EXECUTION COPY

 

EXHIBIT 10.2

 

Amendment No. 1
to NOTE AND WARRANT PURCHASE Agreement

 

This Amendment No. 1 to Note and Warrant Purchase Agreement is dated as of
April 12, 2013 (this “Agreement”), and is between CTI Industries Corporation, an
Illinois corporation (the “Company”) 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 (the “Purchase Agreement”), under which the Company
has extended certain credit facilities to the Company.

 

In connection with the Purchase Agreement, the Company executed a Senior Secured
Subordinated Promissory Note dated July 17, 2012 (the “Note”), under which,
among other things, the Company promised to pay the Note Amount to the Purchaser
on the terms and conditions therein.

 

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.          Limited Waiver. (a) The Company has informed the Purchaser (1) that
the Company’s Senior Leverage Ratio as of the last day of the fiscal quarter
ending March 31, 2013, was or is expected to be, in each case, greater than 3.40
to 1.00, the maximum permitted level for that ratio set forth in section 8.23(a)
of the Purchase Agreement; and (2) that the Company’s Total Leverage Ratio as of
the last day of the fiscal quarter ending December 31, 2012, and as of the last
day of the fiscal quarter ending March 31, 2013, was or is expected to be, in
each case, greater than 5.10 to 1.00, the maximum permitted level for that ratio
set forth in section 8.23(b) of the Purchase Agreement. The Company acknowledges
that an Event of Default has occurred and is continuing or would occur as a
result of each such financial-covenant violation (the “Subject Event of
Default”). The Company further acknowledges that each Subject Event of Default
entitles the Purchaser to exercise its rights and remedies under the Purchase
Agreement, applicable law, or otherwise. The Company has therefore requested
that the Purchaser waive each Subject Event of Default. The Company acknowledges
that but for the terms of this Agreement all obligations under the Purchase
Agreement and each of the other Operative Documents would be immediately due and
payable upon the occurrence of any Subject Event of Default. In addition, the
Company acknowledges that the Purchaser has incurred reasonable attorneys’ fees
in connection with the Subject Event of Default and that those costs, fees, and
expenses are recoverable by the Purchaser under the Purchase Agreement.

 

(b)          The Purchaser hereby waives each Subject Event of Default and the
Purchaser’s remedies under the Purchase Agreement with respect to each Subject
Event of Default. This limited waiver is to be narrowly construed. Except as
provided in this Agreement, this limited waiver neither extends to any other
violations under, or default of, the Purchase Agreement nor prejudices any
rights or remedies that the Purchaser might have or be entitled to with respect
to any such other violations or defaults.

 

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3.          Amendments to Purchase Agreement. (a) The definition of “EBITDA” in
section 5.1 of the Purchase Agreement is hereby amended to read in its entirety
as follows:

 

“           “EBITDA” means, with reference to any period, (a) Net Income of the
Company and its Subsidiaries, on a consolidated basis, for such period minus
(b) amounts added in arriving at such Net Income for such period in respect of
exchange-rate gains during such period plus (c) all amounts deducted in arriving
at such Net Income for such period in respect of (i) Interest Expense for such
period, (ii) federal, state, and local income taxes for such period, (iii) all
amounts properly charged for depreciation of fixed assets and amortization of
intangible assets during such period, and (iv) exchange-rate losses during such
period.”

 

(b)          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” 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).”

 

(c)          Section 8.23(a) of the Purchase Agreement is hereby amended to read
in its entirety as follows:

 

“           (a)          Senior Leverage Ratio. As of the last day of each
fiscal quarter of the Company, the Company shall not permit the Senior Leverage
Ratio for the four fiscal quarters of the Company then ended to be more than the
amount set forth below for such fiscal quarter:

 

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Fiscal Quarter Ending   Level June 30, 2013, and
September 30, 2013   3.60 to 1.00 December 31, 2013   3.30 to 1.00 March 31,
2014   3.05 to 1.00 June 30, 2014, and
each fiscal quarter thereafter   2.75 to 1.00

 

(d)          Section 8.23(b) of the Purchase Agreement is hereby amended to read
in its entirety as follows:

 

“           (b)          Total Leverage Ratio. As of the last day of each fiscal
quarter of the Company, the Company shall not permit the Total Leverage Ratio
for the four fiscal quarters of the Company then ended to be more than the
amount set forth below for such fiscal quarter:

 

Fiscal Quarter Ending   Level June 30, 2013, and
September 30, 2013   5.50 to 1.00 December 31, 2013   4.95 to 1.00 March 31,
2014   4.70 to 1.00 June 30, 2014, and
each fiscal quarter thereafter   4.60 to 1.00

 

4.            Fee. As consideration for the limited waiver and the amendments to
the Purchase Agreement to be effected by this Agreement, the Company shall pay
to the Purchaser a fee in the amount of $12,500, which fee is fully earned upon
the execution of this Agreement by the Purchaser, due and payable upon the
execution and delivery of this Agreement by the Company to the Purchaser, and
nonrefundable once paid.

 

5.           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;

 

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(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, 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, other
than in respect of the Subject Events of Default; 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, other than the Subject Events of
Default.

 

6.          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)         a copy of the amendment to the Senior Credit Agreement and each of
the other documents required to be delivered in accordance with Section 7 of
that amendment, each duly executed by all applicable Persons;

 

(C)         a copy of the amended and restated Junior Subordination Agreement,
duly executed by all applicable Persons;

 

(D)         a copy of each replacement Subordinated Debt Document, duly executed
by all applicable Persons;

 

(E)         a copy of a reaffirmation of the Subsidiary Guaranty of CTI Helium,
duly executed by all applicable Persons; and

 

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

 

(2)         that the Company has paid, and the Purchaser has received, the fee
described in section 4; and

 

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(3)         that all legal matters incident to the execution and delivery of
this Agreement are satisfactory to the Purchaser and its counsel.

 

7.          Post-Closing Matters.

 

(a)          The Company shall deliver to the Purchaser within 15 days after the
date of this Agreement (or any later date to which the Purchaser agrees in
writing) a lien-waiver agreement, in form and substance satisfactory to the
Purchaser, from the landlord of the Company’s leased premises at 800 N. Church
Street, Lake Zurich, Illinois.

 

(b)          The Company hereby acknowledges (1) that default in the observance
or performance of the covenant set forth in Section 7(a) will constitute an
Event of Default under the Purchase Agreement; and (2) that no grace or cure
period will apply in respect of any such default in the observance or
performance of any such covenant.

 

8.          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 Note 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.

 

(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.

 

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(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.

 

[Signature pages follow]

  

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(Signature Page to Amendment No. 1 to Note and Warrant Purchase Agreement)

 

The parties are signing this Amendment No. 1 to Note and Warrant Purchase
Agreement as of the date stated in the introductory clause.

 

  CTI INDUSTRIES CORPORATION         By:     Name:     Title:         BMO
PRIVATE EQUITY (U.S.), INC.         By:     Name:     Title: