Unassociated Document


    
      


      EXHIBIT
        10.1

      THIRD
        AMENDMENT TO LOAN AND SECURITY AGREEMENT

       

      THIS
        THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (the “Third Amendment”) is
        executed and entered into this 13th day of November, 2007 by and between
        CTI
        Industries Corporation, an Illinois corporation and CTI Helium, Inc., an
        Illinois corporation (collectively the “Borrower”) and RBS Citizens, N.A.,
        successor by merger to Charter One Bank, N.A., a national banking association
        (“Bank”) and amends, as of the effective date hereof, the Loan and Security
        Agreement between the parties dated February 1, 2006, as amended by the First
        Amendment to Loan and Security Agreement dated June 28th, 2006 and the Second
        Amendment to Loan and Security Agreement dated December 6, 2006 (collectively
        the “Loan Agreement”). Capitalized terms used herein without definition shall
        have the meanings ascribed to them in the Loan Agreement.

      


      For
        and
        in consideration of the mutual covenants and agreements set forth herein,
        and
        other good and valuable consideration, the receipt and sufficiency of which
        is
        hereby acknowledged, the Loan Agreement is hereby amended as
        follows:

      


      1. The
        definition of “Borrowing Base Amount” in Section
        1
        of the
        Loan Agreement shall be amended in its entirety to read as follows:

      


      “Borrowing
        Base Amount”
shall
        mean:

      


      (a) an
        amount
        equal to eighty-five percent (85%) of the net amount (after deduction of
        such
        reserves and allowances as the Bank deems proper and necessary including
        reasonable reserves for royalty fees payable by Borrower and for dilution)
        of
        all Eligible Accounts other than Eligible Foreign Accounts; plus

      


      (b) the
        lesser of (i) an amount equal to ninety percent (90%) of the net amount (after
        deduction of such reserves and allowances as the Bank deems proper and
        necessary) of all Eligible Foreign Accounts; and (ii) One Million and No/100
        Dollars ($1,000,000.00); plus

       

      (c) the
        lesser of (i) an amount equal to sixty percent (60%) of the lower of cost
        or
        market value (after deduction of such reserves and allowances as the Bank
        deems
        proper and necessary) of all Eligible Inventory; and (ii) Four Million Five
        Hundred Thousand and No/100 Dollars ($4,500,000.00).

      


      2. The
        following definitions shall be inserted as new definitions in Section
        1
        of the
        Loan Agreement:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Capital
        Lease Loans”
shall
        mean the advance or advances made by the Bank or one of its Affiliates to
        fund
        the Capital Leases between RBS Asset Finance, Inc. and Borrower pursuant
        to the
        Equipment Lease Documents.

      


      “Capital
        Lease Loan Commitment”
shall
        mean One Million Five Hundred Thousand and No/100 Dollars
        ($1,500,000.00).

      


      “Equipment
        Lease Documents”
shall
        mean the Master Equipment Lease Agreement dated July 11, 2007 by and between
        RBS
        Asset Finance, Inc. and Borrower, and any and all documents executed by any
        of
        the Obligors in connection therewith or otherwise related thereto.

      


      3. The
        definition of “Loans” in Section
        1
        of the
        Loan Agreement shall be amended in its entirety to read as follows:

      


      “Loans”
shall
        mean, collectively, all Capital Lease Loans, Revolving Loans, the Term Loan
        and
        Mortgage Loan made by the Bank or its Affiliates to the Borrower and all
        Letter
        of Credit Obligations, under and pursuant to this Agreement.

      


      4. The
        definition of “Loan Documents” in Section
        1
        of the
        Loan Agreement shall be amended in its entirety to read as follows:

      


      “Loan
        Documents”
shall
        mean each of the agreements, documents, instruments and certificates set
        forth
        in Section
        3.1
        hereof,
        and any and all such other instruments, documents, certificates and agreements
        from time to time executed and delivered by the Borrower, the Guarantors
        or any
        of the Borrower’s Subsidiaries for the benefit of the Bank pursuant to any of
        the foregoing, the Equipment Lease Documents, and all amendments, restatements,
        supplements and other modifications of any of the foregoing.

