EXHIBIT 10.2


 


	
        Payment of the indebtedness evidenced by
        this instrument or document and the rights of the holder hereof are subordinated and subject to the rights of BMO Harris Bank N.A.
        to the extent provided in a Subordination Agreement dated as of September 30, 2016, from the payee to said lender.

         

        Payment of the indebtedness evidenced by
        this instrument or document and the rights of the holder hereof are subordinated and subject to the rights of BMO Private
        Equity (U.S.), Inc., to the extent provided in a Subordination Agreement dated as of September 30, 2016, from the payee to
        said lender.



 


PROMISSORY NOTE


 


FOR VALUE RECEIVED, and subject to the
terms and conditions set forth herein, CTI Industries Corporation, an Illinois corporation (the "Maker"), hereby
unconditionally promises to pay to the order of John H. Schwan or his assigns (the "Noteholder", and together
with the Maker, the "Parties"), the principal amount of Five Hundred Thirty Thousand Dollars ($530,000) (the "Loan"),
together with all accrued interest thereon, as provided in this Promissory Note (the "Note", as the same may be
amended, restated, supplemented or otherwise modified from time to time in accordance with its terms).


 


1.    Definitions.
Capitalized terms used herein shall have the meanings set forth in this Section 1.


 


"Applicable Rate" means
the rate equal to Six percent (6%) per annum.


 


"Business Day" means
a day other than a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois are authorized or required by law
to close.


 


"Default" means any
of the events specified in Section 6 which constitutes an Event of Default or which, upon the giving of notice, the
lapse of time, or both pursuant to Section 6 would, unless cured or waived, become an Event of Default.


 


"Default Rate" means,
at any time, the Applicable Rate plus 2%.


 


"Event of Default" has
the meaning set forth in Section 6.


 


"Governmental Authority" means
the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, municipal
or any other level, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of, or pertaining to, government (including
any supranational bodies such as the European Union or the European Central Bank).


 




     


     


    

 


"Law" as to any Person,
means any law (including common law), statute, ordinance, treaty, rule, regulation, policy or requirement of any Governmental Authority
and authoritative interpretations thereon, whether now or hereafter in effect, in each case, applicable to or binding on such Person
or any of its properties or to which such Person or any of its properties is subject.


 


"Loan" has the meaning
set forth in the introductory paragraph.


 


"Maker" has the meaning
set forth in the introductory paragraph.


 


"Maturity Date" means
the earlier of (a) the date that is six months after the latest maturity date for any indebtedness owing by the Maker under
(i) a Credit Agreement dated as of April 29, 2010, between the Maker and BMO Harris Bank N.A. (as the same
may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms) or (ii) a Note
and Warrant Purchase Agreement dated as of July 17, 2012, between the Maker and BMO Private Equity (U.S.), Inc. (as the
same may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms), and (b) the
date on which all amounts under this Note shall become due and payable pursuant to Section 7.


 


"Note" has the meaning
set forth in the introductory paragraph.


 


"Noteholder" has
the meaning set forth in the introductory paragraph.


 


"Order" as to any
Person, means any order, decree, judgment, writ, injunction, settlement agreement, requirement or determination of an arbitrator
or a court or other Governmental Authority, in each case, applicable to or binding on such Person or any of its properties or to
which such Person or any of its properties is subject.


 


"Parties" has the
meaning set forth in the introductory paragraph.


 


"Person" means any
individual, corporation, limited liability company, trust, joint venture, association, company, limited or general partnership,
unincorporated organization, Governmental Authority or other entity.


 


2.    Final
Payment Date; Optional Prepayments.


 


2.1       Final
Payment Date. The aggregate unpaid principal amount of the Loan, all accrued and unpaid interest and all other amounts payable
under this Note shall be due and payable on the Maturity Date.


 




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2.2       Optional
Prepayment. The Maker may prepay the Loan in whole or in part at any time or from time to time without penalty or premium by
paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. No prepaid amount may
be reborrowed.


 


3.    Interest.


 


3.1       Interest
Rate. Except as otherwise provided herein, the outstanding principal amount of the Loan made hereunder shall bear interest
at the Applicable Rate from the date the Loan was made until the Loan is paid in full, whether at maturity, upon acceleration,
by prepayment or otherwise.


 


3.2       Interest
Payment Dates. In accordance with Section 2.1, all accrued and unpaid interest shall be due and payable on the Maturity
Date.


 


3.3       Default
Interest. If any amount payable hereunder is not paid when due (without regard to any applicable grace periods), whether at
stated maturity, by acceleration or otherwise, such overdue amount shall bear interest at the Default Rate from the date of such
non-payment until such amount is paid in full.


