CTI INDUSTRIES CORPORATION
October 25, 1999
Dear Fellow Shareholders:
You are being asked to consider and provide written consent to a
proposed one-for-three reverse split of the Common Stock of CTI Industries
Corporation (the "Company"). The reverse stock split contemplates that every
three outstanding shares of the Company's Common Stock will become one share of
the Company's Common Stock and every three outstanding shares of the Company's
Class B Common Stock will become one share of the Company's Class B Common
Stock. The Company is seeking to effectuate this reverse stock split in an
effort to increase share price in order to bring the Company into full
compliance with the continued listing rules of the NASDAQ SmallCap Stock Market.
The proposed reverse stock split is extremely important to the Company.
Your Board of Directors has unanimously approved the proposed reverse stock
split and recommends that you CONSENT to the proposal to effectuate the reverse
split.
Attached is a Proxy Statement that more fully describes the proposal.
Please give this information your careful attention.
It is anticipated that each member of the Board of Directors who own
shares of the Company's Common Stock and all of the owners of the Company's
Class B Common Stock will consent to the one-for-three reverse stock split.
These shares total approximately 38% of the outstanding voting stock of the
Company, but every vote is important because the proposed reverse stock split
requires the written consent of the holders of a majority of the outstanding
Common Stock and Class B Common Stock voting together.
Please act promptly in marking, signing, and dating the enclosed
consent card solicited by your Board of Directors, and returning it in the
return envelope provided, which requires no postage is mailed in the United
States.
Very truly yours,
Howard W. Schwan
President
<PAGE>
22160 North Pepper Road
Barrington, Illinois 60010
NOTICE OF SOLICITATION OF WRITTEN CONSENT
To: Shareholders of CTI Industries Corporation
YOU ARE HEREBY NOTIFIED, in accordance with the provisions of Section
228 of Delaware General Corporation Law ("DGCL") that the Board of Directors of
CTI Industries Corporation (the "Company") has determined that the written
consent, in lieu of a special meeting, of the holders of capital stock of the
Company be solicited with respect to the following matter:
The approval of a one-for-three reverse split of the Company's
Common Stock which on the effective date of such reverse split, will
result in each current holder of the Company's Common Stock receiving 1
share of Common Stock for every 3 shares then held, and which will
cause certain changes to the Company's Second Restated Certificate of
Incorporation, all of which is more fully described in the accompanying
Proxy Statement and the Exhibits thereto.
Only shareholders of record of the Company's Common Stock and Class B
Common Stock at the close of business on October 20, 1999, are entitled to
notice of and to consent to the written action by shareholders. The proposed
action requires the written consent of a majority of the outstanding shares of
the Company's capital stock. It is, therefore, important that you sign, date and
return the enclosed consent card in the envelope provided as soon as possible.
In accordance with DGCL Section 228, prompt notice of the taking of the action
will be given in writing to those shareholders who have not consented, once the
Company has obtained the necessary number of consents.
BY ORDER OF THE BOARD OF DIRECTORS
October 20, 1999
-------------------------------------------
Stephen M. Merrick, Secretary
YOUR VOTE IS IMPORTANT
It is important that as many shares as possible consent to the
proposed action. Please date, sign, and promptly return the
consent card in the enclosed envelope.
<PAGE>
CTI INDUSTRIES CORPORATION
22160 North Pepper Road
Barrington, Illinois 60010
PROXY STATEMENT
Information Concerning the Solicitation
This statement, which is being distributed on or about October 25,
1999, is furnished in connection with a solicitation of consents by the Board of
Directors of CTI Industries Corporation (the "Company"), a Delaware corporation,
to effectuate a one-for-three reverse split of the Company's Common Stock, $.065
par value (the "Common Stock").
The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers, nominees and fiduciaries for the out-of-pocket and clerical
expenses of transmitting copies of the proxy material to the beneficial owners
of shares held of record by such persons will be borne by the Company. The
Company does not intend to solicit consents otherwise than by use of the mail,
but certain officers and regular employees of the Company or its subsidiaries,
without additional compensation, may use their personal efforts, by telephone or
otherwise, to obtain consents. The proxy materials are being mailed to
shareholders of record at the close of business on October 20, 1999.
