directly
or indirectly, as an employee, consultant, advisor, referring source, agent of,
or investor in, any Person from:
(a) engaging in the manufacture, sale, or distribution of
latex balloons (the "Business") within 200 kilometers of any city in
which the Company, its subsidiaries, or their respective successors and
assigns engage in the Business at such time (the "Territory");
(b) directly or indirectly influencing or attempting to
influence any customer or potential customer of the Company, its
subsidiaries, or their respective successors and assigns to purchase
products related to the Business from any person other than Company,
its subsidiaries, or their respective successors and assigns.
(c) employing or attempting to employ or solicit for any
employment competitive with the Company, its subsidiaries, or their
respective successors and assigns any individuals who are employees of
the Company, its subsidiaries, or their respective successors and
assigns at any time at which any Stockholders employs or attempts to
employ or solicit such individuals (or were employees of the Company,
its subsidiaries, or their respective successors and assigns within one
year prior to such time) or influence or seek to influence any such
employees to leave the Company's its subsidiaries', or there respective
successors' or assigns' employment;
provided that all provisions of (a) above will not apply to (I) any investment
in publicly traded securities constituting less than 2% of the outstanding
securities in such class, or (ii) to the ownership of an interest in, or the
provision of services to Hecht. Each of the Stockholders acknowledges that such
Stockholder's obligations under this Article Seven are a material inducement and
condition to CTI entering into this Agreement and performing the transactions
contemplated by this Agreement. Each of the Stockholders acknowledges that this
Section 7.1 is
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necessary to protect the interest of CTI and its affiliates and that the
restrictions and remedies contained in this Agreement are reasonable in light of
the consideration and other value the Stockholders have accepted pursuant to
this Agreement. If any provision of this Section 7.1 should be found by any
court of competent jurisdiction to be unenforceable by reason of its being too
broad as to the period of time, territory, and/or scope, then and in that even,
such provision will nevertheless remain valid and fully effective, but will be
considered to be amended so that the period of time, territory, and/or scope set
forth will be changed to be the maximum period of time, the largest territory,
and/or the broadest scope, as the case may be, that would be found enforceable
by such court. Should any Person violate this Section 7.1 the period of time of
the Non-Compete Period will automatically be extended for a period of time equal
to the period of time such person began such violation until such violation
permanently ceases.
7.2 Liquidated Damages. In the event of a violation of this Article
Seven, will be entitled to liquidated damages from the Stockholders in the
amount of U.S. $1,000.00 per day for each day the violation continues.
ARTICLE EIGHT
Miscellaneous
8.1 Notices. Any notice or communication given or made under or in
connection with the matters contemplated by this Subscription and Loan Agreement
shall be in writing and shall be delivered personally or sent by courier or by
facsimile. Any such notice or communication shall be addressed to the registered
office or principal place of business of the relevant party as set out herein
and otherwise as provided herein and, if so addressed, shall be deemed to have
been duly given or made as follows:
(a) if sent by personal delivery, upon delivery and signature of
the relevant party atthe address;
(b) if sent by facsimile when received and confirmed by the same
means.
The relevant address and facsimile number of each party for the purposes of this
Subscription and Loan Agreement is:
Name of Party Facsimile Number
- ------------- ----------------
CTI Industries Corporation (847) 382-1219
22160 N. Pepper Road
Barrington Illinois U.S.A. 60010
Company and Stockholders (3) 633-1406
c/o Enrique Mora Velasco
Hugo Vazquez Reyes, No.33
Fracc. Ind. Belenes C.P.
450100 Zapopan, Jalisco
Mexico
with a copy to:
Juan Manuel Carrillo Coronado
- -----------------------------
- -----------------------------
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A party shall notify the other parties of a change in such party's
name, relevant address or facsimile number for the purpose of this paragraph.
For the avoidance of doubt, the parties agree that the provisions of
this paragraph shall not apply in relation to the service of any writ, summons,
order, judgment or other document related to or in connection with any
proceedings or action arising out of this Subscription and Loan Agreement.
8.2 Attorneys' Fees and Costs. If attorneys' fees or other costs are
incurred to secure performance of any obligations under this Agreement, or to
establish damages for the breach of this Agreement or to obtain any other
appropriate relief, whether by way of prosecution or defense, the prevailing
party will be entitled to recover reasonable attorneys' fees and costs incurred
in connection therewith.
8.3 No Brokers. Each party to this Agreement represents to the other
party that it has not incurred and will not incur any liability for brokerage
fees or agents' commissions in connection with this Agreement or the
transactions contemplated by this Agreement, and agrees that it will indemnify
and hold harmless the other parties against any claim for brokerage and finders'
fees or agents' commissions in connection with the negotiation or consummation
of the transactions contemplated by this Agreement.