 


3.4       Computation
of Interest. All computations of interest shall be made on the basis of a year of 365 days, and the actual number of days elapsed.
Interest shall accrue on the Loan on the day on which such Loan is made, and shall not accrue on the Loan on the day on which it
is paid. Interest shall not accrue on accrued and unpaid interest.


 


4.    Payment
Mechanics.


 


4.1       Manner
of Payment. All payments of interest and principal shall be made in lawful money of the United States of America no later than
[12:00] PM on the date on which such payment is due by wire transfer of immediately available funds to the Noteholder's account
at a bank specified by the Noteholder in writing to the Maker from time to time.


 


4.2       Application
of Payments. All payments made hereunder shall be applied first, to the payment of any fees or charges outstanding hereunder,
second, to accrued interest and third, to the payment of the principal amount outstanding under the Note.


 


4.3       Business
Day Convention. Whenever any payment to be made hereunder shall be due on a day that is not a Business Day, such payment shall
be made on the next succeeding Business Day and such extension will be taken into account in calculating the amount of interest
payable under this Note.


 


5.      
Representations and Warranties. The Maker hereby represents and warrants to the Noteholder on the date hereof as follows:


 




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5.1       Existence.
The Maker is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its jurisdiction
of organization.


 


5.2       Power
and Authority. The Maker has the power and authority, and the legal right, to execute and deliver this Note and to perform
its obligations hereunder.


 


5.3       Authorization;
Execution and Delivery. The execution and delivery of this Note by the Maker and the performance of its obligations hereunder
have been duly authorized by all necessary corporate action in accordance with all applicable Laws. The Maker has duly executed
and delivered this Note.


 


5.4       No
Approvals. Other than consent by BMO Harris N.A. and BMO Private Equity (US) Inc., which consent has been given, no consent
or authorization of, filing with, notice to or other act by, or in respect of, any Governmental Authority or any other Person is
required in order for the Maker to execute, deliver, or perform any of its obligations under this Note.


 


5.5       No
Violations. The execution and delivery of this Note and the consummation by the Maker of the transactions contemplated hereby
do not and will not (a) violate any provision of the Maker's organizational documents; (b) violate any Law or Order applicable
to the Maker or by which any of its properties or assets may be bound; or (c) constitute a default under any material agreement
or contract by which the Maker may be bound.


 


5.6       Enforceability.
The Note is a valid, legal and binding obligation of the Maker, enforceable against the Maker in accordance with its terms except
as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.


 


6.    Events
of Default. The occurrence of any of the following shall constitute an Event of Default hereunder:


 


6.1       Failure
to Pay. The Maker fails to pay (a) any principal amount of the Loan when due; or (b) interest or any other amount when due
and such failure continues for [5] days.


 


6.2       Breach
of Representations and Warranties. Any representation or warranty made or deemed made by the Maker to the Noteholder herein
is incorrect in any material respect on the date as of which such representation or warranty was made or deemed made.


 




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6.3       Bankruptcy.
 


 


(a)      the
Maker commences any case, proceeding or other action (i) under any existing or future law relating to bankruptcy, insolvency, reorganization,
or other relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it as bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, or (ii) seeking appointment of a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or the Maker makes a general assignment for the benefit of its creditors;


 


(b)      there
is commenced against the Maker any case, proceeding or other action of a nature referred to in clause (a) above which (i) results
in the entry of an order for relief or any such adjudication or appointment or (ii) remains undismissed, undischarged or unbonded
for a period of 60 days;


 


(c)      there
is commenced against the Maker any case, proceeding or other action seeking issuance of a warrant of attachment, execution or similar
process against all or any substantial part of its assets which results in the entry of an order for any such relief which has
not been vacated, discharged, or stayed or bonded pending appeal within 30 days from the entry thereof;


 


(d)      the
Maker takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth
in clause (a), (b) or (c) above; or


 


(e)      the
Maker is generally not, or is unable to, or admits in writing its inability to, pay its debts as they become due.


 


6.4       Judgments.
A judgment or decree is entered against the Maker and such judgment or decree has not been vacated, discharged, stayed or bonded
pending appeal within 15 days from the entry thereof.


 


6.5       Default.
The Maker shall be in default under, or shall have received notice of default with respect to, any note, agreement, or instrument
to which Maker shall be a party and such notice of default shall not have been rescinded or waived within five days from the date
given.