Voting
Only shareholders of record at the close of business on October 20,
1999 are entitled to consent to the one-for-three reverse stock split. On that
day, there were issued and outstanding _____________ shares of Common Stock and
1,098,901 shares of Class B Common Stock. Each share has one vote. The written
consent of a simple majority of the shares of Common Stock and Class B Common
Stock, voting together as a class, will be required for approval. Abstentions,
withheld votes, and broker non-votes have the effect of votes against these
matters.
If a shareholder specifies how the consent card is to be voted with
respect to the proposal, the consent card will be voted in accordance with such
specification. If a shareholder fails to so specify, the consent card will be
deemed a CONSENT to the one-for-three-reverse stock split.
Proposal to Effectuate a One-For-Three Reverse Split of the Company's Common
Stock
In August, 1997, the NASDAQ Stock Market amended the requirements for
issuers, such as the Company, to maintain the listing of their securities on the
NASDAQ SmallCap Market. One of these continued listing requirements is that the
market closing price for the listed issuer's stock must remain at or above $1.00
per share. Additional NASDAQ requirements are that there be, at all times, a
public float of at least 500,000 shares, and a market value of any public float
of at least $1,000,000. NASDAQ defines "public float" as shares that are not
held directly or indirectly by any officer or director of the issuer or by any
other person who is the beneficial owner of more than 10% of the total shares
outstanding. In addition, there must be a minimum of 300 round-lot shareholders
of the Company's stock (a "round-lot" shareholder being an individual or entity
who owns 100 or more shares). The Company must also either (i) have Net Tangible
Assets of $2,000,000 ("Net Tangible Assets" being defined by NASDAQ as "total
assets (excluding goodwill) minus total liabilities");
<PAGE>
or (ii) a market capitalization of $35,000,000; or (iii) net income in the
latest fiscal year or two of the last three fiscal years of $500,000. These new
continued listing requirements, including the minimum price per share rule,
became effective in February, 1998.
On August __, 1999, the Company was notified by NASDAQ that because the
market closing price for the Company's Common Stock had been below $1.00 several
times since April 1, 1999, the Company's Common Stock would be delisted from the
SmallCap Market unless a minimum $1.00 per share closing price was consistently
maintained in the future.
As a result of the foregoing, the Board of Directors of the Company has
adopted a resolution to effect a one-for-three reverse split of the Common
Stock, effective as soon as is practicable following shareholder approval of
said resolution by written consent. This means that, on the effective date,
three shares of the Company's Common Stock will be combined by operation of law
into one share. The intent is to bring about a three-fold increase in the market
price of the Common Stock, although there is no assurance that such a result
will occur.
To the extent that the one-for-three reverse split results in
shareholders receiving fractions of shares, the Company intends to pay cash for
such fractions in an amount per share based on the market closing price for the
Company's Common Stock on the NASDAQ SmallCap Market on the effective date.
Fractional shares will not be issued.
Management of the Company presently estimates that the one-for-three
reverse split and the attendant elimination of fractional shares should not
decrease the number of beneficial holders or the market value of its securities
below that required under NASDAQ's additional continued listing requirements or
with respect to any periodic public reporting requirements under the securities
laws and should concomitantly increase the market price to in excess of $1.00
per share, although there is no assurance that the foregoing will occur.
If the one-for-three reverse stock split is not accomplished, then,
absent an increase in the market price of the Company's Common Stock over the
near short term, the Company will not be in compliance with the NASDAQ Stock
Market's continued listing requirements, and will consequently be delisted from
the NASDAQ SmallCap Market. There is no assurance that the delisting of the
Company's Common Stock will not occur even if the one-for-three reverse split
takes place. The benefits to shareholders of the Company remaining a NASDAQ
SmallCap Market listed company is the potential for market liquidity of the
Company's Common Stock, together with price "transparency" of having its market
price readily available to the public through newspaper, electronic media and
otherwise.
In order to effectuate the one-for-three reverse stock split, once
shareholder consent has been obtained, the Company will, as soon as is
practicable thereafter, amend its current (Second Restated) Certificate of
Incorporation. Upon the filing of the Company's Third Amended and Restated
Certificate of Incorporation (attached hereto as Exhibit "A") with the Delaware
Secretary of State, the one-for-three reverse splits of the Company's Common
Stock and Class B Common Stock will occur.
