Exhibit 10.2

 

Consent and Acknowledgment

 

This Consent and Acknowledgment is dated as of July 28, 2017, but effective as
of July 18, 2017, and is between BMO Harris Bank N.A., a national banking
association, successor to Harris N.A. (as further defined in the Intercreditor
Agreement, the “Senior Lender”), BMO Private Equity (U.S.), Inc., a Delaware
corporation (as further defined in the Intercreditor Agreement, the “Subordinate
Creditor”), and CTI Industries Corporation, an Illinois corporation (the
“Borrower”)

 

The Senior Lender and the Subordinate Creditor entered into, and the Borrower
consented to, a Subordination and Intercreditor Agreement dated as of July 17,
2012 (as amended, modified, or supplemented before the date of this agreement,
the “Intercreditor Agreement”).

 

The Senior Lender and the Borrower now desire to amend the Credit Agreement in
certain respects pursuant to an amendment in the form attached to this agreement
as Exhibit A (that amendment, the “Senior Amendment”). The Subordinate Creditor
and the Borrower desire to amend the Purchase Agreement pursuant to an amendment
in the form attached to this agreement as Exhibit B (that amendment, the
“Subordinate Amendment”).

 

The Subordinate Creditor and the Borrower now desire to agree to certain terms
with respect to the exercise by the Subordinated Creditor and other Warrant
Holders of their put rights under the Subordinated Warrant Agreement, as further
described in this agreement.

 

The parties desire to provide certain consents and acknowledgments (including,
without limitation, under the Intercreditor Agreement) in connection with the
Senior Amendment and the transactions contemplated thereby, the Subordinate
Amendment and the transactions contemplated thereby, and in connection with
certain deemed modifications to terms of the Subordinate Creditor’s Documents.

 

The parties therefore agree as follows:

 

1.            Definitions.

 

(a)          Defined terms used but not defined in this agreement are as defined
in the Intercreditor Agreement.

 

(b)          For purposes of this agreement, the following definitions apply:

 

“Put Notice” is as defined in the Subordinated Warrant Agreement.

 

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“Put Rights” means the Warrants-related put rights of the Subordinate Creditor
and the other Warrant Holders under section 14(a) of the Subordinated Warrant
Agreement.

 

“Redemption Price” is as defined in the Subordinated Warrant Agreement and is
not deemed modified by this agreement.

 

“Subordinated Warrant Agreement” means a Warrant Agreement dated July 17, 2012,
between the Borrower and BMO Private Equity, as deemed modified pursuant to this
agreement and as further amended, restated, supplemented, or otherwise modified
in accordance with the Intercreditor Agreement.

 

“Subordinated Maturity Date” means the “Maturity Date” as defined in the
Purchase Agreement, as in effect on the date of this agreement (after giving
effect to the Subordinate Amendment) or as amended, restated, supplemented, or
otherwise modified in accordance with the Intercreditor Agreement.

 

“Warrant Holder” is as defined in the Subordinated Warrant Agreement.

 

“Warrants” is as defined in the Subordinated Warrant Agreement.

 

2.            Consents and Acknowledgments.

 

(a)          Subject to the other terms of this agreement, the Senior Lender
hereby expressly consents to (1) the amendments contemplated by, and the
execution by the Borrower and the Subordinate Creditor of, the Subordinate
Amendment; and (2) the deemed modifications to the Subordinate Creditor’s
Documents and the other transactions described in section 3 below (including,
without limitation, the delivery of a Put Notice and the issuance of the
Subordinated Warrant Conversion Note, in each case done or effected in
accordance with this agreement and with the Subordinate Creditor’s Documents (as
deemed modified by this agreement).

 

(b)          Subject to the other terms of this agreement, the Subordinate
Creditor hereby expressly consents to the amendments contemplated by, and the
execution by the Borrower and the Senior Lender of, the Senior Amendment.