      


      5. The
        definition of “Revolving Loan Commitment” in Section
        1
        of the
        Loan Agreement shall be amended in its entirety to read as follows:

      


      “Revolving
        Loan Commitment”
shall
        mean Nine Million and No/100 Dollars ($9,000,000.00).

      


      6. Section
        2.4
        of the
        Loan Agreement shall be deleted in its entirety and the following shall be
        inserted in lieu thereof:

       

      2.4 Capital
        Lease Loans.
        Subject
        to the terms and conditions of this Agreement and the other Loan Documents
        (including the terms of the Equipment Lease Documents), the Bank, directly
        or
        indirectly through one of its Affiliates, agrees to make available such Capital
        Lease Loans as the Borrower may from time to time request, and the Bank shall
        approve, until November 13, 2008; provided, however, that the aggregate
        principal balance of all Capital Lease Loans shall not exceed the Capital
        Lease
        Loan Commitment. The Capital Lease Loans shall be used to acquire such equipment
        as RBS Asset Finance, Inc. and Bank may approve.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      7. Upon
        the
        effective date of this Third Amendment, Bank hereby waives the following
        Events
        of Default or Unmatured Events of Defaults by Borrower for the period ending
        September 30, 2007: (a) the failure to maintain a ratio of Senior Debt to
        EBITDA
        of not greater than 3.00 to 1.00 under Section
        10.3
        of the
        Agreement; and (b) the failure to maintain a fixed charge coverage ratio
        of not
        less than 1.15 to 1.00 under Section
        10.4
        of the
        Agreement. Such limited waivers shall not be deemed a waiver of any further
        or
        additional violations of the Agreement, or a waiver of any other condition,
        requirement or provision of the Agreement.

      


      8. Section
        9.1(g)
        of the
        Loan Agreement shall be amended in its entirety to read as follows:

       

      (g) Capitalized
        Lease Obligations, provided that the aggregate amount of all such Debt
        outstanding at any time shall not exceed Fifty Thousand and 00/100 Dollars
        ($50,000.00) in the aggregate (excluding the Obligations under the Equipment
        Lease Documents);

      


      9. Section
        10.3
        of the
        Loan Agreement shall be amended in its entirety to read as follows:

       

      10.3 Senior
        Debt to EBITDA.
        As of
        the end of each of its fiscal quarters set forth below, the Borrower and
        its
        Subsidiaries shall maintain a ratio of (a) consolidated Senior Debt; to (b)
        consolidated EBITDA for the twelve month period ending on the last day of
        such
        fiscal quarter, of not greater than the following:

      


      
        	
                 

              	
                Senior
                  Debt

              
	
                Computation
                  Period Ending

              	
                to
                  EBITDA

              
	 	 
	
                December
                  31, 2007

              	
                4.00
                  to 1.00

              
	 	 
	
                March
                  31, 2008

              	
                3.25
                  to 1.00

              
	 	 
	
                June
                  30, 2008 and thereafter

              	
                3.00
                  to 1.00

              


      

      


      10. Section
        10.4
        of the
        Loan Agreement shall be amended in its entirety to read as follows:

       

      10.4 Fixed
        Charge Coverage.
        As of
        the end of each fiscal quarter, the Borrower and its Subsidiaries shall maintain
        a ratio of (a) the total for the Computation Period (as defined below) ending
        on
        the last day of such fiscal quarter of EBITDA minus
        the sum
        of all income taxes paid in cash by the Borrower and its Subsidiaries and
        all
        Capital Expenditures which are not financed with Funded Debt or by the
        Contribution to Capital, to (b) the sum for such Computation Period of (i)
        Interest Charges plus
        (ii)
        required payments of principal of Borrower’s Funded Debt (including the Term
        Loan, Mortgage Loan, and the Capital Lease Loans, but excluding the Revolving
        Loans) for such period, of not less than 1.15 to 1.00. The “Computation Period”
as used herein shall mean twelve months.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      


      11. The
        effectiveness of this Third Amendment is subject to the satisfaction of all
        of
        the following conditions precedent:

      


      (a) Bank
        shall have accepted this Third Amendment in the spaces provided for that
        purpose
        below.