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The one-for-three reverse stock split will not result in any change in
the business or management of the Company, and there will be no change in
directors as a result of the reverse stock splits. The Company's Common Stock is
listed on the NASDAQ SmallCap Market, and the necessary application materials
will be submitted to continue listing post-reverse split shares of the Company's
Common Stock on NASDAQ. Post-reverse split shares of the Company's Common Stock
will maintain a par value of $.065 per share. Following the reverse split,
previously outstanding certificates representing the Company's Common Stock may
be delivered in effecting sales through a broker, or otherwise, and all
necessary adjustments to the number of shares held will be made at the time of
sale or transfer. THUS, IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF THE COMPANY
TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR POST-REVERSE SPLIT STOCK
CERTIFICATES.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED ONE-FOR-THREE
REVERSE STOCK SPLIT.
Stock Ownership by Management and Others
The following table sets forth certain information with respect to the
beneficial ownership of the Company's capital stock, as of October 1, 1999, by
(i) each stockholder who is known by the Company to be the beneficial owner of
more than 5% of the Company's Common Stock or Class B Common Stock, (ii) each
director and executive officer of the Company who owns any shares of Common
Stock or Class B Common Stock, and (iii) all executive officers and directors as
a group. Except as otherwise indicated, the Company believes that the beneficial
owners of the shares listed below have sole investment and voting power with
respect to such shares.
Shares of Class B Shares of Common
Common Stock Stock Percent
Beneficially Beneficially of Common
Name and Address(1) Owned(2)(3) Owned(2) Stock(4)
- ----------------------- ------------ ------------ -------
Stephen M. Merrick 219,781 361,411(5) 14.37
John H. Schwan 329,670 266,707(6) 13.51
Howard W. Schwan 164,835 139,553(7) 7.67
John C. Davis -- 445,514(8) 11.47
Sharon Konny -- 12,000(9) *
Brent Anderson -- 12,000(9) *
Stanley M. Brown -- 10,000(10) *
747 Glenn Avenue
Wheeling, Illinois
Frances Ann Rohlen 274,725 -- 7.16
c/o Cheshire Partners
1504 Wells
Chicago, Illinois 60610
Philip W. Colburn 109,890 118,266(11) 5.95
Bret Tayne -- 8,510(12) *
6834 N. Kostner Avenue
Lincolnwood, Illinois 60646
All directors and executive 714,286 1,205,695 42.88
officers as a group (8 persons)
- --------------
*less than one percent
(1) Except as otherwise indicated, the address of each stockholder listed
above is c/o CTI Industries Corporation, 22160 North Pepper Road,
Barrington, Illinois 60010.
(footnotes continued on next page)
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<PAGE>
(2) A person is deemed to be the beneficial owner of securities that can be
acquired within 60 days from the date set forth above through the
exercise of any option, warrant or right. Shares of Common Stock
subject to options, warrants or rights that are currently exercisable
or exercisable within 60 days are deemed outstanding for purposes of
computing the percentage ownership of the person holding such options,
warrants or rights, but are not deemed outstanding for purposes of
computing the percentage ownership of any other person.
3) Figures below represent all Class B Common Stock outstanding.
Beneficial ownership of shares of Class B Common Stock for Messrs.
Merrick, John Schwan, Howard Schwan and Ms. Rohlen include indirect
ownership of such shares through CTI Investors, L.L.C. See "Certain
Transactions."
(4) Assumes conversion of all shares of Class B Common Stock into shares of
Common Stock.
(5) Includes warrants to purchase up to 72,527 shares of Common Stock at
$.91 per share, warrants to purchase up to 100,961 shares of Common
Stock at $3.12 per share and options to purchase up to 36,000 shares of
Common stock at $2.75 per share granted under the Company's 1997 Stock
Option Plan.
(6) Includes warrants to purchase up to 61,923 of Common Stock at $.91 per
share, warrants to purchase up to 112,180 shares of Common Stock at
$3.12 per share and options to purchase up to 36,000 shares of Common
stock at $2.75 per share granted under the Company's 1997 Stock Option
Plan.
(7) Includes warrants to purchase up to 76,923 shares of Common Stock at
$.91 per share, warrants to purchase up to 16,026 shares of Common
Stock at $3.12 per share, and options to purchase up to 40,000 shares
of Common Stock at $2.50 per share granted under the Company's 1997
Stock Option Plan.
(8) Includes warrants to purchase up to 48,077 shares of Common Stock and
212,002 shares of Common Stock subject to redemption by the Company.
See "Certain Transactions."
