EXHIBIT 10.3

 

Amendment No. 9
to Credit Agreement

 

This Amendment No. 9 to Credit Agreement is dated as of October 12, 2016, but
effective as of September 30, 2016, and is between CTI Industries Corporation,
an Illinois corporation (the “Borrower”); CTI Supply, Inc., an Illinois
corporation f/k/a CTI Helium, Inc., and a Wholly-Owned Subsidiary of the
Borrower, in its capacity as a guarantor (the “Subsidiary Guarantor”); and
BMO Harris Bank N.A., a national banking association, successor to Harris N.A.
(the “Bank”).

 

The Borrower and the Bank entered into a Credit Agreement dated as of April 29,
2010 (as amended, modified, or supplemented before the effective date of this
agreement, the “Credit Agreement”), under which the Bank has extended certain
credit facilities to the Borrower.

 

In connection with the Credit Agreement, the Subsidiary Guarantor entered into a
Guaranty dated as of April 29, 2010 (the “Subsidiary Guaranty”), under which,
among other things, the Subsidiary Guarantor guarantees the prompt and complete
payment and performance of the Obligations.

 

The parties now desire to amend the Credit Agreement in certain respects.

 

The parties therefore agree as follows:

 

1.          Definitions. Defined terms used but not defined in this agreement
are as defined in the Credit Agreement.

 

2.          Amendments to Credit Agreement. (a) The definition of “CTI Helium”
in section 5.1 of the Credit Agreement is hereby amended to read in its entirety
as follows:

 

“            “CTI Helium” means CTI Supply, Inc., an Illinois corporation and a
Wholly-Owned Subsidiary f/k/a CTI Helium, Inc.”

 

(b)          The definition of “Fixed Charges” in section 5.1 of the Credit
Agreement is hereby amended to read in its entirety as follows:

 

“            “Fixed Charges” means, with reference to any period, the sum of (a)
the aggregate amount of payments made or required to be made by the Borrower and
its Subsidiaries, on a consolidated basis, during such period in respect of
principal on all Indebtedness for Borrowed Money (whether at maturity, as a
result of mandatory sinking fund redemption, scheduled payments or otherwise)
other than (i) Revolving Loans, (ii) Intercompany Debt, and (iii) in the case of
Subordinated Debt, principal reductions caused by the exercise of warrants by
the holders of such debt and principal reductions made prior to the date of this
Agreement, plus (b) total cash interest expense (including interest on
Subordinated Debt but excluding interest on Intercompany Debt) for such period.”

 

 1 

 

 

(c)          The definition of “Total Funded Debt” in section 5.1 of the Credit
Agreement is hereby amended to read in its entirety as follows:

 

“            “Total Funded Debt” means, at any time the same is to be
determined, the aggregate of all Indebtedness for Borrowed Money of the Borrower
and its Subsidiaries, on a consolidated basis, at such time, plus all
Indebtedness for Borrowed Money of any other person or entity which is directly
or indirectly guaranteed by the Borrower or any of its Subsidiaries or which the
Borrower or any of its Subsidiaries has agreed (contingently or otherwise) to
purchase or otherwise acquire or in respect of which the Borrower or any of its
Subsidiaries has otherwise assured a creditor against loss. For purposes of this
Agreement, “Total Funded Debt” includes the 2016 CTI–Merrick Debt and the
2016 CTI–Schwan Debt, but “Total Funded Debt” does not include any Excluded VIE
Debt or the Subordinated Debt owing to John H. Schwan and Stephen M. Merrick
described in Section 8.7(f).”

 

(d)          Section 5.1 of the Credit Agreement is hereby further amended by
inserting each of the following new definitions in the appropriate alphabetical
order:

 

“            “2016 CTI–Merrick Debt” means the Indebtedness for Borrowed Money
of the Borrower owing to Stephen M. Merrick evidenced by a Promissory Note dated
September 30, 2016, in the original principal amount of $370,000 made by the
Borrower and payable to Stephen M. Merrick.

 

“2016 CTI–Schwan Debt” means the Indebtedness for Borrowed Money of the Borrower
owing to John H. Schwan evidenced by a Promissory Note dated September 30, 2016,
in the original principal amount of $530,000 made by the Borrower and payable to
John H. Schwan.