      


      (b) The
        Guaranties shall have been amended and reaffirmed by the
        Guarantors.

      


      (c) The
        Bank
        shall have received from the Borrower a new Revolving Note in the amount
        of up
        to $9,000,000.00.

      


      (d) The
        Borrower shall be in full compliance with the terms of the Loan Documents
        and no
        Event of Default or Unmatured Event of Default shall have occurred or be
        continuing after giving effect to this Third Amendment.

      


      (e) Borrower
        shall have paid Bank a commitment fee of $5,000.00.

      


      (f) Borrower
        shall have delivered certified copies of Board of Director resolutions
        authorizing this Third Amendment.

      


      (g) All
        other
        legal matters incident to the execution and delivery hereof contemplated
        hereby
        and to the transaction contemplated hereby (including the delivery of ancillary
        documentation requested by Bank) shall be satisfactory to Bank and its
        counsel.

      


      Upon
        the
        date all of the foregoing conditions precedent have been satisfied, this
        Third
        Amendment shall take effect. Thereupon, the Bank shall cancel and return
        to the
        Borrower the existing Revolving Note in the amount of
        $7,000,000.00.

      


      12. To
        the
        extent the terms of this Third Amendment conflict with the terms of the Loan
        Agreement, the terms hereof shall be controlling. Except as specifically
        amended
        hereby, the Loan Agreement shall remain unchanged and in full force and effect.
        The Loan Agreement, as amended hereby, and all rights and powers created
        thereby
        and thereunder are in all respects ratified and confirmed. This Third Amendment
        may be executed in any number of counterparts and by different parties hereto
        on
        separate counterparts and each such counterpart shall be deemed an original,
        but
        all such counterparts together shall constitute but one and the same Third
        Amendment. This Third Amendment shall be binding upon and inure to the benefit
        of the Bank and the Borrower, and their respective successors and assigns.
        This
        Third Amendment shall be governed by and construed in accordance with the
        laws
        of the State of Illinois.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF the parties hereto have caused this Third Amendment to be
        duly
        executed and delivered by their duly authorized officers as of the date first
        set forth above.

       

      
        	BORROWER:	 	 	
              
	 	 	 	 
	CTI Helium, Inc.	 	 	CTI Industries Corporation
	 	 	 	 
	By:  /s/ Stephen M. Merrick	 	 	By:  /s/ Stephen M. Merrick
	
                
                  

                

              	 	 	
                
                  

                

              
	Title: Executive Vice President	 	 	Title: Executive Vice President
	
                
                  
 

              	 	 	
                
                  
 

              


      

      


       

      
         

        
          	 	 	 	BANK:
	 	 	 	 
	 	 	 	
                  RBS
                    Citizens, N.A., successor by merger to

                  Charter
                    One Bank, N.A.

                
	 	 	 	 
	 	 	 	By: 
                  /s/ Erica Scully
	
                	 	 	
                  
                    

                  

                
	 	 	 	Title: Vice President
	
                   

                	 	 	
                  
                    
 

                


        

        


         

        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        

      

      


      


      SECOND
        REPLACEMENT REVOLVING NOTE

       

      
        
          
            	
                    $9,000,000.00

                  	
                    Date:
                      November 13th, 2007

                  
	
                    Chicago,
                      Illinois

                  	 


          

           

        

      