(9) Includes options to purchase up to 12,000 shares of Common Stock at
$2.50 per share granted under the Company's 1997 Stock Option Plan.
(10) Includes options to purchase up to 5,000 shares of Common Stock at
$2.50 per share and options to purchase up to 5,000 shares of Common
Stock at $4.00 per share, both granted under the Company's 1997 Stock
Option Plan.
(11) Includes shares held by immediate family members.
(12) Includes options to purchase up to 5,000 shares of Common Stock at
$2.50 per share granted under the
Company's 1997 Stock Option Plan.
4
<PAGE>
Incorporation of Certain Documents by Reference
The information contained in this Proxy Statement is qualified in its
entirety by reference to the Third Amended and Restated Certificate of
Incorporation of CTI Industries Corporation and the following documents, all of
the foregoing being hereby incorporated herein by reference in their entirety:
(i) The Company's Annual Report on Form 10-KSB for the fiscal year
ending October 31, 1998;
(ii) The Company's Quarterly Report on Form 10-QSB for the fiscal
quarter ending January 31, 1999;
(iii) The Company's Quarterly Report on Form 10-QSB and 10-QSB/A, as
amended, for the fiscal quarter ending April 30, 1999;
(iv) Form 8-K as filed by the Company on ________, __, 1999;
(v) The Company's Quarterly Report on Form 10-QSB for the fiscal
quarter ending July 31, 1999.
BY ORDER OF THE
BOARD OF DIRECTORS
Dated: October 20, 1999 _____________________________
Stephen M. Merrick, Secretary
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<PAGE>
EXHIBIT A
THIRD RESTATED CERTIFICATE
OF INCORPORATION OF
CTI INDUSTRIES CORPORATION
CTI Industries Corporation, a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is CTI Industries Corporation. The date
of the filing of its original Certificate of Incorporation of the Corporation
with the Secretary of State, under the name Container Merger Company, Inc., was
October 14, 1983 and the Second Restated Certificate of Incorporation was filed
on July 23, 1997.
2. This Third Restated Certificate of Incorporation restates,
integrates and further amends the Second Restated Certificate of Incorporation
of the Corporation, as amended, in its entirety and has been adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware, as amended, to read as herein set
forth in full:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is:
CTI INDUSTRIES CORPORATION
SECOND: The address, including the street, number, city and county of
the registered office of the corporation in the State of Delaware is 1209 Orange
Street, City of Wilmington, County of New Castle, and the name of the registered
agent of the corporation in the State of Delaware at such address is The
Corporation Trust Company.
THIRD: The nature of the business and of the purposes to be conducted
and promoted by the corporation shall be to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
FOURTH:
A. This Corporation is authorized to issue three classes of capital
stock to be designated respectively Common Stock ("Common Stock"), Class B
Common Stock ("Class B Common Stock") and Preferred Stock. The total number of
shares of capital stock that the Corporation is authorized to issue is Seven
Million Five Hundred Thousand (7,500,000). The total number of shares of Common
Stock this Corporation shall have authority to issue is Five Million
(5,000,000). The total number of shares of Class B Common Stock this Corporation
shall have authority to issue is Five Hundred Thousand (500,000). The total
number of shares of Preferred Stock the Company shall have the authority to
issue is Two Million (2,000,000). The Common Stock shall have a par value of
$.065 per share, the Class B Common Stock shall have a par value of $.91 per
share and the Preferred Stock shall have a par value of $.01 per share. Shares
<PAGE>
of Preferred Stock may be issued from time to time with such designations,
preferences, conversion rights, cumulative, relative, participating, option or
other rights, qualifications, limitations or restrictions thereof as shall be
stated and expressed in the resolution or resolutions providing for the issuance
of such Preferred Stock adopted by the Board of Directors pursuant to the
authority in this paragraph given.
B. Upon the effective date of this Third Restated Certificate of
Incorporation a reverse stock split of the Company's Common Stock shall
automatically take place whereby current holders of Common Stock will receive 1
share of Common Stock for every 3 shares of Common Stock then held and (ii) a
reverse stock split of the Company's Class B Common Stock shall automatically
take place whereby current holders of Class B Common Stock will receive 1 share
of Class B Common Stock for every 3 shares of Class B Common Stock then held.
The reverse stock splits provided for above will take effect automatically and
immediately without the need for replacement certificates to be issued by the
Company. The Company shall, however, issue replacement certificates as soon as
practicable thereafter.
C. The powers, preferences, rights, restrictions, and other matters
relating to the Common Stock and Class B Common Stock are as follows:
1. Dividends. The holders of the Common Stock and Class B
Common Stock shall participate equally and pro rata in dividends, if any,
declared by the Company on a per share basis.
2. Liquidation. In the event of any voluntary or involuntary
liquidation (whether complete or partial), dissolution or winding up of the
Corporation, the holders of Common Stock and Class B Common Stock shall
participate equally, on a per share basis, in the assets of the Corporation
available for distribution to its stockholders, whether from capital, surplus or
earnings.
3. Voting Rights.
3.01 General Voting Rights. Except in circumstances in which
the holders of Common Stock and Class B Common Stock, respectively,
shall be required to vote separately as a class, with respect to all
matters upon which the Corporation's stockholders shall vote or be
entitled to vote, the holders of all Common Stock and Class B Common
Stock shall vote together as a single class with each holder being
entitled to one vote per share on all such matters.
3.02 Election of Directors. For so long as there shall be
issued and outstanding more than 166,667 shares of Class B Common
Stock.
(a) By-Laws; Number of Directors. Notwithstanding the
provisions of Article Seventh hereof, the by-laws of the Corporation
shall provide for the election of seven directors and such provision
may not be amended, modified, altered or repealed except by the
approval of the holders of two-thirds of the outstanding shares of
Class B Common Stock voting separately as a class, provided, however,
that the number of directors shall in no event be reduced below seven
without the additional approval of the holders of two-thirds of the
outstanding shares of Common Stock voting separately as a class.
2
<PAGE>
(b) Election of Directors.
(i) Four of the seven directors of the
Corporation shall be elected by the
holders of a majority of the
outstanding shares of Class B Common
Stock voting separately as a class;
(ii) The remaining three directors shall
be elected by the holders of a
majority of the outstanding shares
of Common Stock and Class B Common
Stock voting together as a single
class.
3.03 Amendments to Class B Common Stock. After the date of
filing of this Third Restated Certificate of Incorporation with the
Delaware Secretary of State, the Corporation shall not (i) issue
additional shares of Class B Common Stock (except for additional
issuances upon stock dividends, stock splits, or recapitalizations with
respect to outstanding shares of Class B Common Stock) or (ii) amend
the terms of the Class B Common Stock in any manner that would
adversely affect the rights of the holders of Common Stock except with
the approval of the holders of two-thirds of the outstanding shares of
Common Stock.
3.04 Quorum. At any meeting of the stockholders of the
Corporation, the presence in person or by proxy of a majority in number
of the issued and outstanding shares of Common Stock and Class B Common
Stock, as a single class, shall be sufficient to constitute a quorum.
3.05 Action Without Meeting. Any action required or permitted
to be taken at any meeting of the stockholders of the Corporation, may
be taken without a meeting, if part of such action of written consent
thereto is signed by the holders of shares of Common Stock and/or Class
B Common Stock necessary to approve such action if such action was
taken at a meeting of stockholders.
4. Transfer.
4.01 No person holding shares of Class B Common Stock of
record (hereinafter called "Class B Holder") may transfer, and the
Corporation shall not register the transfer of, such shares of Class B
Common Stock, whether by sale, assignment, gift, bequest, appointment,
3
<PAGE>
operation of law or otherwise, except to a Permitted Transferee. A
Permitted Transferee shall mean:
(a) Stephen M. Merrick, John H. Schwan, Howard W.
Schwan, Frances Ann Rohlen, and Philip W. Colburn, their respective
spouses, issue, and the spouses of such issue (collectively referred to
as "Family Members");
(b) The trustee or trustees of a trust or trusts
(including a voting trust) for the primary benefit of any one or more
Family Members (collectively referred to as "Family Trusts");
(c) A corporation or partnership controlled (as
defined below) by one or more Family Members or Family Trusts
(collectively referred to as "Family Entities"); and
(d) The estate of such Class B Holder.
4.02 Notwithstanding anything to the contrary set forth
herein, any Class B Holder may pledge such Holder's shares of Class B Common
Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral
security for indebtedness due to the pledgee, provided that such shares shall
not be transferred to or registered in the name of the pledgee and shall remain
subject to the provisions of this Section 4. In the event of foreclosure or
other similar action by the pledgee, such pledged shares of Class B Common Stock
may only be transferred to a Permitted Transferee of the pledgor or converted
into shares of Common Stock as the pledgee may elect.