 

3.            Deemed Modifications to Subordinate Creditor’s Documents.
Notwithstanding any provision of the Subordinated Warrant Agreement, any other
Subordinate Creditor’s Document (including the Subordinate Amendment), the
Credit Agreement, any other Loan Document (including the Senior Amendment), or
the Intercreditor Agreement to the contrary, the following terms apply with
respect to the exercise of the Put Rights and the Subordinate Creditor’s
Documents are hereby deemed modified by those terms:

 

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(a)          The Subordinate Creditor and the other Warrant Holders may deliver
a Put Notice at any time after the date of this agreement.

 

(b)          Upon the Borrower’s receipt of any such Put Notice, the Subordinate
Creditor and the other Warrant Holders will be deemed to have requested that the
Borrower, in its capacity as “Issuer” under the Subordinated Warrant Agreement,
issue, and the Borrower, in its capacity as “Issuer” under the Subordinated
Warrant Agreement, shall issue upon any such deemed request and effective as of
the date that the Borrower receives any such Put Notice and deemed request, a
promissory note payable to the Subordinate Creditor and the other Warrant
Holders with the following terms and otherwise in form and substance acceptable
to the Subordinate Creditor (that promissory note, which would be the
“BMO Mezzanine Warrant Conversion Note” under and as defined in the Credit
Agreement (after giving effect to the Senior Amendment) and the “Warrant
Conversion Note” under and as defined in the Purchase Agreement (after giving
effect to the Subordinate Amendment), the “Subordinated Warrant Conversion
Note”):

 

(1)the principal amount of the Subordinated Warrant Conversion Note will be an
amount equal to the aggregate Redemption Price as determined in accordance with
the Subordinated Warrant Agreement as of the date that the Subordinated Warrant
Conversion Note is issued;

 

(2)(A) the unpaid principal amount of the Subordinated Warrant Conversion Note
will bear interest from and after the date that the Subordinated Warrant
Conversion Notice is issued at a rate per annum equal to 11.50%, which is the
“Current Interest Rate” (as defined in the Purchase Agreement, as in effect on
the date of this agreement (after giving effect to the Subordinate Amendment)),
compounded daily; and (B) any regularly scheduled non-cash payment-in-kind of
the Subordinated Warrant Conversion Note resulting from (or deemed to result
from) any such accrual or compounding of interest will be deemed to be a
Permitted Payment under the Intercreditor Agreement;

 

(3)subject to the Intercreditor Agreement, all accrued interest under the
Subordinated Warrant Conversion Note payable in cash will be payable upon the
earlier to occur of (A) the Subordinated Maturity Date, and (B) the payment in
full of the outstanding principal amount of the Subordinated Warrant Conversion
Note;

 

(4)the maturity date of the Subordinated Warrant Conversion Note will be the
Subordinated Maturity Date; and

 

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(5)all other terms of the Subordinated Warrant Conversion Note will be
substantially consistent with the applicable terms of the Subordinated Note (as
in effect on the date of this agreement or as amended, restated, supplemented,
or otherwise modified in accordance with the Intercreditor Agreement).

 

(c)          The delivery of a Put Notice by the Subordinate Creditor and the
other Warrant Holders and the issuance of the Subordinated Warrant Conversion
Note, in each case done or effected in accordance with this agreement and with
the Subordinate Creditor’s Documents (as deemed modified by this agreement),
will not be deemed (1) to constitute an Event of Default, (2) to constitute an
“Event of Default” under and as defined in the Subordinate Creditor’s Documents,
or (3) to violate the Intercreditor Agreement.

 

(d)          If the Subordinated Warrant Conversion Note is issued in accordance
with this agreement and with the Subordinate Creditor’s Documents (as deemed
modified by this agreement), then the following will occur, in each case
effective upon the issuance of the Subordinated Warrant Conversion Note: (1) the
Subordinated Warrant Agreement and all Put Rights and other rights of the
Subordinate Creditor and the other Warrant Holders under the Subordinated
Warrant Agreement will automatically terminate; and (2) all indebtedness,
obligations, and liabilities of the Loan Parties to the Subordinate Creditor and
the other Warrant Holders evidenced solely by the Subordinated Warrant Agreement
and the Warrants (including as deemed modified by this agreement) will be deemed
to have been replaced and superseded by the indebtedness, obligations, and
liabilities of the Loan Parties evidenced by the Subordinated Warrant Conversion
Note.

