Document:

Exhibit
10.5

     

    Pledge
Agreement

     

    This Pledge Agreement (this “Agreement”) is dated as of
April 29, 2010, between CTI
Industries Corporation, an Illinois corporation (the “Pledgor”), and Harris
N.A., a national banking association (the “Secured Party”), in
connection with the Credit Agreement described below.

     

    Preliminary
Statement

    

    A.           The
Pledgor has requested that the Secured Party from time to time extend credit or
otherwise make financial accommodations available to or for the account of the
Pledgor, including, without limitation, pursuant to the terms of that certain
Credit Agreement dated as of April 29, 2010, between the Pledgor and the Secured
Party, as the same may from time to time be amended, modified or restated (the
“Credit Agreement”;
capitalized terms used herein and not otherwise defined shall have the meanings
given such terms in the Credit Agreement).

    B.           As
a condition to extending credit or otherwise making financial accommodations
available to or for the account of the Pledgor, the Secured Party requires,
among other things, that the Pledgor pledge and assign to the Secured Party and
grant to the Secured Party a security interest in all of the Pledged Collateral
(as defined below), whether now owned or hereafter acquired, to secure prompt
payment and full performance of the Secured Obligations (as defined
below).

    Now,
Therefore, in consideration of the benefits accruing to the Pledgor, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

    SECTION
1.       DEFINITIONS

     

    As used
herein, the following terms have the meanings set forth below:

     

    Pledged
Collateral:  collectively, (a) those certain shares of capital
stock or other equity interests owned beneficially and, if applicable, of record
by the Pledgor listed on Schedule I attached hereto and made a part hereof
(provided that the Pledged Collateral shall not include more than 65% of any
voting capital stock or other voting equity interests of foreign issuers owned
beneficially and, if applicable, of record by the Pledgor), and all cash,
dividends, other securities, instruments, rights, and other property at any time
and from time to time received or receivable in respect thereof or in exchange
for all or any part thereof, including without limitation, dividends,
distributions, warrants, profits, rights to subscribe, rights to return of its
contribution, conversion rights, liquidating dividends, and other rights
(subject to Section 6.1 below); (b) all other property hereafter delivered to
the Secured Party (or any agent or bailee holding on behalf of the Secured
Party) by the Pledgor in substitution for or in addition to any of the
foregoing, and all certificates and instruments representing or evidencing such
other property and all cash, dividends, other securities, instruments, rights,
and other property at any time and from time to time received or receivable in
respect thereof or in exchange for all or any part thereof, including without
limitation, dividends, distributions, warrants, profits, rights to subscribe,
conversion rights, liquidating dividends, and other rights; and (c) all proceeds
of all of the foregoing.

     

    Secured Obligations:
(a) any and all indebtedness, obligations and liabilities of whatsoever
kind and nature of the Pledgor to the Secured Party (whether arising before or
after the filing of a petition in bankruptcy), whether direct or indirect,
absolute or contingent, due or to become due, and whether now existing or
hereafter arising and howsoever held, evidenced or acquired, and whether
several, joint or joint and several; and (b) any and all expenses and
charges, legal or otherwise, suffered or incurred by the Secured Party in
collecting or enforcing any of such indebtedness, obligations or liabilities or
in realizing on or protecting or preserving any security therefor, including,
without limitation, the lien and security interest granted hereby.

     

    
      
        
        

      

      
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    SECTION
2.          PLEDGED
COLLATERAL

     

    2.1.           Pledge of
Collateral.  The Pledgor
hereby pledges and assigns to the Secured Party and grants to the Secured Party
a security interest in all of the Pledged Collateral, whether now owned or
hereafter acquired, to secure prompt payment and full performance of the Secured
Obligations.

     

    2.2.           Delivery
of Certificates.
All certificates or instruments representing or evidencing the Pledged
Collateral must be delivered to and held by or on behalf of the Secured Party
pursuant to this Agreement and must be in suitable form for transfer by
delivery, or accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance satisfactory to the Secured
Party.  The Secured Party has the right, at any time after an Event of
Default (as defined herein) has occurred and is continuing, in its reasonable
discretion and without notice to the Pledgor, to transfer to or to register any
or all of the Pledged Collateral in the name of the Secured Party or any of its
nominees.  In addition, the Secured Party has the right at any time to
exchange certificates or instruments representing or evidencing any or all of
the Pledged Collateral for certificates or instruments of smaller or larger
denominations.

     

    2.3.           Dividends
and Replacement Stock.  Except as
provided in Section 6.1 below, in the event that the Pledgor receives any cash,
dividends, other securities, instruments, rights, or other property at any time
and from time to time received or receivable in respect of any of the Pledged
Collateral, or in exchange for all or any part thereof, including without
limitation, dividends, distributions, warrants, profits, rights to subscribe,
conversion rights, liquidating dividends, and other rights, the Pledgor
acknowledge that the same will be received IN TRUST for the Secured Party and
will immediately deliver the same to the Secured Party in original form of
receipt, together with any stock or bond powers, assignments, endorsements, or
other documents or instruments as the Secured Party may request to establish,
protect, or perfect the Secured Party’s interest in respect of such Pledged
Collateral.

