Document:

Unassociated Document

     

    
      AMENDED
AND RESTATED

      

      WARRANT
SUBSCRIPTION AGREEMENT

      

      AMENDED
AND RESTATED WARRANT SUBSCRIPTION AGREEMENT (this “Agreement”) is made as of
this 13th day of May, 2010 by and among 57th Street
General Acquisition Corp., a Delaware corporation (the “Company”), having its
principal place of business at 590 Madison Avenue, 35th Floor, New York, New
York 10022, 57th Street GAC Holdings LLC (“Sponsor”), having its principal place
of business at 590 Madison Avenue, 35th Floor, New York, New York 10022 and each
of the underwriters (“Underwriters”) of the Company’s IPO (as defined below) for
which Morgan Joseph & Co. Inc. (“MJ”) is acting as representative of the
underwriters (together with the “Sponsor” the “Subscribers” and each a
“Subscriber”).

      

      WHEREAS,
the Company and the Sponsor entered into a Subscription Agreement (the “Original
Subscription Agreement”) on October 30, 2009, pursuant to which Sponsor agreed
to purchase warrants of the Company;

      

      WHEREAS,
the parties intend this Agreement to modify, amend and supercede the Original
Subscription Agreement;

      

      WHEREAS,
the Company desires to sell on a private placement basis (the “Offering”) an
aggregate of 3,700,000 warrants (the “Warrants”) of the Company for a purchase
price of $0.50 per Warrant.  Each Warrant is exercisable to purchase
one share of Common Stock at an exercise price of $11.50 per share during the
period commencing on the later of: (i) one year from the date of the prospectus
relating to the Company’s IPO (as defined below) and (ii) 30 days following the
consummation of a Business Transaction (as defined in Section 5 below) and
expiring on the fifth anniversary of the consummation of an initial Business
Transaction;

      

      WHEREAS,
Subscribers wish to purchase the Warrants and the Company wishes to accept such
subscriptions.

      

      NOW,
THEREFORE, in consideration of the premises and the mutual covenants hereinafter
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Subscribers hereby agree
as follows

      

      1. Agreement to
Subscribe

      

      1.1.
Purchase and Issuance
of the Warrants. Upon the terms and subject to the conditions of this
Agreement, the Subscribers hereby agree to purchase from the Company, and the
Company hereby agrees to sell to the Subscribers, on the Closing Date, the
Warrants for an aggregate purchase price of $1,850,000 (the “Purchase Price”) in
such amount as indicated on the signature pages hereto.

      

      1.2.
Delivery of the
Purchase Price. Upon execution of this Agreement, the Subscribers are
hereby bound to fulfill their obligations hereunder and hereby irrevocably
commit to deliver into a trust account at a financial institution to be chosen
by the Company, maintained by Continental Stock Transfer & Trust Company,
acting as Trustee on the date of Closing (as hereinafter defined), the Purchase
Price in immediately available funds by certified bank check, wire transfer or
such other form of payment as shall be acceptable to the Trustee, in its sole
and absolute discretion, at the Closing.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      1.3.
Closing. The
closing (the “Closing”) of the Offering, shall take place at the offices of the
Company, on or prior to the closing date of the Company’s initial public
offering (“IPO”) of 5,000,000 units of Common Stock and Warrants (the “Closing
Date”).

      

      2. Representations and Warranties of
the Subscribers

      

      Each
Subscriber represents and warrants to the Company solely as to such Subscriber
that:

      

      2.1.
No Government
Recommendation or Approval. Subscriber understands that no United States
federal or state agency has passed upon or made any recommendation or
endorsement of the Company or the Offering of the Warrants or the Common Stock
underlying the Warrants (the “Warrant Shares” and, collectively with the
Warrants, the “Securities”).

      

      2.2.
Regulation D
Offering. Subscriber represents that it is an “accredited investor” as
such term is defined in Rule 501(a) of Regulation D under the Securities Act of
1933, as amended (the “Securities Act”) and acknowledges the sale contemplated
hereby is being made in reliance on a private placement exemption to “Accredited
Investors” within the meaning of Section 501(a) of Regulation D under the
Securities Act or similar exemptions under state law.