 


7.    Remedies.
Upon the occurrence of an Event of Default and at any time thereafter during the continuance of such Event of Default, the Noteholder
may at its option, by written notice to the Maker (a) declare the entire principal amount of this Note, together with all accrued
interest thereon and all other amounts payable hereunder, immediately due and payable and/or (b) exercise any or all of its rights,
powers or remedies under applicable law; provided, however that, if an Event of Default described in Section 6.3(a)
or 6.3(b) shall occur, the principal of and accrued interest on the Loan shall become immediately due and payable without any notice,
declaration or other act on the part of the Noteholder.


 




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8.    Miscellaneous.


 


8.1       Notices.
 


 


(a)      All
notices, requests or other communications required or permitted to be delivered hereunder shall be delivered in writing to such
address as a Party may from time to time specify in writing.


 


(b)      Notices
if (i) mailed by certified or registered mail or sent by hand or overnight courier service shall be deemed to have been given when
received, (ii) sent by facsimile during the recipient's normal business hours shall be deemed to have been given when sent (and
if sent after normal business hours shall be deemed to have been given at the opening of the recipient's business on the next business
day) and (iii) sent by e-mail shall be deemed received upon the sender's receipt of an acknowledgment from the intended recipient
(such as by the "return receipt requested" function, as available, return e-mail or other written acknowledgment).


 


8.2       Expenses.
The Maker shall reimburse the Noteholder on demand for all reasonable out-of-pocket costs, expenses and fees (including reasonable
expenses and fees of its counsel) incurred by the Noteholder in connection with the transactions contemplated hereby including
the negotiation, documentation and execution of this Note and the enforcement of the Noteholder's rights hereunder.


 


8.3       Governing
Law. This Note and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon,
arising out of or relating to this Note and the transactions contemplated hereby shall be governed by the laws of the State of
Illinois.


 


8.4       Submission
to Jurisdiction.  


 


(a)      The
Maker hereby irrevocably and unconditionally (i) agrees that any legal action, suit or proceeding arising out of or relating to
this Note may be brought in the courts of the State of Illinois or of the United States of America for the Northern District of
Illinois and (ii) submits to the exclusive jurisdiction of any such court in any such action, suit or proceeding. Final judgment
against the Maker in any action, suit or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on
the judgment.


 


(b)      Nothing
in this Section 8.4 shall affect the right of the Noteholder to (i) commence legal proceedings or otherwise sue the
Maker in any other court having jurisdiction over the Maker or (ii) serve process upon the Maker in any manner authorized by the
laws of any such jurisdiction.


 


8.5       Venue.
The Maker irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may
now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Note in any court referred
to in Section 8.4(a) and the defense of an inconvenient forum to the maintenance of such action or proceeding in
any such court.


 




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8.6       Waiver
of Jury Trial. THE MAKER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY.


 


8.7       Counterparts;
Integration; Effectiveness. This Note and any amendments, waivers, consents or supplements hereto may be executed in counterparts,
each of which shall constitute an original, but all taken together shall constitute a single contract. This Note constitutes the
entire contract between the Parties with respect to the subject matter hereof and supersede all previous agreements and understandings,
oral or written, with respect thereto. Delivery of an executed counterpart of a signature page to this Note by facsimile or in
electronic (i.e., "pdf" or "tif") format shall be effective as delivery of a manually executed counterpart
of this Note.


 


8.8       Successors
and Assigns. This Note may be assigned, transferred or negotiated by the Noteholder to any Person at any time without notice
to or the consent of the Maker. The Maker may not assign or transfer this Note or any of its rights hereunder without the prior
written consent of the Noteholder. This Note shall inure to the benefit of and be binding upon the parties hereto and their permitted
assigns.


 


8.9       Waiver
of Notice. The Maker hereby waives presentment, demand for payment, protest, notice of dishonor, notice of protest or nonpayment,
notice of acceleration of maturity and diligence in connection with the enforcement of this Note or the taking of any action to
collect sums owing hereunder.


 


8.10     Amendments
and Waivers. No term of this Note may be waived, modified or amended except by an instrument in writing signed by both of the
parties hereto. Any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given.


 


8.11     Headings.
The headings of the various Sections and subsections herein are for reference only and shall not define, modify, expand or limit
any of the terms or provisions hereof.


 


8.12     No
Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising on the part of the Noteholder, of any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.


 




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8.13     Severability.
If any term or provision of this Note is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other term or provision of this Note or invalidate or render unenforceable such term or provision
in any other jurisdiction.


 


IN WITNESS WHEREOF, the Maker has executed this Note as of September
30, 2016.


 


	 	CTI INDUSTRIES CORPORATION
	 	 	 
	 	By:	/s/ Timothy Patterson
	 	 	Authorized Officer
	 	 
	 	Name: Timothy Patterson
	 	 
	 	Title: Chief Financial Officer


 




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