4.03 The following events shall result in the conversion of
the applicable shares of Class B Common Stock into shares of Common Stock:
(a) a Class B Holder shall transfer or attempt to
transfer Class B Common Stock to a person or entity not a Permitted
Transferee;
(b) a Class B Holder shall transfer or attempt to
transfer to any person or entity not a Permitted Transferee, including,
without limitation, a pledgee, the right to vote any Class B Common
Stock, whether by agreement, voting trust or otherwise;
(c) a Family Trust holding Class B Common Stock shall
cease to be a trust for the primary benefit of any one or more Family
Members;
(d) a Family Entity holding Class B Common Stock
shall cease to be controlled by one or more Family Members or Family
Trusts. For purposes of this Section 4, "controlled" means: (i) in the
case of a corporation, the ownership, beneficially and of record, of
shares of capital stock representing a majority of the equity ownership
of, and economic interest in, such corporation, as well as a majority
of all votes entitled to vote for the election of directors; and (ii)
in the case of a partnership, the ownership, beneficially and of
record, of partnership interests representing a majority of the equity
as a majority of the partnership interests entitled to participate in
the management of the partnership.
4
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If any of the foregoing events shall occur, all shares of
Class B Common Stock subject to such transfer or attempted transfer or then held
by such Family Trust or Family Entity, whichever applicable, shall, without
further act on anyone's part, be converted into shares of Common Stock effective
upon the date of such event occurs, and stock certificates formerly representing
such shares of Class B Common Stock shall thereupon and thereafter be deemed to
represent the like number of shares of Common Stock. The Corporation may, in
connection with preparing a list of shareholders entitled to vote at any meeting
of shareholders, or as a condition to the transfer or the resignation of shares
of Class B Common Stock on the Corporation's books, require the furnishing of
such affidavits, documents or other proof as it deems necessary to establish
that any person is a Permitted Transferee or to ascertain that none of the
events described in this subparagraph 4.03 occurred.
4.04 Shares of Class B Common Stock shall be registered in the
names of the beneficial owners thereof and not in "street" or "nominee" name.
For this purposes, a "beneficial owner" of any shares of Class B Common Stock
shall mean a person who, or any entity which, possesses the power, either singly
or jointly, to direct the voting or disposition of such shares. The Corporation
shall note on the certificates for shares of Class B Common Stock the existence
of the restrictions on transfer imposed by this Section 4.
5. Conversion.
5.01 Conversion Rights and Procedure.
(a) Right of Conversion. Each holder of shares of
Class B Common Stock shall be entitled to exercise all or a portion of
the conversion rights provided herein at any time or from time to time.
(b) Rate of Conversion. Upon exercise of the right of
conversion hereunder with respect to shares of Class B Common Stock,
the holder thereof shall be entitled to receive that number of shares
of Common Stock ("Conversion Shares") equal to the number of shares of
Class B Common Stock tendered subject to adjustment as provided in
Section 4.02.
(c) Method of Conversion. A holder of shares of Class
B Common Stock shall exercise such holder's conversion rights hereunder
by (i) delivering or mailing to the Corporation, by certified or
registered mail, return receipt requested, a written notice stating
such holder's intention to exercise such rights and specifying the
number of shares of Class B Common Stock as to which the conversion
right is exercised and (ii) accompanying such notice with a certificate
or certificates representing such shares duly endorsed in blank or
accompanied with a stock power duly endorsed in blank. The right of
exercise shall be deemed to have been exercised on the date that such
notice shall be delivered to the Corporation or mailed in accordance
with this section ("Exercise Time"). Each share of Class B Common Stock
shall be canceled after it has been converted as provided herein.
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(d) Delivery of Certificates. Certificates for
Conversion Shares shall be delivered to the holder named therein within
15 days after the Exercise Time. Unless all of the Class B Common Stock
evidenced by the certificate delivered to the Corporation shall have
been converted, the Corporation shall within such 15 day period prepare
a new certificate, substantially identical to that surrendered,
representing the balance of the shares of Class B Common Stock formerly
represented by the certificate which shall not have been converted and
shall within the said 15 day period deliver such certificate to the
person designated as the holder thereof.