      

      2.3.
Intent.
Subscriber is purchasing the Warrants solely for investment purposes, for its
own account and not for the account or benefit of any U.S. Person, and not with
a view towards the distribution thereof and Subscriber has no present
arrangement to sell the Securities to or through any person or entity.
Subscriber shall not engage in hedging transactions with regard to the Warrants
and the underlying securities unless in compliance with the Securities
Act.

      

      2.4.
Restrictions on
Transfer. Subscriber acknowledges and understands the Warrants are being
offered in a transaction not involving a public offering in the United States
within the meaning of the Securities Act. The Securities have not been
registered under the Securities Act, and, if in the future Subscriber decides to
offer, resell, pledge or otherwise transfer the Securities, such Securities may
be offered, resold, pledged or otherwise transferred only (A) pursuant to an
effective registration statement filed under the Securities Act, (B) pursuant to
an exemption from registration under Rule 144 promulgated under the Securities
Act, if available, or (C) pursuant to any other available exemption from the
registration requirements of the Securities Act, and in each case in accordance
with any applicable securities laws of any state or any other jurisdiction.
Subscriber agrees that if any transfer of its Securities or any interest therein
is proposed to be made, as a condition precedent to any such transfer,
Subscriber may be required to deliver to the Company an opinion of counsel
satisfactory to the Company. Absent registration or another available exemption
from registration, Subscriber agrees it will not resell the Securities.
Subscriber further acknowledges that because the Company is a shell company Rule
144 may not be available to Subscriber for the resale of the Securities until
the one year anniversary following consummation of the initial Business
Transaction of the Company, despite technical compliance with the requirements
of Rule 144 and the release or waiver of any contractual transfer
restrictions.

      

      2.5.
Sophisticated
Investor.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      (i)
Subscriber is sophisticated in financial matters and is able to evaluate the
risks and benefits of the investment in the Securities.

      

      (ii)
Subscriber is aware that an investment in the Warrants is highly speculative and
subject to substantial risks because, among other things, none of the Securities
have been registered under the Securities Act and therefore cannot be sold
unless subsequently registered under the Securities Act or an exemption from
such registration is available. Subscriber is able to bear the economic risk of
its investment in the Securities for an indefinite period of time.

      

      2.6.
Independent
Investigation. Subscriber, in making the decision to purchase the
Warrants, has relied upon an independent investigation of the Company and has
not relied upon any information or representations made by any third parties or
upon any oral or written representations or assurances from the Company, its
officers, directors or employees or any other representatives or agents of the
Company, other than as set forth in this Agreement. Subscriber is familiar with
the business, operations and financial condition of the Company and has had an
opportunity to ask questions of, and receive answers from the Company’s officers
and directors concerning the Company and the terms and conditions of the
offering of the Warrants and has had full access to such other information
concerning the Company as Subscriber has requested.  Subscriber
confirms that all documents that it has requested have been made available and
that Subscriber has been supplied with all of the additional information
concerning this investment which it has requested.

      

      2.7               Organization and
Authority. Subscriber is an entity duly organized, validly existing and
in good standing under the laws of its state of incorporation or organization
and possesses all requisite power and authority necessary to carry out the
transactions contemplated by this Agreement.

      

      2.8.
Authority. This
Agreement has been validly authorized, executed and delivered by Subscriber and
is a valid and binding agreement enforceable in accordance with its terms,
subject to the general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors’ rights generally.

      

      2.9. No Conflicts. The
execution, delivery and performance of this Agreement and the consummation by
the Subscriber of the transactions contemplated hereby do not violate, conflict
with or constitute a default under (i) the Subscriber’s origination documents,
(ii) any agreement, indenture or instrument to which the Subscriber is a party
or (iii) any law, statute, rule or regulation to which Subscriber is subject, or
any agreement, order, judgment or decree to which Subscriber is
subject.