     

    SECTION
3.          REPRESENTATIONS
AND WARRANTIES

     

    3.1.           General
Representations and Warranties.  To induce the
Secured Party to enter into the Credit Agreement and the other Loan Documents,
the Pledgor represents and warrants that:

     

    3.1.1.      Ownership of Pledged
Collateral.  The Pledgor is the sole legal, beneficial, and, if
applicable, record owner of the Pledged Collateral (or, in the case of
after-acquired Pledged Collateral, will be the sole such owner thereof), having
good and marketable title thereto, free of all liens, security interests,
encumbrances, or claims of any kind other than those in favor of the Secured
Party under this Agreement.

     

    3.1.2.      Securities
Act.  All capital stock or other equity interests constituting
Pledged Collateral: (a) have been duly and validly issued in compliance
with (or pursuant to a valid exception from) all applicable laws (including
without limitation, if applicable, the Securities Act of 1933, as amended (the
“Securities Act”));
(b) if applicable, are fully paid, non-assessable, and free of preemptive
rights; (c) are not subject to any restrictions upon the voting rights or
upon the transfer thereof other than the Securities Act, any applicable “blue
sky” laws or other similar foreign laws (if applicable); (d) constitute (i) all
capital stock or other equity interests of the domestic issuers, if any, of the
Pledged Collateral owned beneficially and of record by the Pledgor and (ii) no
more than 65% of the voting capital stock or other voting equity interests of
the foreign issuers of the Pledged Collateral; and (e) include the
percentages of the issued and outstanding capital stock or other equity
interests as set forth on Schedule I attached
hereto.

     

    
      
        
        

      

      
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    3.1.3.      Representations and
Warranties in Credit Agreement and Security Agreement Incorporated.
Without limiting any of the foregoing representations and warranties, the
Pledgor represents and warrants that each of the representations and warranties
set forth in the Credit Agreement and in the Security Agreement are true,
correct, and complete as written.

     

    3.2.           Complete
Disclosure.  No Loan Document
contains any untrue statement of a material fact regarding the Pledgor or its
properties, nor fails to disclose any material fact regarding the Pledgor or its
properties necessary to make the statements contained therein not materially
misleading.  There is no fact or circumstance that the Pledgor has
failed to disclose to the Secured Party in writing that could reasonably be
expected to have a Material Adverse Effect.

     

    SECTION
4.         COVENANTS

     

    4.1.           Covenants
of Pledgor.  Until all of the
Secured Obligations, both for principal and interest, have been fully paid and
satisfied and all agreements of the Secured Party to extend credit to or for the
account of the Pledgor have expired or otherwise have been terminated, the
Pledgor shall:

     

    4.1.1.      Protect Pledged
Collateral.  Preserve and protect the Pledged
Collateral.

     

    4.1.2.      No
Liens.  Not create, incur, assume, or permit to exist any
liens, encumbrances, security interests, levies, assessments, or charges on or
in any of the Pledged Collateral, except liens permitted by the Loan
Documents.

     

    4.1.3.      No
Sales.  Not sell, encumber, or otherwise dispose of or transfer
any Pledged Collateral, or any right or interest therein and will: (a) cause the
issuer(s) of the Pledged Collateral not to issue any other voting stock in
addition to or in substitution for the Pledged Collateral, except to the
Pledgor, or in connection with outstanding stock options or with the prior
written consent of the Secured Party; and (b) pledge hereunder, immediately
upon the Pledgor’s acquisition (directly or indirectly) thereof, any and all
additional shares of stock or other securities of the issuers of the Pledged
Collateral.

     

    4.1.4.      Defend
Title.  Appear in and defend, at the Pledgor’s own expense, any
action or proceeding that may affect the Pledgor’s title to or the Secured
Party’s interest in the Pledged Collateral.

     

    4.1.5.      Taxes on Pledged
Collateral.  Promptly pay and discharge all taxes, assessments,
and governmental charges or levies imposed on the Pledgor or any of the Pledged
Collateral before the same become delinquent.

     

    4.1.6.      Further
Assurances.  Procure or execute and deliver, from time to time,
in form and substance satisfactory to the Secured Party, any stock powers, bond
powers, endorsements, assignments, financing statements, estoppel certificates,
or other writings deemed necessary or appropriate by the Secured Party to
perfect, maintain, or protect the Secured Party’s security interest in the
Pledged Collateral and the priority thereof, and take such other action and
deliver such other documents, instruments, and agreements pertaining to the
Pledged Collateral as the Secured Party may reasonably request to effectuate the
intent of this Agreement.

     

    4.1.7.      Advances.  If
the Secured Party gives value to enable the Pledgor to acquire rights in or use
of any Pledged Collateral, use such value only for such purpose.

     

    
      
        
        

      

      
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    4.1.8.      Records and Other
Information. Keep separate, accurate, and complete records of the Pledged
Collateral and provide the Secured Party with access thereto with the right to
make extracts therefrom and provide the Secured Party with such other
information pertaining to the Pledged Collateral as the Secured Party may
reasonably request from time to time.