      FOR
        VALUE
        RECEIVED, CTI Industries Corporation, an Illinois corporation and
        CTI
        Helium, Inc., an Illinois corporation (collectively
        the “Borrower”), whose address is 22160 North Pepper Road, Barrington, Illinois
        60010, promises to pay to the order of RBS CITIZENS, N.A. successor by merger
        to
        CHARTER ONE BANK, N.A., a national banking association (hereinafter, together
        with any holder hereof, the “Bank”), whose address is 71 South Wacker Drive,
        Suite 2900, Chicago, Illinois 60606, on the Revolving Loan Maturity Date,
        the
        lesser of (i) Nine Million and 00/100 Dollars ($9,000,000.00), or (ii) the
        aggregate principal amount of all Revolving Loans outstanding under and pursuant
        to that certain Loan and Security Agreement dated as of February 1, 2006,
        executed by and between the Borrower and the Bank, as amended from time to
        time
        (as amended, supplemented or modified from time to time, the “Loan Agreement”),
        and made available by the Bank to the Borrower at the maturity or maturities
        and
        in the amount or amounts stated on the records of the Bank, together with
        interest (computed on the actual number of days elapsed on the basis of a
        360
        day year) on the aggregate principal amount of all Revolving Loans outstanding
        from time to time as provided in the Loan Agreement. Capitalized words and
        phrases not otherwise defined herein shall have the meanings assigned thereto
        in
        the Loan Agreement.

      


      This
        Second Replacement Revolving Note (the “Revolving Note”) evidences the Revolving
        Loans, Letters of Credit and other indebtedness incurred by the Borrower
        under
        and pursuant to the Loan Agreement, to which reference is hereby made for
        a
        statement of the terms and conditions under which the Revolving Loan Maturity
        Date or any payment hereon may be accelerated. The holder of this Revolving
        Note
        is entitled to all of the benefits and security provided for in the Loan
        Agreement. All Revolving Loans shall be repaid by the Borrower on the Revolving
        Loan Maturity Date, unless payable sooner pursuant to the provisions of the
        Loan
        Agreement.

      


      Principal
        and interest shall be paid to the Bank at its address set forth above, or
        at
        such other place as the holder of this Revolving Note shall designate in
        writing
        to the Borrower. Each Revolving Loan made, and all Letters of Credit issued
        by
        the Bank, and all payments on account of the principal and interest thereof
        shall be recorded on the books and records of the Bank and the principal
        balance
        as shown on such books and records, or any copy thereof certified by an officer
        of the Bank, shall be rebuttably presumptive evidence of the principal amount
        owing hereunder.

      


      Except
        for such notices as may be required under the terms of the Loan Agreement,
        the
        Borrower waives presentment, demand, notice, protest, and all other demands,
        or
        notices, in connection with the delivery, acceptance, performance, default,
        or
        enforcement of this Revolving Note, and assents to any extension or postponement
        of the time of payment or any other indulgence.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      The
        Revolving Loans and the Letters of Credit evidenced hereby have been made
        and/or
        issued and this Revolving Note has been delivered at the Bank’s main office set
        forth above. This Revolving Note shall be governed and construed in accordance
        with the laws of the State of Illinois, in which state it shall be performed,
        and shall be binding upon the Borrower, and its legal representatives,
        successors, and assigns. Wherever possible, each provision of the Loan Agreement
        and this Revolving Note shall be interpreted in such manner as to be effective
        and valid under applicable law, but if any provision of the Loan Agreement
        or
        this Revolving Note shall be prohibited by or be invalid under such law,
        such
        provision shall be severable, and be ineffective to the extent of such
        prohibition or invalidity, without invalidating the remaining provisions
        of the
        Loan Agreement or this Revolving Note. The term “Borrower” as used herein shall
        mean all parties signing this Revolving Note, and each one of them, and all
        such
        parties, their respective successors and assigns, shall be jointly and severally
        obligated hereunder.

      


      This
        Revolving Note replaces that certain Replacement Revolving Note dated December
        6, 2006, which note is replaced in its entirety as of the date
        hereof.