 

“2016 Walmart Promotional Program” means a program and arrangement pursuant to
which the Borrower will provide and sell to Walmart in November 2016
approximately 4,000 half-pallets of vacuum-sealing machines and rolls of film
for sale at Walmart stores.

 

“Amendment No. 9 Effective Date” means September 30, 2016, which is the
effective date of an Amendment No. 9 to Credit Agreement dated as of October 12,
2016, but effective as of September 30, 2016, between the Borrower, CTI Helium,
and the Bank.”

 

 2 

 

 

(e)          Section 8.5(a) of the Credit Agreement is hereby amended to read in
its entirety as follows:

 

“            (a)          (i) from and after the Amendment No. 9 Effective date
through and including the earlier of (A) the date as of which all Receivables
from the 2016 Walmart Promotional Program have been paid to the Borrower (as
determined by the Bank in its sole and absolute discretion based, in part, on
delivery to the Bank of invoice documentation and proof of payment remittance
from Walmart) and (B) February 28, 2017, as soon as available, and in any event
by the first Business Day of each week, a Borrowing Base certificate in the form
attached hereto as Exhibit F showing the computation of the Borrowing Base in
reasonable detail as of the close of business on the last day of the immediately
preceding week, together with an accounts receivable and accounts payable aging
and an inventory report supporting the computation of the Borrowing Base,
prepared by the Borrower and certified to by its chief financial officer or such
other officer acceptable to the Bank; and (ii) thereafter, as soon as available,
and in any event within fifteen (15) days after the last day of each calendar
month, a Borrowing Base certificate in the form attached hereto as Exhibit F
showing the computation of the Borrowing Base in reasonable detail as of the
close of business on the last day of such month, together with an accounts
receivable and accounts payable aging and an inventory report supporting the
computation of the Borrowing Base, prepared by the Borrower and certified to by
its chief financial officer or such other officer acceptable to the Bank;”

 

(f)          Section 8.7 of the Credit Agreement is hereby amended as follows:
(1) by deleting “and” from the end of section 8.7(h); (2) by renumbering
existing section 8.7(i) as a new section 8.7(k); and (3) by inserting the
following as new sections 8.7(i) and 8.7(j):

 

“             (i)          the 2016 CTI–Merrick Debt existing on the Amendment
No. 9 Effective Date in an aggregate principal amount not to exceed $370,000 as
of the Amendment No. 9 Effective Date, as reduced by permitted payments or
permitted deemed payments thereon, and provided that (A) the maturity date for
the 2016 CTI–Merrick Debt shall be not earlier than the date that is six months
after the latest of the Equipment Loan Final Maturity Date, the Mortgage Loan
Final Maturity Date, and the Revolving Credit Termination Date, (B) the
2016 CTI–Merrick Debt shall be unsecured, (C) the 2016 CTI–Merrick Debt shall be
Subordinated Debt, and (D) the first $900,000 of Receivables from the
2016 Walmart Promotional Program paid to the Borrower shall, subject to
Section 8.21, be used by the Borrower to make one or more prepayments or deemed
prepayments of all of the outstanding principal amount of the 2016 CTI–Merrick
Debt and the 2016 CTI–Schwan Debt;

 

 3 

 

 

(j)          the 2016 CTI–Schwan Debt existing on the Amendment No. 9 Effective
Date in an aggregate principal amount not to exceed $530,000 as of the Amendment
No. 9 Effective Date, as reduced by permitted payments or permitted deemed
payments thereon, and provided that (A) the maturity date for the
2016 CTI–Schwan Debt shall be not earlier than the date that is six months after
the latest of the Equipment Loan Final Maturity Date, the Mortgage Loan Final
Maturity Date, and the Revolving Credit Termination Date, (B) the
2016 CTI–Schwan Debt shall be unsecured, (C) the 2016 CTI–Schwan Debt shall be
Subordinated Debt, and (D) the first $900,000 of Receivables from the
2016 Walmart Promotional Program paid to the Borrower shall, subject to
Section 8.21w, be used by the Borrower to make one or more prepayments or deemed
prepayments of all of the outstanding principal amount of the 2016 CTI–Merrick
Debt and the 2016 CTI–Schwan Debt; and”