     

    SECTION
5.          AUTHORIZED ACTION
BY THE SECURED PARTY

     

    5.1.           Attorney-in-Fact.  The Pledgor
hereby irrevocably appoints the Secured Party as its attorney-in-fact to do (but
the Secured Party shall not be obligated to and shall not incur any liability to
the Pledgor or any third party for failure to do) any act that the Pledgor is
obligated by this Agreement to do, and (subject to Section 6.1 below) to
exercise such rights and powers as the Pledgor might exercise with respect to
the Pledged Collateral, including without limitation, the right to:

     

    (a)  Collect
by legal proceedings or otherwise and endorse, receive, and receipt for all
payments, proceeds and other sums and property now or hereafter payable on or in
respect of proceeds, and other sums and property now or hereafter payable on or
in respect of the Pledged Collateral, including dividends, profits, and interest
payments;

     

    (b)  Enter
into any extension, reorganization, deposit, merger, or consolidation agreement
or other agreement pertaining to any of the Pledged Collateral, and in
connection therewith, to: (i) deposit or surrender control of the Pledged
Collateral thereunder; (ii) accept other property in exchange therefor; and
(iii) do and perform such acts and things as the Secured Party may deem proper;
and any money or property secured in exchange therefor will be applied to the
Secured Obligations or held by the Secured Party pursuant to the provisions of
this Agreement;

     

    (c)  Protect
and preserve the Pledged Collateral;

     

    (d)  Transfer
the Pledged Collateral to its own or its nominee’s name; and

     

    (e)  Make
any compromise, settlement, or adjustment, and take any action the Secured Party
deems advisable, with respect to the Pledged Collateral.

     

    5.2.           Reimbursement. The Pledgor agrees to
reimburse the Secured Party upon demand for any costs and reasonable expenses,
including attorneys’ fees, that the Secured Party may incur while acting as the
Pledgor’s attorney-in-fact under this Agreement, all of which costs and expenses
are included in the Secured Obligations and are payable upon
demand.  It is further agreed and understood between the parties
hereto that such care as the Secured Party gives to the safekeeping of its own
property of like kind constitutes reasonable care of the Pledged Collateral when
in the Secured Party’s possession; provided, however, that the Secured
Party will not be required to make any presentment, demand, or protest, or give
any notice and need not take any action to preserve any rights against any prior
party or any other person in connection with the Secured Obligations or with
respect to the Pledged Collateral.

     

    5.3.           Irrevocable
Interests.  All the foregoing
powers authorized in this Section 5, being coupled with an interest, are
irrevocable so long as any of the Secured Obligations are
outstanding.

     

    
      
        
        

      

      
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    SECTION
6.        TRANSFER, VOTING, DIVIDENDS,
ETC.

     

    6.1.         Prior to
Event of Default.  Notwithstanding
any other provision of this Agreement, so long as no Event of Default (as
defined herein) has occurred and is continuing:

     

    (a)  The
Pledgor is entitled to exercise all voting powers pertaining to all shares of
stock and other securities constituting the Pledged Collateral for all purposes
not inconsistent with the terms of this Agreement;

     

    (b)  The
Pledgor is entitled to receive and retain all dividends (other than shares of
stock or liquidating dividends) and all interest payments payable in respect of
the Pledged Collateral; provided, that such dividends
or interest payments are permitted by the terms of the Credit Agreement and the
other Loan Documents; and provided, further, however, that all shares of
stock or property representing shares of stock or liquidating dividends or a
distribution or return of capital upon or in respect of the shares of stock
constituting the Pledged Collateral or resulting from a split-up, revision, or
reclassification of the Pledged Collateral or received in exchange therefor, as
a result of a merger, consolidation, or otherwise, must be paid or transferred
directly to the Secured Party immediately upon receipt thereof by the Pledgor
and be retained by the Secured Party as Pledged Collateral hereunder;
and

     

    (c)  In
order to permit the Pledgor to exercise such voting powers and to receive such
dividends, the Secured Party will, if necessary and upon the written request of
the Pledgor, from time to time, execute and deliver to the Pledgor appropriate
proxies.

     

    6.2.         During
Event of Default.  If any Event of
Default (as defined herein) has occurred and while the same is
continuing:

     

    (a)           The
Secured Party or its nominee or nominees may, if the Secured Party so elects by
written notice to the Pledgor, have the sole and exclusive right to exercise all
voting powers pertaining to the shares of stock constituting Pledged Collateral,
and may exercise such powers in such manner as the Secured Party may elect, and
the Pledgor hereby grants the Secured Party an irrevocable proxy, coupled with
an interest, to vote such shares of stock; provided, however, that such proxy will
terminate upon termination of the Secured Party’s security interest in the
Pledged Collateral; and

     

    (b)           All
dividends and other distributions and profits made upon or in respect of the
Pledged Collateral and all interest payments must be paid directly to and be
retained by the Secured Party as Pledged Collateral hereunder (or applied to the
Secured Obligations, consistent with the terms of the Credit Agreement and the
Security Agreement).

     

    
      
        
        

      

      
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    SECTION
7.        DEFAULT AND
REMEDIES

     

    7.1.         Events of
Default.  Any “Event of
Default” as defined in the Credit Agreement shall be an “Event of Default”
hereunder.