      


       

      IN
        WITNESS WHEREOF, the Borrower has executed this Revolving Note as of the
        date
        set forth above.

      
         

        
          	 	 	 	CTI Industries Corporation, an Illinois
                  corporation
	 	 	 	 
	 	 	 	By:      /s/ Stephen
                  M. Merrick 
	
                	 	 	
                  
                    

                  

                
	 	 	 	Name: Stephen M. Merrick
                  
	 	 	 	
                  
                    

                  

                
	 	 	 	Title:   Executive Vice
                  President
	
                   

                	 	 	
                  
                    
 

                


        

        
           

          
            	 	 	 	CTI Helium, Inc., an Illinois
                    corporation
	 	 	 	 
	 	 	 	By:      /s/ Stephen
                    M. Merrick 
	
                  	 	 	
                    
                      

                    

                  
	 	 	 	Name: Stephen M.
                    Merrick 
                     
	 	 	 	
                    
                      

                    

                  
	 	 	 	Title:   Executive Vice
                    President
	
                     

                  	 	 	
                    
                      
 

                  


          

          
 

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

        

      


       

       AMENDMENT
        AND REAFFIRMATION AGREEMENT

       

      THIS
        AMENDMENT AND REAFFIRMATION AGREEMENT (AAmendment
        and Reaffirmation@)
        is made
        by Stephen M. Merrick (the AGuarantor@)
        and
        delivered to RBS Citizens, N.A. successor by merger to Charter One Bank,
        N.A.
        (ABank@).
        In
        order to induce Bank to consent to the Third Amendment to the Loan and Security
        Agreement attached hereto as Exhibit
        A
        (the
AThird
        Amendment@)
        the
        Guarantor hereby: 

       

      1. Consents
        to the Third Amendment in all respects.

      


      
        	 	
                2.

              	
                Reaffirms
                  and ratifies the Limited Continuing Unconditional Guaranty executed
                  by the
                  Guarantor dated February 1, 2006, as amended (the “Limited Continuing
                  Unconditional Guaranty”) and confirms that the Limited Continuing
                  Unconditional Guaranty remains in full force and effect and is
                  binding
                  upon the Guarantor without any setoffs, defenses or counterclaims
                  of any
                  kind whatsoever.

              


      

      


      
        	 	
                3.

              	
                Agrees
                  that the Limited Continuing Unconditional Guaranty is hereby amended
                  by
                  deleting the fifth paragraph thereof in its entirety and replacing
                  it with
                  the following:

              


      

      


      
        	 	 	
                “NOW,
                  THEREFORE, FOR VALUE RECEIVED, it is agreed that the preceding
                  provisions
                  and recitals are an integral part hereof and that this Guaranty
                  shall be
                  construed in light thereof, and in consideration of advances, credit
                  or
                  other financial accommodation heretofore afforded, concurrently
                  herewith
                  being afforded or hereafter to be afforded to the Borrower by the
                  Bank,
                  the Guarantor hereby unconditionally and absolutely guarantees
                  to the Bank
                  or other person paying or incurring the same, irrespective of the
                  validity, regularity or enforceability of any instrument, writing,
                  arrangement or credit agreement relating to or the subject of any
                  such
                  financial accommodation, the payment in full, promptly on demand
                  of the
                  Bank or such other person paying or incurring the same, of up to
                  the
                  principal amount of Two Million and 00/100 Dollars ($2,000,000.00)
                  (the
                  “Guaranteed Debt”) of the Indebtedness (as hereinafter
                  defined).”

              


      

      


      
        	 	
                4.

              	
                In
                  all other respects, the Limited Continuing Unconditional Guaranty
                  remains
                  unchanged and in full force and
                  effect.

              


      

      


      
        	 	
                5.

              	
                Reaffirms
                  and ratifies the Subordination Agreement between the Bank, Guarantor
                  and
                  CTI Industries Corporation dated February 1, 2006 (the “Subordination
                  Agreement”), confirms that the Subordination Agreement remains in full
                  force and effect and that the increased Revolving Loan Commitment
                  amount
                  implemented by the Third Amendment shall be included in the Senior
                  Debt,
                  as defined in the Subordination
                  Agreement.