(e) The Corporation covenants and agrees that:
(i) At all times during which any shares
of Class B Common Stock are issued
and outstanding, the Corporation
shall reserve and maintain a
sufficient number of authorized and
unissued shares of Common Stock
sufficient to issue shares of Common
Stock upon conversion of all of the
then issued and outstanding Class B
Common Stock, including additional
shares which may become issuable by
reason of an adjustment pursuant to
Section 5.02 hereof. The Corporation
shall not issue any shares of Common
Stock if, after the issuance
thereof, the number of authorized
and unissued shares of Common Stock
would then be insufficient to issue
shares of Common Stock to holders of
the then issued and outstanding
Class B Common Stock if all of such
holders were to exercise their
rights of conversion hereunder;
(ii) The Conversion Shares issuable upon
any conversion of any shares of
Class B Common Stock shall be deemed
to have been issued to the person
exercising such conversion privilege
at the Exercise Time, and the person
exercising such conversion privilege
shall be deemed for all purposes to
have become the record holder of
such Common Stock shares at the
Exercise Time.
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<PAGE>
(iii) All Conversion Shares which may be
issued upon any conversion of any
shares of Class B Common Stock will,
upon issuance, be fully paid and
non-assessable and free from all
taxes, liens and charges with
respect to the issue thereof.
(f) Notwithstanding the above, the shares of Class B
Common Stock then outstanding shall be automatically converted into
shares of Common Stock upon the conversion terms then in effect on
July, 2002.
5.02 Adjustment Provisions.
(a) 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 number
of shares of Common Stock into which a share of Class B Common Stock
may be converted shall be adjusted to reflect such subdivision or
combination of shares of Common Stock.
(b) 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 holders of Class B Common Stock shall thereafter have
the right to purchase and receive such shares of stock, securities, or
assets as may be issued or payable with respect to or exchange for a
number of outstanding shares of such Common Stock equal to the number
of shares of such stock immediately theretofore purchasable and
receivable upon the conversion of Class B Common Stock 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 the Class B
Common Stock to the end that the provisions hereof 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.
In the event of a merger or consolidation of the Company with or into
another corporation as a result of which a 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 immediately prior to
such merger or consolidation are issuable to holders of Common Stock of
the Company, then the number of shares of Common Stock subject to
issuance upon conversion of a share of Class B Common Stock shall be
adjusted in the same manner as though there were a subdivision or
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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. The provisions of this Section 5.02(b)
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.
(c) Notice of Adjustment. The Company shall give to
the holder of the Class B Common Stock prompt written notice of every
adjustment of the Conversion terms 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 adjustment, and shall set
forth in reasonable detail the method of calculation and the facts upon
which such calculation was based.
FIFTH: The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the board of directors or in
the by-laws of the Corporation.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its jurisdiction within the State of Delaware may, on the
application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed
for this Corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders of this Corporation,
as the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation as the case may
be, and also on this Corporation.
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SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and stockholders, it is
further provided:
(a) The number of directors of the Corporation shall
be as specified in the by-laws of the Corporation, but such number may
from time to time be increased or decreased in such manner as shall be
provided in the by-laws of the Corporation. The number of directors
shall not be less than the minimum prescribed by law. The election of
directors need not be by ballot. Directors need not be stockholders.
(b) In furtherance and not in limitation of the
powers conferred by the laws of the State of Delaware, the board of
directors is expressly authorized and empowered to make, alter, amend
and repeal by-laws, subject to the power of the stockholders to alter
or repeal by-laws made by the board of directors.
(c) Any director or any officers elected or appointed
by the stockholders or by the board of directors may be removed at any
time in such manner as shall be provided in the by-laws of the
Corporation.
(d) In the absence of fraud, no contract or other
transaction between the Corporation and any other corporation and no
act of the Corporation, shall in any way be affected or invalidated by
the fact that any of the directors of the Corporation are peculiarly or
otherwise interested in, or are directors or officers of, such other
corporation; and in the absence of fraud, any director, individually,
or any firm of which any director may be a member, may be a party to,
or may be peculiarly or otherwise interested in, any contract or
transaction of the Corporation, provided in any case, that the fact
that he or such firm is so interested shall be disclosed or shall have
been known to the Board of Directors or the majority thereof; and any
director of the Corporation, who is also a director or officer of any
such other corporation, or who is also interested may be counted in
determining the existence of quorum at any seating of the Board of
Directors of the Corporation which shall authorize any such contract,
act or transaction, may vote thereat to authorize any such contract,
act or transaction, with like force and effect as if he were not such
director or officer of such other corporation, or not so interested.