      

      2.10.
No Legal Advice from
Company. Subscriber acknowledges it has had the opportunity to review
this Agreement and the transactions contemplated by this Agreement and the other
agreements entered into between the parties hereto with Subscriber’s own legal
counsel and investment and tax advisors. Except for any statements or
representations of the Company made in this Agreement and the other agreements
entered into between the parties hereto, Subscriber is relying solely on such
counsel and advisors and not on any statements or representations of the Company
or any of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement or
the securities laws of any jurisdiction.

      

      
        
           

        

        
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      2.11.
Reliance on
Representations and Warranties. Subscriber understands the Warrants are
being offered and sold to it in reliance on exemptions from the registration
requirements under the Securities Act, and analogous provisions in the laws and
regulations of various states, and that the Company is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and
understandings of Subscriber set forth in this Agreement in order to determine
the applicability of such provisions.

      

      2.12.
No
Advertisements. Subscriber is not subscribing for the Warrants as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or
meeting.

      

      2.13.
Legend.
Subscriber acknowledges and agrees the certificates evidencing the Warrants and
the Warrant Shares shall bear a restrictive legend (the “Legend”), in form and
substance as set forth in Section 4 hereof, prohibiting the offer, sale, pledge
or transfer of the securities, except (i) pursuant to an effective registration
statement covering these securities under the Securities Act or (ii) pursuant to
any other exemptions from the registration requirements under the Securities Act
and such laws which, in the opinion of counsel for this Company, is
available.

      

      3. Representations and Warranties of
the Company

      

      The
Company represents and warrants to the Subscribers that:

      

      3.1.
Valid Issuance of
Capital Stock. The total number of shares of all classes of capital stock
which the Company has authority to issue is 100,000,000 shares of Common Stock
and 1,000,000 shares of Preferred Stock. As of the date hereof, the Company has
638,889 shares of Common Stock (of which 83,333 shares are subject to forfeiture
as described in the registration statement related to the Company’s IPO) and no
shares of Preferred Stock issued and outstanding. All of the issued shares of
capital stock of the Company have been duly authorized, validly issued, and are
fully paid and non-assessable.

      

      3.2 Title to
Warrants. Upon issuance in accordance with, and payment pursuant to, the
terms hereof and the Warrant Agreement, as the case may be, each of the Warrants
and the shares of Common Stock issued upon exercise of the Warrants will be duly
and validly issued, fully paid and non-assessable. Upon issuance in accordance
with, and payment pursuant to, the terms hereof and the Warrant Agreement, as
the case may be, Subscriber will have or receive good title to the Warrants,
free and clear of all liens, claims and encumbrances of any kind, other than (i)
transfer restrictions hereunder and under the other agreements contemplated
hereby and (ii) transfer restrictions under federal and state securities
laws.

      

      3.2.
Organization and
Qualification. The Company is a corporation duly incorporated and
existing in good standing under the laws of the state of Delaware and has the
requisite corporate power to own its properties and assets and to carry on its
business as now being conducted.

      

      3.3.
Authorization;
Enforcement. (i) The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and to
issue the Warrants and the underlying securities in accordance with the terms
hereof, (ii) the execution, delivery and performance of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate action, and no further consent
or authorization of the Company or its Board of Directors or stockholders is
required, and (iii) this Agreement constitutes valid and binding obligations of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, moratorium, reorganization, or similar laws relating to,
or affecting generally the enforcement of, creditors’ rights and remedies or by
equitable principles of general application and except as enforcement of rights
to indemnity and contribution may be limited by federal and state securities
laws or principles of public policy.

       

      
        
           

        

        
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      3.4.
No Conflicts.
The execution, delivery and performance of this Agreement and the consummation
by the Company of the transactions contemplated hereby do not (i) result in a
violation of the Company’s Certificate of Incorporation or Bylaws, (ii) conflict
with, or constitute a default under any agreement, indenture or instrument to
which the Company is a party or (iii) any law statute, rule or regulation to
which the Company is subject or any agreement, order, judgment or decree to
which the Company is subject. Other than any Securities Exchange Commission
(“SEC”) or state securities filings which may be required to be made by the
Company subsequent to the Closing, and any registration statement which may be
filed pursuant thereto, the Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency or
self-regulatory entity in order for it to perform any of its obligations under
this Agreement or issue the Warrants or the Common Stock issuable upon exercise
thereof in accordance with the terms hereof.