              


      

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      IN
        WITNESS WHEREOF, the Guarantor has executed this Amendment and Reaffirmation
        as
        of this 13th day of November, 2007.

       

      
        	 	 	GUARANTOR:
	 	 	 
	 	 	/S/ Stephen M. Merrick 
	 	
                
Stephen
                M. Merrick
	 	 


      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


       

       AMENDMENT
        AND REAFFIRMATION AGREEMENT

       

      THIS
        AMENDMENT AND REAFFIRMATION AGREEMENT (AAmendment
        and Reaffirmation@)
        is made
        by John H. Schwan (the AGuarantor@)
        and
        delivered to RBS Citizens, N.A. successor by merger to Charter One Bank,
        N.A.
        (ABank@).
        In
        order to induce Bank to consent to the Third Amendment to the Loan and Security
        Agreement attached hereto as Exhibit
        A
        (the
AThird
        Amendment@)
        the
        Guarantor hereby: 

       

      1. Consents
        to the Third Amendment in all respects.

      


      
        	 	
                4.

              	
                Reaffirms
                  and ratifies the Limited Continuing Unconditional Guaranty executed
                  by the
                  Guarantor dated February 1, 2006, as amended (the “Limited Continuing
                  Unconditional Guaranty”) and confirms that the Limited Continuing
                  Unconditional Guaranty remains in full force and effect and is
                  binding
                  upon the Guarantor without any setoffs, defenses or counterclaims
                  of any
                  kind whatsoever.

              


      

      


      
        	 	
                5.

              	
                Agrees
                  that the Limited Continuing Unconditional Guaranty is hereby amended
                  by
                  deleting the fifth paragraph thereof in its entirety and replacing
                  it with
                  the following:

              


      

      


      
        	 	 	
                “NOW,
                  THEREFORE, FOR VALUE RECEIVED, it is agreed that the preceding
                  provisions
                  and recitals are an integral part hereof and that this Guaranty
                  shall be
                  construed in light thereof, and in consideration of advances, credit
                  or
                  other financial accommodation heretofore afforded, concurrently
                  herewith
                  being afforded or hereafter to be afforded to the Borrower by the
                  Bank,
                  the Guarantor hereby unconditionally and absolutely guarantees
                  to the Bank
                  or other person paying or incurring the same, irrespective of the
                  validity, regularity or enforceability of any instrument, writing,
                  arrangement or credit agreement relating to or the subject of any
                  such
                  financial accommodation, the payment in full, promptly on demand
                  of the
                  Bank or such other person paying or incurring the same, of up to
                  the
                  principal amount of Two Million and 00/100 Dollars ($2,000,000.00)
                  (the
                  “Guaranteed Debt”) of the Indebtedness (as hereinafter
                  defined).”

              


      

      


      
        	 	
                4.

              	
                In
                  all other respects, the Limited Continuing Unconditional Guaranty
                  remains
                  unchanged and in full force and
                  effect.

              


      

      


      
        	 	
                5.

              	
                Reaffirms
                  and ratifies the Subordination Agreement between the Bank, Guarantor
                  and
                  CTI Industries Corporation dated February 1, 2006 (the “Subordination
                  Agreement”), confirms that the Subordination Agreement remains in full
                  force and effect and that the increased Revolving Loan Commitment
                  amount
                  implemented by the Third Amendment shall be included in the Senior
                  Debt,
                  as defined in the Subordination
                  Agreement.

              


      

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      IN
        WITNESS WHEREOF, the Guarantor has executed this Amendment and Reaffirmation
        as
        of this 13th day of November, 2007.

      
         

        
          	 	 	GUARANTOR:
	 	 	 
	 	 	/s/ John H. Schwan
	 	
                  
John
                  H Schwan