EIGHTH:
(a) The Corporation shall have power to indemnify any
person who was or is party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by the reason of the fact that
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he is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of
the Corporation and, with respect to any criminal action or
proceedings, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) The Corporation shall have power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense of and in a manner he reasonably believes
to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim,
issue or matter he reasonably believes to be in or not opposed to the
best interest of the Corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or
misconduct in the performance of this duty to the Corporation unless
and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) No director of the Corporation shall be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability for (1) any breach
of the director's duty of loyalty to the Corporation or its
stockholders; (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (3) acts under
Section 174 of the Delaware General Corporation law; or (4) any
transaction from which the director derived an improper personal
benefit.
(d) Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the board of directors in the specific case upon receipt
of an undertaking by or on behalf of the director or officer, to repay
such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in this
Article Eighth. Such expenses incurred by other employees or agents may
be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
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(e) Any indemnification under paragraphs (a), (b) and
(c) (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of
conduct set forth in paragraphs (a), (b) and (c). Such determination
shall be made (1) by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2), if such a quorum is not obtainable, or,
even if obtainable and a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion, or (3) by the
stockholders.
(f) The indemnification provided by this Article
Eighth shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any by-laws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(g) The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of this Article Eighth.
(h) For the purpose of this Article Eighth, reference
to "the Corporation" shall include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or
surviving corporation so that any person who is or was a director,
officer, employee or agent of such a constituent corporation or is or
was serving at the request of such constituent corporation,
partnership, joint venture, trust or other enterprise shall stand in
the same position under the provisions of this section with respect to
the resulting or surviving corporation in the same capacity.
NINTH: From time to time any of the provision of this Third Restated
Certificate of Incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this Certificate are granted subject to the provisions of this Article Ninth.
IN WITNESS WHEREOF, CTI Industries Corporation has caused the
Certificate to be signed by Howard W. Schwan, being the President of the
Corporation this __ day of ____, 1999.
By: ________________________________
Howard W. Schwan, President
ATTEST:
_____________________________
Secretary
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STATE OF ILLINOIS )
) ss
COUNT OF COOK )
BE IT REMEMBERED, that personally appeared before me, the undersigned,
a Notary Public authorized to take acknowledgment of deed by the laws of the
place where the foregoing Restated Certificate of Incorporation was signed
Howard W. Schwan, the President who signed the foregoing Restated Certificate of
Incorporation, known to me personally to be such, and I having make known to him
the contents of said Restated Certificate of Incorporation, he acknowledged that
the same to be his act and deed, and that the facts therein stated are truly set
forth.
GIVEN UNDER my hand and seal this ___ day of _______, 1999.
________________________________
Notary Public
<PAGE>
CTI INDUSTRIES CORPORATION
CTI INDUSTRIES CORPORATION
CONSENT FOR ONE-FOR-THREE REVERSE SPLIT
OF THE COMMON STOCK OF CTI INDUSTRIES CORPORATION
The undersigned hereby votes all shares of Common Stock, par value
$0.65 (the "Common Stock") of CTI Industries Corporation ( the "Company"), which
he is entitled to vote, as follows with respect to the following proposal:
Item 1. Proposal to effectuate a one-for-three reverse
split of the Company's Common Stock which on the
effective date of such reverse split, will result in
each current holder of the Company's Common Stock
receiving 1 share of Common Stock for every 3 shares
then held, and which will cause certain changes to
the Company's Second Restated Certificate of
Incorporation.
| | FOR | | AGAINST | | ABSTAIN
________________________________________________________________________________
THIS CONSENT, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED HEREIN. IF THIS
CONSENT DOES NOT SPECIFY A CHOICE, IT WILL BE VOTED FOR THE APPROVAL OF THE
ONE-FOR-THREE REVERSE SPLIT OF THE COMPANY'S COMMON STOCK.
_______________________________
_______________________________
Signature of Stockholder
Dated:___________________, 1999
NOTE: Please date consent and sign it exactly as name or names appear above. All
joint owners of shares should sign. State full title when signing as executor,
administrator, trustee, guardian, et cetera. Please return signed consent in the
enclosed envelope.