 

(g)          Clause (b) of Section 8.21 of the Credit Agreement is hereby
amended to read in its entirety as follows:

 

“(b) make any voluntary prepayment of Subordinated Debt or effect any voluntary
redemption thereof, other than voluntary prepayments (or deemed voluntary
prepayments) of the 2016 CTI–Merrick Debt and the 2016 CTI–Schwan Debt that are
not prohibited under the terms of any instrument or agreement subordinating the
same to the Obligations, or”

 

3.            Reaffirmation of Subsidiary Guaranty. The Subsidiary Guarantor
hereby expressly does each of the following:

 

(1)consents to the execution by the Borrower and the Bank of this agreement;

 

(2)acknowledges that the “Indebtedness” (as defined in the Subsidiary Guaranty)
includes all of the “Obligations” under and as defined in the Credit Agreement,
as amended from time to time (including as amended by this agreement);

 

(3)acknowledges that the Subsidiary Guarantor does not have any set-off,
defense, or counterclaim to the payment or performance of any of the obligations
of the Borrower under the Credit Agreement or the Subsidiary Guarantor under the
Subsidiary Guaranty;

 

 4 

 

 

(4)reaffirms, assumes, and binds itself in all respects to all of the
obligations, liabilities, duties, covenants, terms, and conditions contained in
the Subsidiary Guaranty;

 

(5)agrees that all such obligations and liabilities under the Subsidiary
Guaranty continue in full force and that the execution and delivery of this
agreement to, and its acceptance by, the Bank will not in any manner whatsoever
do any of the following:

 

(A)impair or affect the liability of the Subsidiary Guarantor to the Bank under
the Subsidiary Guaranty;

 

(B)prejudice, waive, or be construed to impair, affect, prejudice, or waive the
rights and abilities of the Bank at law, in equity, or by statute against the
Subsidiary Guarantor pursuant to the Subsidiary Guaranty; or

 

(C)release or discharge, or be construed to release or discharge, any of the
obligations and liabilities owing to the Bank by the Subsidiary Guarantor under
the Subsidiary Guaranty; and

 

(6)represents and warrants that each of the representations and warranties made
by the Subsidiary Guarantor in any of the documents executed in connection with
the Loans remain true and correct as of the date of this agreement.

 

4.            Representations and Warranties. To induce the Bank to enter into
this agreement, the Borrower hereby represents to the Bank as follows:

 

(1)that the Borrower is duly authorized to execute and deliver this agreement
and is and will continue to be duly authorized to borrow monies under the Credit
Agreement, as amended by this agreement, and to perform its obligations under
the Credit Agreement, as amended by this agreement;

 

(2)that the execution and delivery of this agreement and the performance by the
Borrower of its obligations under the Credit Agreement, as amended by this
agreement, do not and will not conflict with any provision of law or of the
articles of organization or operating agreement of the Borrower or of any
agreement binding upon the Borrower;

 

(3)that the Credit Agreement, as amended by this agreement, is a legal, valid,
and binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms, except as enforceability might be limited by
bankruptcy, insolvency, or other similar laws of general application affecting
the enforcement of creditors’ rights or by general principles of equity limiting
the availability of equitable remedies;

 

(4)that the representation and warranties set forth in section 6 of the Credit
Agreement, as amended by this agreement, are true and correct with the same
effect as if those representations and warranties had been made on the date
hereof, except that all references to the financial statements mean the
financial statements most recently delivered to the Bank and except for changes
specifically permitted under the Credit Agreement, as amended by this agreement;

 

 5 

 

 

(5)that the Borrower has complied with and is in compliance with all of the
covenants set forth in the Credit Agreement, as amended by this agreement,
including the covenants stated in section 8 of the Credit Agreement; and

 

(6)that as of the date of this agreement no Default and no Event of Default
under section 10 of the Credit Agreement, as amended by this agreement, has
occurred or is continuing.