      

      4. Legends

      

      4.1.
Legend. The
Company will issue the Warrants, and when issued, the Warrant Shares, purchased
by each Subscriber in its respective name. The Securities will bear the
following Legend and appropriate “stop transfer” instructions:

      

      “THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THIS CORPORATION, IS AVAILABLE.”

      

      THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS CONTAINED IN A SECURITIES ESCROW AGREEMENT (THE “AGREEMENT”) AND MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED DURING THE TERM
OF THE ESCROW PERIOD (AS DEFINED IN THE AGREEMENT).”

       

      
        
           

        

        
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      4.2.
Subscribers’
Compliance. Nothing in this Section 4 shall affect in any way each
Subscriber’s obligations and agreements to comply with all applicable securities
laws upon resale of the Securities.

      

      4.3.
Company’s Refusal to
Register Transfer of the Securities. The Company shall refuse to register
any transfer of the Securities, if in the sole judgment of the Company such
purported transfer would not be made (i) pursuant to an effective registration
statement filed under the Securities Act, or (ii) pursuant to an available
exemption from the registration requirements of the Securities Act.

      

      4.4 Registration
Rights.  Subscribers will be entitled to certain registration
rights which will be governed by a registration rights agreement (“Registration
Rights Agreement”) to be entered into with the Company on or prior to the
closing of the IPO.

      

      5. Escrow. Upon
consummation of the IPO, the holders of the Warrants shall enter into a
securities escrow agreement (the “Escrow Agreement”) with Continental Stock
Transfer & Trust Company, whereby the Warrants shall be held in escrow until
one day following consummation of a Business Transaction (as defined therein)
subject to certain restrictions as set forth in the Escrow
Agreement.

      

      6. Securities Laws
Restrictions.  In addition to the restrictions contained in the
Escrow Agreement, each Subscriber agrees not to sell, transfer, pledge,
hypothecate or otherwise dispose of all or any part of the Securities unless,
prior thereto (a) a registration statement on the appropriate form under the
Securities Act and applicable state securities laws with respect to the
Securities proposed to be transferred shall then be effective or (b) the Company
shall have received an opinion from counsel reasonably satisfactory to the
Company, that such registration is not required because such transaction
complies with the Securities Act and the rules promulgated by the SEC thereunder
and with all applicable state securities laws.

      

      7. Waiver of Liquidation
Distributions.
In connection with the Securities purchased pursuant to this Agreement, and with
respect to any Common Stock purchased by Sponsor prior to the private placement,
Sponsor hereby waives any and all right, title, interest or claim of any kind in
or to any distributions of the trust account, whether in connection with (i) the
exercise of redemption rights if the Company consummates a Business Transaction
or (ii) upon the Company’s redemption of shares of Common Stock sold in the
Company’s IPO upon the Company’s failure to timely complete a Business
Transaction. For purposes of clarity, in the event Sponsor purchases shares of
Common Stock in the IPO or in the aftermarket, any additional shares so
purchased shall be eligible to receive the redemption value of such shares of
Common Stock upon the same terms offered to all other purchasers of Common Stock
in the IPO. In no event will a Sponsor have the right to exercise any Warrants
prior to the later of: (i) one year from the date of the prospectus relating to
the Company’s IPO and (ii) 30 days following the consummation of a Business
Transaction.

      

      8. Forfeiture of
Warrants.

      

      8.1.
Failure to Consummate
Business Transaction. The Warrants shall be forfeited to the Company upon
the dissolution of the Company in the event that the Company does not consummate
a Business Transaction within 15 months from the consummation of the
IPO.