     

    7.2.         Remedies
upon Default.  If an Event of
Default described in Section 9.1(j) of the Credit Agreement occurs with respect
to the Pledgor, then to the extent permitted by applicable law, all Secured
Obligations shall become automatically due and payable by the Pledgor, without
any action by the Secured Party or notice of any kind.  In addition,
or if any other Event of Default exists, the Secured Party may in its discretion
do any one or more of the following from time to time (upon such notice to the
Pledgor as may be required by applicable law after giving effect to the
agreements and waivers contained herein):

     

    (a)           declare
any Secured Obligations immediately due and payable, whereupon they shall be due
and payable without diligence, presentment, demand, protest, or notice of any
kind, including notice of intent to accelerate and notice of acceleration, all
of which are hereby waived by the Pledgor to the fullest extent permitted by
law;

     

    (b)           settle,
compromise, or release, on terms acceptable to the Secured Party, in whole or in
part, any amounts owing on the Pledged Collateral, and to extend the time of
payment, in the Secured Party’s name or in the name of the Pledgor, in respect
thereof;

     

    (c)           apply
to the payment of the Secured Obligations, or collect the Pledged Collateral,
notwithstanding any forfeiture of interest or loss of other rights of the
Pledgor against any obligor on the Pledged Collateral resulting from such
action;

     

    (d)           sell
or otherwise dispose of all or any part of the Pledged Collateral in accordance
with applicable law, either at public or private sale, on any broker’s board or
securities exchange, in lots or in bulk, for cash, on credit, or otherwise, with
or without representations or warranties, and upon such terms as are acceptable
to the Secured Party; and

     

    (e)           exercise
any other default rights or remedies afforded under the Credit Agreement, any
other Loan Document, or any other agreement, by law, at equity or otherwise,
including the rights and remedies of a secured party under the Uniform
Commercial Code of the State of Illinois as in effect from time to
time.

     

    7.3.        Application
of Proceeds.  The net cash
proceeds resulting from the collection, liquidation, sale, or other disposition
of the Pledged Collateral will be applied first to the expenses (including all
attorneys’ fees) of holding, storing, preparing for sale, selling, collecting,
liquidating, and the like, including any brokerage commissions and stamp or
transfer taxes, and then to the satisfaction of all Secured Obligations,
application as to any particular obligation or indebtedness or against principal
or interest to be in the Secured Party’s absolute discretion.

     

    
      
        
        

      

      
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    7.4.        Securities
Act.  If by reason of
any prohibition contained in the Securities Act, as now or hereafter in effect,
or in applicable Illinois or other state securities laws, as now or hereafter in
effect, or in any rules or regulations pertaining to any of the foregoing laws,
the Secured Party believes in its sole judgment that it is compelled to resort
to one or more private sales of shares of stock constituting Pledged Collateral
to a single purchaser or a restricted group of purchasers who will be obliged to
agree, among other things, to acquire such securities for their own account, for
investment and not with a view to the distribution or resale thereof, the
Pledgor acknowledges and agrees that private sales of such Pledged Collateral
may be held notwithstanding that such sales may be at prices and on other terms
less favorable to the Pledgor than if such Pledged Collateral were sold at
public sale.  The Pledgor further agrees that the Secured Party has no
obligation to delay the sale of any such Pledged Collateral for the period of
time necessary to permit registration of the Pledged Collateral, even if the
issuer thereof would, or should, agree to register such Pledged Collateral for
public sale under applicable securities laws.  The Pledgor
specifically agrees that private sales made under the foregoing circumstances
shall be deemed to have been made in a “commercially reasonable”
manner.

     

    7.5.        Duty of
Secured Party.  The Secured Party
is not under any duty or obligation whatsoever to collect any dividends,
interest, profits, or other payments due or accruing in respect of the Pledged
Collateral or to take any action to preserve rights in connection with any
Pledged Collateral, including without limitation, making or giving any
presentment, demands for performance, notices of non-performance, protests,
notices of protest, or notices of dishonor in connection with any Pledged
Collateral.

     

    7.6.        Return;
Acquittance.  The Secured Party
may deliver any Pledged Collateral to the Pledgor at any time and the receipt
thereof by the Pledgor will be a complete and full acquittance in respect of the
Pledged Collateral so delivered, and the Secured Party will thereafter be
discharged from any liability or responsibility therefor.

     

    7.7.        Remedies Cumulative; No
Waiver.

     

    7.7.1.       Cumulative
Rights.  All covenants, conditions, provisions, warranties,
guaranties, indemnities, and other undertakings of the Pledgor contained in the
Loan Documents are cumulative and not in derogation or substitution of each
other.  In particular, the rights and remedies of the Secured Party
are cumulative, may be exercised at any time and from time to time, concurrently
or in any order, and shall not be exclusive of any other rights or remedies that
the Secured Party may have, whether under any agreement, by law, at equity, or
otherwise.

