EXHIBIT 10.4

 

Amendment No. 4
to NOTE AND WARRANT PURCHASE Agreement

 

This Amendment No. 4 to Note and Warrant Purchase 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 “Company”); CTI Supply,
Inc., an Illinois corporation f/k/a CTI Helium, Inc., and a Wholly-Owned
Subsidiary of the Company, in its capacity as a guarantor (the “Subsidiary
Guarantor”); and BMO PRIVATE EQUITY (U.S.), INC., a Delaware corporation (the
“Purchaser”).

 

The Company and the Purchaser entered into a Note and Warrant Purchase Agreement
dated as of July 17, 2012 (as amended, restated, supplemented or otherwise
modified prior to the effective date hereof, the “Purchase Agreement”), under
which, among other things, the Company sold to the Purchaser and the Purchaser
purchased from the Company a note in the aggregate principal amount of
$5,000,000.

 

In connection with the Purchase Agreement, the Subsidiary Guarantor entered into
a Guaranty dated as of July 17, 2012 (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 Purchase 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 Purchase Agreement.

 

2.          Amendments to Purchase Agreement. (a) The definition of “CTI Helium”
in section 5.1 of the Purchase 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 Purchase
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 Company 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 (as defined in the Senior Credit Agreement), (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.”

 

 

 

 

(c)          The definition of “Total Funded Debt” in section 5.1 of the
Purchase 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 Company
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 Company or any of its Subsidiaries or which the
Company or any of its Subsidiaries has agreed (contingently or otherwise) to
purchase or otherwise acquire or in respect of which the Company 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 Flexo 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 Purchase 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 Company 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
Company and payable to Stephen M. Merrick.

 

“2016 CTI-Schwan Debt” means the Indebtedness for Borrowed Money of the Company
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 Company and payable to
John H. Schwan.

 

“2016 Walmart Promotional Program” means a program and arrangement pursuant to
which the Company 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. 4 Effective Date” means September 30, 2016, which is the
effective date of an Amendment No. 4 to Note and Warrant Purchase Agreement
dated as of October 12, 2016, but effective as of September 30, 2016, between
the Company, CTI Helium, and the Purchaser.”

 

 

 

 

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

 

“(a)          (i) from and after the Amendment No. 4 Effective Date and through
and including the earlier of (A) the date as of which all Receivables (as such
term is defined in the Senior Credit Agreement) from the 2016 Walmart
Promotional Program have been paid to the Company (as determined by Purchaser in
its sole and absolute discretion based, in part, on delivery to the Purchaser of
invoice documentation and proof of payment remittance from Walmart) and (B)
February 28, 2017, concurrently with delivery to the Senior Lender, and in any
event by the first Business Day of each week, a copy of the Borrowing Base
certificate in the form attached as Exhibit F to the Senior Credit Agreement
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 Company and
certified to by its chief financial officer or such other officer acceptable to
the Purchaser; and (ii) thereafter, concurrently with delivery to the Senior
Lender, and in any event within fifteen (15) days after the last day of each
calendar month, a copy of the Borrowing Base certificate in the form attached as
Exhibit F to the Senior Credit Agreement 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 Company and certified to by its chief financial officer or such
other officer acceptable to the Purchaser;”

 

(f)            Section 8.7 of the Purchase 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. 4
Effective Date in an aggregate principal amount not to exceed $370,000 as of the
Amendment No. 4 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
Maturity 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 (as such term is defined in the Senior Credit Agreement) from the
2016 Walmart Promotional Program paid to the Company shall, subject to Section
8.21, be used by the Company 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;

 

 2 

 

 

(j)          the 2016 CTI-Schwan Debt existing on the Amendment No. 4 Effective
Date in an aggregate principal amount not to exceed $530,000 as of the Amendment
No. 4 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
Maturity 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 (as such term is defined in the Senior Credit Agreement) from the
2016 Walmart Promotional Program paid to the Company shall, subject to Section
8.21, be used by the Company 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 Purchase Agreement is hereby
amended and restated in its entirety to read 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 Company and the Purchaser 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 Purchase
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 Company under the Purchase Agreement or the Subsidiary Guarantor under
the Subsidiary Guaranty;

 

(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 Purchaser will not in any manner
whatsoever do any of the following:

 

 3 

 

 

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

 

(B)prejudice, waive, or be construed to impair, affect, prejudice, or waive the
rights and abilities of the Purchaser 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 Purchaser 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 Note and the other Operative Documents remain true and correct as of the
date of this agreement.

 

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

 

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

 

(2)that the execution and delivery of this agreement and the performance by the
Company of its obligations under the Purchase 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 Company or of any
agreement binding upon the Company;

 

(3)that the Purchase Agreement, as amended by this agreement, is a legal, valid,
and binding obligation of the Company, enforceable against the Company 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 Purchase
Agreement, as amended by this agreement, and Section 6 of the Senior Credit
Agreement, as amended, in each case 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 Purchaser and except for changes specifically
permitted under the Purchase Agreement, as amended by this agreement;

 

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

 

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

 

 4 

 

 

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

 

(1)that the Purchaser 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 Purchase Agreement as
in effect immediately after giving effect to this agreement), each in form and
substance satisfactory to the Purchaser and duly executed by all applicable
Persons;

 

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

 

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

 

(2)that all legal matters incident to the execution and delivery of this
agreement are satisfactory to the Purchaser 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 Purchase 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 Purchase 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
Purchase Agreement and this agreement.

 

(b)          This agreement is an Operative 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 Purchaser.

 

(d)          Except as specifically modified or amended by the terms of this
agreement, the terms and provisions of the Purchase Agreement, the Subsidiary
Guaranty, and the other Operative Documents are incorporated by reference herein
and in all respects continue in full force and effect. The Company, 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
Purchase Agreement and the other Operative Documents to which it is a party.

 

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

 

 5 

 

 

(f)          The Company 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 Purchaser or any affiliate or parent of the Purchaser. The
Company 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 Purchaser 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 Company 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 Purchaser arising out of, pursuant to, or
pertaining in any way to the Purchase Agreement, any and all documents and
instruments in connection with or relating to the foregoing, or this agreement.
The Company hereby further covenants and agrees not to sue the Purchaser or
assert any claims, defenses, demands, actions, or liabilities against the
Purchaser arising out of, pursuant to, or pertaining in any way to the Purchase
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 Operative Documents
(including this agreement) maintained by the Purchaser will be deemed to be
originals.

 

[Signature pages follow]

 

 6 

 

 

(Signature Page to Amendment No. 4 to Note and Warrant Purchase Agreement)

 

The parties are signing this Amendment No. 4 to Note and Warrant Purchase
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
PRIVATE EQUITY (U.S.), INC.   By: /s/Serkan Eskinazi   Name:  Serkan Eskinazi  
Title:  President