       

      
        
           

        

        
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      8.2.
Termination of Rights
as holder; Escrow. If the Warrants are forfeited in accordance with this
Section 8, then after such time the Subscribers (or successor in interest),
shall no longer have any rights as a holder of such Warrants, and the Company
shall take such action as is appropriate to cancel such Warrants. To effectuate
the foregoing, all certificates representing the Warrants shall be held in
escrow as provided in Section 5 hereof. In addition, each Subscriber hereby
irrevocably grants the Company a limited power of attorney for the purpose of
effectuating the foregoing and agrees to take any and all measures reasonably
requested by the Company necessary to effect the foregoing.

      

      9. Rescission Right Waiver and
Indemnification.

      

      9.1. Each
Subscriber understands and acknowledges an exemption from the registration
requirements of the Securities Act requires there be no general solicitation of
purchasers of the Warrants. In this regard, if the IPO were deemed to be a
general solicitation with respect to the Warrants, the offer and sale of such
Warrants may not be exempt from registration and, if not, the each Subscriber
may have a right to rescind its purchase of the Warrants. In order to facilitate
the completion of the Offering and in order to protect the Company, its
stockholders and the trust account from claims that may adversely affect the
Company or the interests of its stockholders, each Subscriber hereby agrees to
waive, to the maximum extent permitted by applicable law, any claims, right to
sue or rights in law or arbitration, as the case may be, to seek rescission of
its purchase of the Warrants. Each Subscriber acknowledges and agrees this
waiver is being made in order to induce the Company to sell the Warrants to scuh
Subscriber. Each Subscriber agrees the foregoing waiver of rescission rights
shall apply to any and all known or unknown actions, causes of action, suits,
claims or proceedings (collectively, “Claims”) and related losses, costs,
penalties, fees, liabilities and damages, whether compensatory, consequential or
exemplary, and expenses in connection therewith, including reasonable attorneys’
and expert witness fees and disbursements and all other expenses reasonably
incurred in investigating, preparing or defending against any Claims, whether
pending or threatened, in connection with any present or future actual or
asserted right to rescind the purchase of the Warrants hereunder or relating to
the purchase of the Warrants and the transactions contemplated
hereby.

      

      9.2.  Each
Subscriber agrees not to seek recourse against the trust account for any reason
whatsoever in connection with its purchase of the Warrants or any Claim that may
arise now or in the future.

      

      9.3.  Sponsor
acknowledges and agrees the stockholders of the Company and MJ are and shall be
third-party beneficiaries of the foregoing provisions of this
Agreement.

      

      9.4.  Each
Subscriber agrees that to the extent any waiver of rights under this Section 9
is ineffective as a matter of law, each Subscriber has offered such waiver for
the benefit of the Company as an equitable right that shall survive any
statutory disqualification or bar that applies to a legal right. Each Subscriber
acknowledges the receipt and sufficiency of consideration received from the
Company hereunder in this regard.

      

      10. Terms of the
Warrant

      

      The
Warrants are substantially identical to the warrants included in the units
offered in the IPO as set forth in the Warrant Agreement to be entered into with
Continental Stock Transfer and Trust Company on or prior to the closing of the
IPO, except: (i) they will be placed in escrow and not released before, except
in limited circumstances, until 30 days following the consummation of a Business
Transaction, (iii) they are being purchased pursuant to an exemption from the
registration requirements of the Securities Act and will become freely tradable
only after they are registered pursuant to the Registration Rights Agreement to
be signed on or before the date of this prospectus, (iv) they will be
non-redeemable so long as they are held by the initial holder thereof (or any of
its permitted transferees), and (v) they are exercisable on a “cashless” basis
if held by a Subscriber or its permitted assigns.

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      11. Governing Law; Jurisdiction;
Waiver of Jury
Trial

      

      This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware for agreements made and to be wholly performed within such
state. The parties hereto hereby waive any right to a jury trial in connection
with any litigation pursuant to this Agreement and the transactions contemplated
hereby.

      

      12. Assignment; Entire Agreement;
Amendment

      

      12.1.
Assignment.
Neither this Agreement nor any rights hereunder may be assigned by any party to
any other person other than by a Subscriber to a person agreeing to be bound by
the terms hereof.