 

(e)          Each of the Subordinated Creditor (for itself and on behalf of each
other Warrant Holder) and the Borrower hereby acknowledges the following:
(1) that all indebtedness, obligations, and liabilities of the Loan Parties
under, evidenced by, or otherwise with respect to the Subordinated Warrant
Agreement and the Warrants (including as deemed modified by this agreement)
constitute Subordinated Debt under the Intercreditor Agreement; (2) that, except
as specifically provided by the terms of this agreement, all Put Rights are, and
after giving effect to this agreement remain, subject to the Intercreditor
Agreement; (3) that all indebtedness, obligations, and liabilities of the Loan
Parties evidenced by the Subordinated Warrant Conversion Note will, upon the
issuance of the Subordinated Warrant Conversion Note, constitute Subordinated
Debt under the Intercreditor Agreement; and (4) that, except as specifically
provided by the terms of this agreement, all rights of the Subordinate Creditor
and the other Warrant Holders with respect to the Subordinated Warrant
Conversion Note, if issued, will be subject to the Intercreditor Agreement.

 

(f)          In connection with or following the issuance, if any, of the
Subordinated Warrant Conversion Note, the Senior Lender, the Subordinate
Creditor, and the Borrower shall negotiate in good faith to document and enter
into any amendment to the Intercreditor Agreement reasonably requested by the
Senior Lender, the Subordinate Creditor, or the Borrower as necessary or
desirable to effect the purposes of, or to otherwise evidence the agreements set
forth in, this section 3 with respect to the Subordinated Warrant Conversion
Note. In the absence of any such amendment, this agreement and, except as
specifically provided by the terms of this agreement, the Intercreditor
Agreement will apply with respect to the Subordinated Warrant Conversion Note.

 

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

 

(1)that each of the parties has received a copy of this agreement, duly executed
by all parties; and

 

(2)that all conditions to the effectiveness of the Senior Amendment (other than
the execution and delivery of this agreement) have been satisfied.

 

5.            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 this agreement is to be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of 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 this
agreement.

 

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

 

(c)          Except as specifically provided by the terms of this agreement,
(1) the terms and provisions of the Intercreditor Agreement are incorporated by
reference herein and in all respects continue in full force and effect; and
(2) each of the Senior Lender, the Subordinate Creditor, and 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 Intercreditor Agreement.

 

(d)          Except as specifically provided by the terms of this agreement and
the Senior Amendment, (1) the terms and provisions of the Credit Agreement and
the other Loan Documents in all respects continue in full force and effect; and
(2) each of the Senior Lender and 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.

 

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(e)          Except as specifically provided by the terms of this agreement and
the Subordinate Amendment, (1) the terms and provisions of the Subordinated
Warrant Agreement and the other Subordinate Creditor’s Documents in all respects
continue in full force and effect; and (2) each of the Subordinate Creditor and
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 Subordinated Warrant Agreement and the other
Subordinate Creditor’s Documents.

 

(f)          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.

 

[Signature pages follow]

 

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The parties are signing this Consent and Acknowledgment effective as of the
effective date stated in the introductory clause.

 

  BMO Harris BANK N.A.,     as the Senior Lender             By: /s/ Lauren M.
Buysse     Name: Lauren M. Buysse     Title: Vice President            
BMO Private Equity (U.S.), Inc.,     as the Subordinate Creditor             By:
/s/ Jason Swanson     Name: Jason Swanson     Title: Managing Director          
  CTI Industries Corporation,     as the Borrower             By: /s/ John H.
Schwan     Name: John H. Schwan     Title: Chairman/CEO  

 

Signature page to Consent and Acknowledgment

 

 

 

 

Exhibit A

 

Form of Senior Amendment

 

See attached.

 

 

 

 

Exhibit B

 

Form of Subordinate Amendment

 

See attached.