8.4 Counterparts. This Agreement may be executed in counterparts for
the convenience of the parties to this Agreement, all of which together will
constitute one and the same instrument.
8.5 Assignment Neither this Agreement nor any of the rights, interests,
or obligations under this Agreement will be assigned or delegated by the
Company, the Stockholders or CTI without the prior written consent of the other
parties; except that CTI may assign its rights and obligations under this
Agreement to any direct or indirect subsidiary of CTI. This Agreement is not
intended to confer any rights or benefits to any person (including, without
limitation, any employees of the Company) other than the parties to this
Agreement.
8.6 Entire Agreement. This Agreement and the related documents
contained as Exhibits and Schedules to this Agreement or expressly contemplated
by this Agreement contain the entire understanding of the parties relating to
the subject matter of this Agreement and
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supersede all prior written or oral and all contemporaneous oral agreements and
understandings relating to the subject matter of this Agreement and supersede
all prior written or oral and all contemporaneous oral agreements and
understandings relating to the subject matter of this Agreement. This Agreement
cannot be modified or amended except in writing signed by the party against whom
enforcement is sought. The Exhibits and Schedules to this Agreement are by this
Agreement incorporated by reference into and made a part of this Agreement for
all purposes.
8.7 Governing Law. This Agreement will be governed by and construed and
interpreted in accordance with the laws of the United Mexican States.
8.9 Arbitration. Except as otherwise specifically set forth herein, the
parties agree to submit any and all disputes relating to this Subscription and
Loan Agreement to final and binding arbitration. Any such dispute will be
resolved by arbitration in accordance with the Commercial Arbitration Rules of
the International Chamber of Commerce applied by the Chamber of Commerce of
Mexico City, or if at the date such dispute arises, there is an arbitration body
with the same faculties and equal characteristics, by the Chamber of Commerce of
Guadalajara City, then the latter one will be the appropriate authority. All
arbitration proceedings shall take place in Mexico City or in the City of
Guadalajara. All arbitration proceedings will be conducted in both English and
Spanish. Unless the parties agree otherwise, within thirty (30) days after
initiation of an arbitration hereunder the Company and the Stockholders, on the
one hand, and CTI on the other hand, will designate an arbitrator pursuant to
the Commercial Code rules. The two appointed arbitrators will then appoint a
neutral arbitrator in the matter prescribed in the Commercial Code rules. The
parties also agree that judgment of a court of competent jurisdiction may be
entered upon any award made pursuant to arbitration hereunder.
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IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
CTI INDUSTRIES CORPORATION
By: /s/ Stephen M. Merrick
---------------------------------------
Stephen M. Merrick, CEO
PULIDOS & TERMINADOS FINOS S.A. de C.V.
By: /s/ Enrique Mora Velasco
---------------------------------------
Enrique Mora Velasco
By: /s/ Juan Manuel Carrillo Coronado
---------------------------------------
Juan Manuel Carrillo Coronado
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STOCKHOLDERS:
/s/ Juan Manuel Carrillo Coronado /s/ Pablo Gortazar de Oyarzabal
- --------------------------------- -------------------------------
Juan Manuel Carrillo Coronado, Pablo Gortazar de Oyarzabal
31,819 shares 90,150 shares
- --------------------------------- -------------------------------
- --------------------------------- -------------------------------
Address Address
- --------------------------------- -------------------------------
Francisco Hernandez Herrera, Jose Antonio Hernandez Amaya
30,771 shares 30,771 shares
- --------------------------------- -------------------------------
- --------------------------------- -------------------------------
Address Address
/s/ Enrique Mora Velasco
- --------------------------------- -------------------------------
Enrique Mora Velasco 92,313 Shares Rosa Maria Valasco de Mora 15,986
Shares
- --------------------------------- -------------------------------
- --------------------------------- -------------------------------
Address Address
- ------------------------------ ------------------------------
Enrique Mora Hernandez, 58,297 Shares Manuel Mora Velasco, 5,289 Shares
- --------------------------------- -------------------------------
- --------------------------------- -------------------------------
Address Address
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Ricardo Mora Velasco 5,289 Shares Roberto Mora Velasco, 5,289 Shares
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Address Address
25
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Rosana Mora Velasco, 5,289 Shares Veronica Mora Velasco, 5,289 Shares
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Address Address
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Alejandra Mora Velasco, 5,289 Shares Claudia Mora Velasco, 5,289 Shares
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Address Address
Alpes Promotora Inmobiliria SA de CV ______________________________
668,182 shares Maria Guadalupe Mora Velasco
5,289 shares
By___________________________
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Address
26