 

5.            Conditions. The effectiveness of this agreement is subject to
satisfaction of the following conditions:

 

(1)that the Bank has received the following:

 

(A)a copy of this agreement, duly executed by the parties;

 

(B)one or more subordination agreements with respect to the 2016 CTI–Merrick
Debt and the 2016 CTI–Schwan Debt (each as defined in the Credit Agreement as in
effect immediately after giving effect to this agreement), each in form and
substance satisfactory to the Bank and duly executed by all applicable Persons;

 

(C)a copy of an amendment to the BMO Mezzanine NWPA and each of the other
documents required to be delivered in accordance with that amendment, each in
form and substance satisfactory to the Bank and duly executed by all applicable
Persons; and

 

(D)all other documents, certificates, resolutions, and opinions of counsel as
the Bank requests; and

 

(2)that all legal matters incident to the execution and delivery of this
agreement are satisfactory to the Bank and its counsel.

 

6.            General. (a) This agreement and the rights and duties of the
parties hereto are governed by, and are to be construed in accordance with, the
internal laws of State of Illinois without regard to principles of conflicts of
laws. Wherever possible each provision of the Credit Agreement and this
agreement is to be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Credit Agreement and this agreement
is prohibited by or invalid under any such law, that provision will be deemed
ineffective to the extent of that prohibition or invalidity, without
invalidating the remainder of that provision or the remaining provisions of the
Credit Agreement and this agreement.

 

 6 

 

 

(b)          This agreement is a Loan Document.

 

(c)          This agreement binds each party and their respective successors and
assigns, and this agreement inures to the benefit of each party and the
successors and assigns of the Bank.

 

(d)          Except as specifically modified or amended by the terms of this
agreement, the terms and provisions of the Credit Agreement, the Subsidiary
Guaranty, and the other Loan Documents are incorporated by reference herein and
in all respects continue in full force and effect. The Borrower, by execution of
this agreement, hereby reaffirms, assumes, and binds itself to all of the
obligations, duties, rights, covenants, terms, and conditions contained in the
Credit Agreement and the other Loan Documents to which it is a party.

 

(e)          Each reference in the Credit Agreement to “this Agreement,”
“hereunder,” “hereof,” or words of like import, and each reference to the Credit
Agreement in any and all instruments or documents delivered in connection
therewith, are deemed to refer to the Credit Agreement, as amended by this
agreement.

 

(f)          The Borrower shall pay all costs and expenses in connection with
the preparation of this agreement and other related loan documents, including,
without limitation, reasonable attorneys’ fees and time charges of attorneys who
are employees of the Bank or any affiliate or parent of the Bank. The Borrower
shall pay any and all stamp and other taxes, UCC search fees, filing fees, and
other costs and expenses in connection with the execution and delivery of this
agreement and the other instruments and documents to be delivered hereunder, and
agrees to save the Bank harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such costs
and expenses.

 

(g)          The Borrower hereby waives and releases any and all current
existing claims, counterclaims, defenses, or set-offs of every kind and nature
which it has or might have against the Bank arising out of, pursuant to, or
pertaining in any way to the Credit Agreement, any and all documents and
instruments in connection with or relating to the foregoing, or this agreement.
The Borrower hereby further covenants and agrees not to sue the Bank or assert
any claims, defenses, demands, actions, or liabilities against the Bank arising
out of, pursuant to, or pertaining in any way to the Credit Agreement, any and
all documents and instruments in connection with or relating to the foregoing,
or this agreement.

 

(h)          The parties may sign this agreement in several counterparts, each
of which will be deemed an original but all of which together will constitute
one instrument. Receipt of an executed signature page to this agreement by
facsimile or other electronic transmission will constitute effective delivery of
that executed signature page. Electronic records of executed Loan Documents
(including this agreement) maintained by the Bank will be deemed to be
originals.

 

[Signature pages follow]

 

 7 

 

 

The parties are signing this Amendment No. 9 to Credit Agreement as of the date
stated in the introductory clause.

 

  CTI Industries Corporation         By: /s/ Stephen Merrick   Name: Stephen
Merrick   Title: President         CTI Supply, Inc.   (f/k/a CTI Helium, Inc.)  
      By: /s/ Stephen Merrick   Name: Stephen Merrick   Title: President        
BMO Harris BANK N.A.         By: Timothy J. Moran   Name: Timothy J. Moran  
Title: Managing Director

 

Signature page to Amendment No. 9 to Credit Agreement