     

    7.7.2.       Waivers.  The
failure or delay of the Secured Party to require strict performance by the
Pledgor with any terms of the Loan Documents, or to exercise any rights or
remedies with respect to Pledged Collateral or otherwise, shall not operate as a
waiver thereof nor as establishment of a course of dealing.  All
rights and remedies shall continue in full force and effect until all of the
Secured Obligations, both for principal and interest, have been fully paid and
satisfied and all agreements of the Secured Party to extend credit to or for the
account of the Pledgor have expired or otherwise have been
terminated.  No modification of any terms of any Loan Documents
(including any waiver thereof) shall be effective, unless such modification is
specifically provided in a writing directed to the Pledgor and executed by the
Secured Party, and such modification shall be applicable only to the matter
specified.  No waiver of any Default or Event of Default shall
constitute a waiver of any other Default or Event of Default that may exist at
such time, unless expressly stated.  If the Secured Party accepts
performance by the Pledgor under any Loan Document in a manner other than that
specified therein, or during any Default or Event of Default, or if the Secured
Party shall delay or exercise any right or remedy under any Loan Document, such
acceptance, delay, or exercise shall not operate to waive any Default or Event
of Default nor to preclude exercise of any other right or remedy.

     

    
      
        
        

      

      
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    SECTION
8.        MISCELLANEOUS

     

    8.1.         Successors
and Assigns.  All of the
rights, privileges, remedies and options given to the Secured Party hereunder
shall inure to the benefit of its successors and assigns, and all the terms,
conditions, covenants, agreements, representations and warranties of and in this
Agreement shall bind the Pledgor and its legal representatives, successors and
assigns, provided that the Pledgor may not assign its rights or delegate its
duties hereunder without the Secured Party’s prior written consent.

     

    8.2.         Notices
and Communications.  Except as
otherwise specified herein, all notices hereunder shall be in writing
(including, without limitation, notice by telecopy) and shall be given to the
relevant party at its address or telecopier number set forth below (or, if no
such address is set forth below, at the address of the Pledgor as shown on the
records of the Secured Party), or such other address or telecopier number as
such party may hereafter specify by notice to the other given by courier, by
United States certified or registered mail, by telecopy or by other
telecommunication device capable of creating a written record of such notice and
its receipt.  Notices hereunder shall be addressed:

     

    
      	
              to
      the Pledgor at:

            	
              to
      the Secured Party at:

            
	 
      	 
      
	
              CTI
      Industries Corporation

            	
              Harris
      N.A.

            
	
              22160
      North Pepper Road

            	
              111
      West Monroe Street – 5W

            
	
              Barrington,
      Illinois 60010

            	
              Chicago,
      Illinois 60603

            
	
              Attention:          Stephen
      M. Merrick

            	
              Attention:           Timothy
      J. Moran

            
	
              Telephone:       (847)
      620-1308

            	
              Telephone:         (312)
      461-2633

            
	
              Facsimile:          _______________________

            	
              Facsimile:
               (312)
      502-3922

            
	 
      	 
      
	
              with
      a copy to:

            	
              with
      a copy to:

            
	 
      	 
      
	
              Vanasco,
      Genelly & Miller

            	
              McGuireWoods
      LLP

            
	
              33
      North LaSalle Street, Suite 2200

            	
              77
      West Wacker Drive, Suite 4100

            
	
              Chicago,
      Illinois 60602

            	
              Chicago,
      Illinois 60601

            
	
              Attention:           Gerald
      Miller

            	
              Attention:           Arthur
      B. Muir

            
	
              Telephone:         (312)
      786-5100

            	
              Telephone:         (312)
      750-3595

            
	
              Facsimile:  
             (312) 786-5111

            	
              Facsimile:        
       (312) 698-4568

            

    

    

    Each such
notice, request or other communication shall be effective (i) if given by
telecopier, when such telecopy is transmitted to the telecopier number specified
in this Section and a confirmation of such telecopy has been received by the
sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered
at the addresses specified in this Section.

    

    8.3.         Performance
of Secured Obligations.  The Secured Party
may, in its discretion at any time and from time to time, at the Pledgor’s
expense, pay any amount or do any act required of the Pledgor hereunder or
otherwise lawfully requested by the Secured Party to (a) enforce any Loan
Document or collect any Secured Obligations; (b) protect, insure, maintain, or
realize upon any Pledged Collateral; or (c) defend or maintain the validity or
priority of the Secured Party’s Liens in any Pledged Collateral, including any
payment of a judgment, insurance premium, warehouse charge, finishing or
processing charge, or landlord claim, or any discharge of a Lien.  All
payments, costs, and expenses (including extraordinary expenses) of the Secured
Party under this Section shall be reimbursed to the Secured Party by the
Pledgor, on demand, with
interest from the date incurred to the date of payment thereof at the rate of
interest applicable to Base Rate Portions during the existence of any Event of
Default.  Any payment made or action taken by the Secured Party under
this Section shall be without prejudice to any right to assert an Event of
Default or to exercise any other rights or remedies under the Loan
Documents.

     

    
      
        
        

      

      
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    8.4.         Severability.  In the event and
to the extent that any provision hereof shall be deemed to be invalid or
unenforceable by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Agreement shall to such extent
be construed as not containing such provision, but only as to such locations
where such law or interpretation is operative, and the invalidity or
unenforceability of such provision shall not affect the validity of any
remaining provisions hereof, and any and all other provisions hereof which are
otherwise lawful and valid shall remain in full force and effect.