      

      12.2.
Entire
Agreement. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.

      

      12.3.
Amendment.
Except as expressly provided in this Agreement, neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.

      

      12.4.
Binding upon
Successors. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and to their respective heirs, legal representatives,
successors and permitted assigns.

      

      13. Notices;
Indemnity

      

      13.1
Notices. Unless
otherwise provided herein, any notice or other communication to a party
hereunder shall be sufficiently given if in writing and personally delivered or
sent by facsimile or other electronic transmission with copy sent in another
manner herein provided or sent by courier (which for all purposes of this
Agreement shall include Federal Express or other recognized overnight courier)
or mailed to said party by certified mail, return receipt requested, at its
address provided for herein or such other address as either may designate for
itself in such notice to the other. Communications shall be deemed to have been
received when delivered personally, on the scheduled arrival date when sent by
next day or 2nd-day courier service, or if sent by facsimile upon receipt of
confirmation of transmittal or, if sent by mail, then three days after deposit
in the mail. If given by electronic transmission, such notice shall be deemed to
be delivered (a) if by electronic mail, when directed to an electronic mail
address at which the stockholder has consented to receive notice; (b) if by a
posting on an electronic network together with separate notice to the
stockholder of such specific posting, upon the later of (1) such posting and (2)
the giving of such separate notice; and (c) if by any other form of electronic
transmission, when directed to the stockholder.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      13.2
Indemnification. Each
of Sponsor and the Company agree to indemnify the Underwriters and the Sponsor,
Company and the Underwriters agree to indemnify each other against any loss,
cost or damages (including reasonable attorney’s fees and expenses) incurred as
a result of such party’s breach of any representation, warranty, covenant or
agreement in this Agreement.

      

      14. Counterparts

      

      This
Agreement may be executed in one or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.

      

      15. Survival;
Severability

      

      15.1.
Survival. The
representations, warranties, covenants and agreements of the parties hereto
shall survive the Closing.

      

      15.2.
Severability.
In the event that any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision;
provided that no such severability shall be effective if it materially changes
the economic benefit of this Agreement to any party.

      

      16. Headings.

      

      The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.

      

      [remainder
of page intentionally left blank]

      

      
        
           

        

        
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      This
subscription is accepted by the Company on the 13th day of May,
2010.

      
 

      
        
          	 
      	57TH
      STREET GENERAL ACQUISITION CORP.
	 
      	 
      	 
      	 
      
	 
      	
                  By:

                	
                  /s/ Mark D. Klein

                	 
      
	 
      	 
      	
                  Name:
      Mark D. Klein

                	 
      
	 
      	 
      	
                  Title:
      Chief Executive Officer

                	 
      
	 
      	 
      	 
      	 
      
	 	 	 	 
	 
      	57TH
      STREET GAC HOLDINGS, LLC
	 
      	 
      	 
      	 
      
	 
      	
                  By: 
      

                	
                  /s/ Mark D. Klein

                	 
      
	 
      	 
      	
                  Name:
      Mark D. Klein

                	 
      
	 
      	 
      	
                  Title:
      Managing Member

                	 
      
	 
      	 
      	      
                  No.
      of Warrants: 3,500,000

                	 
      
	 	 	 	 
	 	 	 	 
	 
      	UNDERWRITER WARRANTHOLDERS:
	 
      	 
      	 
      	 
      
	 
      	MORGAN JOSEPH & CO. INC.
	 
      	 
      	 
      	 
      
	 
      	
                  By:

                	
                   

                	 
      
	 
      	 
      	
                  Name: 

                	 
      
	 
      	 
      	
                  Title:

                	 
      
	 	 	No. of Warrants:	 
	 	 	 	 
	 
      	 
      	 
      	 
      
	 
      	LADENBURG
      THALMANN & CO. INC.
	 
      	 
      	 
      	 
      
	 
      	
                  By:

                	
                   

                	 
      
	 
      	 
      	
                  Name:

                	 
      
	 
      	 
      	
                  Title:

                	 
      
	 	 	No. of Warrants:	 
	 	 	 	 
	 
      	 
      	 
      	 
      
	 
      	I-BANKERS
      SECURITIES, INC.
	 