     

    8.5.         Cumulative
Effect; Conflict of Terms.  The provisions of
this Agreement and the other the Loan Documents are cumulative.  The
parties acknowledge that the Loan Documents may use several limitations, tests,
or measurements to regulate similar matters, and they agree that these are
cumulative and that each must be performed as provided.  Except as
otherwise provided in another Loan Document (by specific reference to the
applicable provision of this Agreement), if any provision contained herein is in
direct conflict with any provision in another Loan Document, the provision
herein shall govern and control.

     

    8.6.         Counterparts.  This Agreement
may be executed in any number of counterparts, and by different parties hereto
on separate counterpart signature pages, and all such counterparts taken
together shall be deemed to constitute one and the same
instrument.  The Pledgor acknowledges that this Agreement is and shall
be effective upon its execution and delivery by the Pledgor to the Secured
Party, and it shall not be necessary for the Secured Party to execute this
Agreement or any other acceptance hereof or otherwise to signify or express its
acceptance hereof.

     

    8.7.         Entire
Agreement.  Time is of the
essence of the Loan Documents.  The Loan Documents constitute the
entire contract among the parties relating to the subject matter hereof, and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof.

     

    8.8.         Governing
Law.  This Agreement
shall be deemed to have been made in the State of Illinois and shall be governed
by, and construed in accordance with, the laws of the State of
Illinois.  Section headings used in this Agreement are for convenience
of reference only and are not a part of this Agreement for any other
purpose.

     

    8.9.         Consent
to Forum;
Waivers.  The Pledgor
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Northern District of Illinois and of any Illinois State court
sitting in the City of Chicago for purposes of all legal proceedings arising out
of or relating to this Agreement or the transactions contemplated hereby. The
Pledgor irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient
forum.  The
Pledgor and the Secured Party each hereby irrevocably waives any and all right
to trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.

     

    8.10.       Advice of
Counsel.  The Pledgor
acknowledges that it has either obtained the advice of counsel or has had the
opportunity to obtain such advice in connection with the terms and provisions of
this Agreement.

     

    [Remainder
of Page Intentionally Left Blank]

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    In
Witness Whereof, the parties hereto have caused this Agreement to be duly
executed and delivered in Chicago, Illinois, as of the date and year first above
written.

    

    
      
        	 
      	 
      	
                CTI
      Industries Corporation

              
	 
      	 
      	 
      
	 
      	
                By: 

              	
                /s/ Stephen M. Merrick

              
	 
      	 
      	
                Executive
      Vice-President and Chief Financial

                Officer

              
	 
      	 
      	 
      
	 
      	 
      	
                Harris
      N.A.

              
	 
      	 
      	 
      
	 
      	
                By: 

              	
                /s/ Timothy J. Moran

              
	 
      	 
      	
                Senior
      Vice-President

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
I

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    Issuer and Jurisdiction of its

                                    Organization

                                  	 	
                                    Class of Equity

                                  	 	
                                    Certificate

                                    No(s).

                                  	 	 	
                                    Number of

                                    Shares/Units

                                  	 	 	
                                    % of

                                    Outstanding

                                    Equity

                                  	 
	
                                    Flexo
      Universal, S.A. de C.V. (Mexico)

                                  	 	
                                    Series
      A

                                  	 	
                                    *

                                  	 	 	
                                    32,500

                                  	 	 	
                                    65%

                                  	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
                                    Flexo
      Universal, S.A. de C.V. (Mexico)

                                  	 	
                                    Series
      B

                                  	 	
                                    2

                                  	 	 	
                                    1,480,400

                                  	 	 	
                                    97.9%

                                  	 

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    *  To
be provided post-closing.

    
      
        
        

      

      
        11NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

    

    COMMON
STOCK PURCHASE WARRANT

    

     GENSPERA,
INC.

     

    
      	
              Warrant
      Shares: 235,000

            	
              Initial
      Exercise Date: [_______]

            

    

     

    THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, _____________ (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise
Date”) and on or prior to the close of business on the five year
anniversary of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from GenSpera, Inc., a
Delaware corporation (the “Company”), up to
235,000 shares (the “Warrant Shares”) of
Common Stock.  The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

     

    Section
1.        Definitions.

     

    “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities Act.  With
respect to a Holder, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Holder will be deemed
to be an Affiliate of such Holder.

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    “Board of Directors”
means the board of directors of the Company.

     

    “Business Day” means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.

     

    “Commission” means the
Securities and Exchange Commission.

     

    “Common Stock” means
the common stock of the Company, par value $0.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed into.

     

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

    

    “Market Price” means:
(a) the closing price reported on the Company’s Trading Market on the Trading
Day immediately preceding any applicable measuring date, (b) if no trading
occurs on the Trading Day immediately preceding any applicable measurement date,
then the closing bid price reported on such Trading Market, (c) if the Company’s
Common Shares are not then listed on a Trading Market, the price offered by any
acquirer in a Fundamental Transaction, or (d) in all other cases, the fair
market value of a share of Common Stock as determined in good faith by the
Company’s Board of Directors at their sole and absolute discretion.

     

    “Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

     

    “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

     

    “Trading Day” means a
day on which the New York Stock Exchange is open for trading.

     

    “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange, and the OTC Bulletin Board.

     

    “Transfer Agent” means
American Stock Transfer and Trust Company, the current transfer agent of the
Company with a mailing address of 59 Maiden Lane, New York, New York 10038 and a
facsimile number of (718) 921-8336, and any successor transfer agent of the
Company.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    Section
2.             Exercise.

     

    a)           Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto; and, within 3 Business Days of the date
said Notice of Exercise is delivered to the Company, the Company shall have
received  payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States
bank.  Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company until
the Holder has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall surrender
this Warrant to the Company for cancellation within 3 Business Days of the date
the final Notice of Exercise is delivered to the Company.  Partial
exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount
equal to the applicable number of Warrant Shares purchased.  The
Holder and the Company shall maintain records showing the number of Warrant
Shares purchased and the date of such purchases.  The Company shall
deliver any objection to any Notice of Exercise Form within 1 Business Day of
receipt of such notice.  In the event of any dispute or discrepancy,
the records of the Company shall be controlling and determinative in the absence
of manifest error. The Holder
and any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof.

     

    b)           Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be $1.65,
subject to adjustment hereunder (the “Exercise
Price”).

     

    c)           Cashless
Exercise.  If at any time after one year from the Closing there
is no effective registration statement registering, or no current prospectus
available for, the resale of the Warrant Shares by the Holder, this Warrant may
also be exercised at such time by means of a “cashless exercise” in which the
Holder shall be entitled to receive a certificate for the number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:

     

    
      (A) = the
Market Price on the Business Day immediately preceding the date of such
election;

    

    

    
      (B)  =
the Exercise Price of this Warrant, as adjusted; and

    

    

    
      (X) = the
number of Warrant Shares issuable upon exercise of this Warrant in accordance
with the terms of this Warrant by means of a cash exercise rather than a
cashless exercise.

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    Notwithstanding
anything herein to the contrary, and provided this Warrant is then in the money,
on the Termination Date this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 2(c).

    

    d)           Exercise Limitations.
The Company shall not effect any exercise of this Warrant, and a Holder shall
not have the right to exercise any portion of this Warrant, pursuant to Section
2 or otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, the Holder (together
with the Holder’s Affiliates, and any other person or entity acting as a group
together with the Holder or any of the Holder’s Affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). 
For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which such determination is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder or any of
its Affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
any other  Common Stock Equivalents) subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its affiliates.  Except as set forth in the
preceding sentence, for purposes of this Section 2(d), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance
therewith.   To the extent that the limitation contained in this
Section 2(d) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with any
Affiliates) and of which portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject to the Beneficial Ownership Limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such
determination.   In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 2(d), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
periodic or annual report, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant,
by the Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant.  The Holder, upon not
less than 61 days’ prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 2(d), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(d) shall continue to
apply.  Any such increase or decrease will not be effective until the
61st
day after such notice is delivered to the Company.  The provisions of
this paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2(c) to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder of
this Warrant.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    e)           Mechanics of
Exercise.

     

    i.      Delivery of Certificates
Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the Holder by
crediting the account of the Holder’s prime broker with the Depository Trust
Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the
Company is a participant in such system and there is an effective registration
statement permitting the resale of the Warrant Shares by the Holder, and
otherwise by physical delivery to the address specified by the Holder in the
Notice of Exercise within 3 Trading Days from the delivery to the Company of the
Notice of Exercise Form, surrender of this Warrant (if required) and payment of
the aggregate Exercise Price as set forth above (“Warrant Share Delivery
Date”).  This Warrant shall be deemed to have been exercised on
the date the Exercise Price is received by the Company.  The Warrant
Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant has been exercised
by payment to the Company of the Exercise Price (or by cashless exercise, if
permitted) and all taxes required to be paid by the Holder, if any, pursuant to
Section 2(e)(vi) prior to the issuance of such shares, have been
paid..

     

    ii.           Delivery of New Warrants
Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    iii.           Rescission
Rights.  If the Company fails to cause the transfer agent of
the Company to transmit to the Holder a certificate or the certificates
representing the Warrant Shares pursuant to Section 2(e)(i) by the Warrant Share
Delivery Date, then, the Holder will have the right to rescind such
exercise.

     

    iv.           No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall, at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.

     

    v.         
 Charges, Taxes
and Expenses.  Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

     

    vi.          Closing of
Books.  The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.

     

    Section
3.             Certain
Adjustments.

     

    a)           Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares or (iv)
issues by reclassification of shares of the Common Stock any shares of capital
stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding immediately before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged.  Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    b)           Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the
Company effects any merger or consolidation of the Company with or into another
Person, (ii) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (iii) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (each “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate
Consideration”) receivable as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. For purposes
of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction.  To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 3(b)
and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, or (2) a “Rule
13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, the Company
or any successor entity shall pay at the Holder’s option, exercisable at any
time concurrently with or within 30 days after the consummation of the
Fundamental Transaction, an amount of cash, per share, equal to the (A) Market
Price, less (B) the Exercise Price, on the date the Fundamental Transaction is
consummated.  In the event the product of the forgoing is negative, no
payment by the Company shall be required.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    c)           Calculations. All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.

     

    d)           Notice to
Holder.

     

    i.      Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly mail to the Holder a notice
setting forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.  Notwithstanding the
forgoing, in the event the Company makes a public disclosure with regard to the
Exercise Price adjustment, such disclosure shall be deemed notice to the
Holders.