      	 
      	 
      	 
      
	 
      	
                  By:

                	
                   

                	 
      
	 
      	 
      	
                  Name:

                	 
      
	 
      	 
      	
                  Title:

                	 
      
	 
      	 
      	No. of Warrants:	 
      
	 	 	 	 
	 
      	 
      	 
      	 
      
	 
      	RODMAN
      & RENSHAW, LLC	 
      
	 
      	 
      	 
      	 
      
	 
      	
                  By:

                	
                   

                	 
      
	 
      	 
      	
                  Name: Paul G. LaRosa

                	 
      
	 
      	 
      	
                  Title:

                	 
      
	 	 	No.
      of Warrants:	 
	 	 	 	 
	 
      	 
      	 
      	 
      
	 
      	MAXIM
      GROUP LLC
	 
      	 
      	 
      	 
      
	 
      	
                  By:

                	
                   

                	 
      
	 
      	 
      	
                  Name: Ramnarain Jaigobind

                	 
      
	 
      	 
      	
                  Title:

                	 
      
	 	 	No.
      of Warrants:	 

        

        

        
          
             

          

          
            10Unassociated Document

    

      
        
          
            	
                    EXHIBIT
      10.2

                  
	 
      

          

        

      

       

      Credit
Agreement

       

      dated
as of

      April
29, 2010,

       

      between

       

      CTI
Industries Corporation

       

      and

       

      Harris
N.A.

      
        
          
            	 
      

          

        

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Table of Contents

       

      
        
          
            
              
                
                  
                    	
                            Section

                          	
                            Description

                          	
                            Page

                          
	
                            Section
      1.        The
    Credits

                          	
                            1

                          
	
                            Section
      1.1

                          	
                            Term
      Loan

                          	
                            1

                          
	
                            Section
      1.2

                          	
                            Mortgage
      Loan

                          	
                            1

                          
	
                            Section
      1.3

                          	
                            Equipment
      Loan

                          	
                            2

                          
	
                            Section
      1.4

                          	
                            Revolving
      Credit

                          	
                            2

                          
	
                            Section
      1.5

                          	
                            Revolving
      Credit Loans

                          	
                            3

                          
	
                            Section
      1.6

                          	
                            Letters
      of Credit

                          	
                            3

                          
	
                            Section
      1.7

                          	
                            Manner
      and Disbursement of Loans

                          	
                            4

                          
	 
      	 
      	 
      
	
                            Section
      2.        Interest and Change In
      Circumstances

                          	
                            4

                          
	 
      	 
      	 
      
	
                            Section
      2.1

                          	
                            Interest
      Rate Options

                          	
                            4

                          
	
                            Section
      2.2

                          	
                            Minimum
      Amounts

                          	
                            6

                          
	
                            Section
      2.3

                          	
                            Computation
      of Interest

                          	
                            6

                          
	
                            Section
      2.4

                          	
                            Manner
      of Rate Selection

                          	
                            6

                          
	
                            Section
      2.5

                          	
                            Change
      of Law

                          	
                            6

                          
	
                            Section
      2.6

                          	
                            Unavailability
      of Deposits or Inability to Ascertain, or Inadequacy of, Adjusted
      LIBOR

                          	
                            6

                          
	
                            Section
      2.7

                          	
                            Taxes
      and Increased Costs

                          	
                            7

                          
	
                            Section
      2.8

                          	
                            Change
      in Capital Adequacy Requirements

                          	
                            8

                          
	
                            Section
      2.9

                          	
                            Funding
      Indemnity

                          	
                            8

                          
	
                            Section
      2.10

                          	
                            Lending
      Branch

                          	
                            8

                          
	
                            Section
      2.11

                          	
                            Discretion
      of Bank as to Manner of Funding

                          	
                            8

                          
	 
      	 
      	 
      
	
                            Section
      3.        Fees, Prepayments,
      Terminations and Applications

                          	
                            9

                          
	 
      	 
      	 
      
	
                            Section
      3.1

                          	
                            Fees.