     

    ii.     Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any other
distribution in whatever form) on the Common Stock, (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register of the Company,
at least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.  The Holder is
entitled to exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such notice.
Notwithstanding the forgoing, in the event the Company makes a public disclosure
with regard to the subject matter of this Section 3(d)(ii), such disclosure
shall be deemed notice to the Holders.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    Section
4.         
   Transfer of
Warrant.

     

    a)           Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof, this Warrant and all rights hereunder (including,
without limitation, any registration rights) are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the Company or
its designated agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer.  Upon such surrender and, if required,
such payment, the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled.  The Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.  Notwithstanding the
foregoing, upon request by Holder, the Company will issue a new Warrant or
Warrants in the names of any assignee(s) of Holder at no charge to Holder or the
assignee(s). 

     

    b)           New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney.  Subject to compliance
with Section 4(a) and 4(d), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. All Warrants issued on transfers or exchanges shall
be dated the original Issue Date and shall be identical with this Warrant except
as to the number of Warrant Shares issuable pursuant thereto.

     

    c)           Warrant Register. The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    d)           Transfer
Restrictions. If, at the time of the surrender of this Warrant in connection with
any transfer of this Warrant, the transfer of this Warrant shall not be
eligible for resale without volume or
manner-of-sale restrictions pursuant to Rule 144, the Company may require, as a condition of allowing
such transfer, that the Holder or transferee of this Warrant, as the case may be, may be required by the Company to provide an opinion of
counsel with regard to such assignment or transfer.

     

    Section
5.             Miscellaneous.

     

    a)           No Rights as Stockholder
Until Exercise.  This Warrant does not entitle the Holder to
any voting rights or other rights as a stockholder of the Company prior to the
exercise hereof as set forth in Section 2(e)(i).

     

    b)           Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

     

    c)           Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then, such action may be taken or such right may be exercised
on the next succeeding Business Day.

     

    d)           Authorized
Shares.

     

    The
Company covenants that, during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant.  The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will
take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.  The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment.  Without limiting the generality of the foregoing, the
Company will (i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (ii) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant and (iii) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may be,
necessary to enable the Company to perform its obligations under this
Warrant.

     

    Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

     

    e)           Governing Law and
Venue. All questions concerning the construction, validity, enforcement
and interpretation of this Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of California,
without regard to the principles of conflicts of law thereof.  Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Warrant
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the state of Maryland.  Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the state of California, County of Los Angeles for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
other manner permitted by law.   If either party shall commence
an action or proceeding to enforce any provisions of this Warrant, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceedings or questions concerning the construction, validity, enforcement and
interpretation of this Warrant.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    f)           Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.

     

    g)           Nonwaiver and
Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.

     

    h)           Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, the date of the
public disclosure if such notice is communicated via public disclosure (d) the
second Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (e) upon actual receipt by the party to
whom such notice is required to be given.  The address for such
notices and communications shall be:  (i) if to Holder, at its address
of records as contained in the Warrant Register, and (ii) if to Company, at its
corporate headquarters.

     

    i)           Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    j)           Remedies.  The
Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Warrant.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Warrant and hereby agrees to waive and not to
assert the defense in any action for specific performance that a remedy at law
would be adequate.

     

    k)           Successors and
Assigns.  Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder.  The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and shall be enforceable by the Holder or holder of Warrant Shares.

     

    l)           Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and Holder.

     

    m)          Severability.  Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.

     

    n)          Headings.  The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

    

    ********************

    

    (Signature
Pages Follow)

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above
indicated.

     

    
      
        
          
            	 
      	
                    GENSPERA,
      INC.

                  
	 
      	 
      
	 
      	
                    By:

                  	 
      
	 
      	 
      	
                    Name:

                  
	 
      	 
      	
                    Title:

                  

          

        

      

    

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    

    NOTICE
OF EXERCISE

    

    TO:      GENSPERA,
INC.

    

    (1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.

     

    (2) Payment
shall take the form of (check applicable box):

     

     ̈ in
lawful money of the United States; or

     

     ̈ the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).

     

    (3) Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:

     

    _______________________________

    

    

    The
Warrant Shares shall be delivered by the physical delivery of a certificate
to:

    

    _______________________________

    

    _______________________________

    

    _______________________________

    

    (4)  [If required by
applicable regulations] Accredited
Investor.  The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

    

    [SIGNATURE
OF HOLDER]

    

    Name of
Investing Entity:
_______________________________________________________________________

    Signature of Authorized Signatory of
Investing Entity:
_________________________________________________

    Name of
Authorized Signatory:
___________________________________________________________________

    Title of
Authorized Signatory:
____________________________________________________________________

    Date:
_______________________________________________________________________________________

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    ASSIGNMENT
FORM

    

    (To
assign the foregoing warrant, execute

    this form
and supply required information.

    Do not
use this form to exercise the warrant.)

    

    FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

    

    _______________________________________________
whose address is

    

    _______________________________________________________________.

    

    _______________________________________________________________

    

    Dated:  ______________,
_______

    

    

    Holder’s
Signature:    _____________________________

    

    Holder’s
Address:      _____________________________

    

                                          
_____________________________

    

    Signature
Guaranteed:  ___________________________________________

    

    NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

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