                          	
                            9

                          
	
                            Section
      3.2

                          	
                            Voluntary
      Prepayments

                          	
                            9

                          
	
                            Section
      3.3

                          	
                            Mandatory
      Prepayments

                          	
                            10

                          
	
                            Section
      3.4

                          	
                            Terminations

                          	
                            10

                          
	
                            Section
      3.5

                          	
                            Place
      and Application of Payments

                          	
                            11

                          
	
                            Section
      3.6

                          	
                            Notations

                          	
                            11

                          
	 
      	 
      	 
      
	
                            Section
      4.        Collateral and
      Guaranties

                          	
                            12

                          
	 
      	 
      	 
      
	
                            Section
      4.1

                          	
                            Collateral

                          	
                            12

                          
	
                            Section
      4.2

                          	
                            Liens
      on Real Property

                          	
                            12

                          
	
                            Section
      4.3

                          	
                            Guaranties

                          	
                            12

                          
	
                            Section
      4.4

                          	
                            Further
      Assurances

                          	
                            12

                          
	 
      	 
      	 
      
	
                            Section
      5.        Definitions;
      Interpretation

                          	
                            12

                          
	 
      	 
      	 
      
	
                            Section
      5.1

                          	
                            Definitions

                          	
                            12

                          
	
                            Section
      5.2

                          	
                            Interpretation

                          	
                            22

                          
	 
      	 
      	 
      
	Section
      6.       Representations
      and Warranties	
                            22

                          
	 
      	 
      	 
      
	
                            Section
      6.1

                          	
                            Organization
      and Qualification

                          	
                            22

                          

                  

                

              

            

          

        

      

      
        
           

        

        
          -i-

          
            

          

        

        
           

        

      

      

      
        
          
            
              	
                      Section
      6.2

                    	
                      Subsidiaries

                    	
                      23

                    
	
                      Section
      6.3

                    	
                      Authority
      and Validity of Obligations

                    	
                      23

                    
	
                      Section
      6.4

                    	
                      Use
      of Proceeds; Margin Stock

                    	
                      24

                    
	
                      Section
      6.5

                    	
                      Financial
      Reports

                    	
                      24

                    
	
                      Section
      6.6

                    	
                      No
      Material Adverse Change

                    	
                      24

                    
	
                      Section
      6.7

                    	
                      Full
      Disclosure

                    	
                      24

                    
	
                      Section
      6.8

                    	
                      Trademarks,
      Franchises and Licenses

                    	
                      24

                    
	
                      Section
      6.9

                    	
                      Governmental
      Authority and Licensing

                    	
                      25

                    
	
                      Section
      6.10

                    	
                      Good
      Title

                    	
                      25

                    
	
                      Section
      6.11

                    	
                      Litigation
      and Other Controversies

                    	
                      25

                    
	
                      Section
      6.12

                    	
                      Taxes

                    	
                      25

                    
	
                      Section
      6.13

                    	
                      Approvals

                    	
                      25

                    
	
                      Section
      6.14

                    	
                      Affiliate
      Transactions

                    	
                      25

                    
	
                      Section
      6.15

                    	
                      Investment
      Company

                    	
                      25

                    
	
                      Section
      6.16

                    	
                      ERISA

                    	
                      26

                    
	
                      Section
      6.17

                    	
                      Compliance
      with Laws

                    	
                      26

                    
	
                      Section
      6.18

                    	
                      Other
      Agreements

                    	
                      26

                    
	
                      Section
      6.19

                    	
                      Solvency

                    	
                      26

                    
	
                      Section
      6.20

                    	
                      Broker
      Fees

                    	
                      26

                    
	
                      Section
      6.21

                    	
                      No
      Default

                    	
                      26

                    
	
                      Section
      6.22

                    	
                      CTI
      Helium

                    	
                      26

                    
	 
      	 
      
	
                      Section
      7.        Conditions
      Precedent

                    	
                      26

                    
	 
      	 
      
	
                      Section
      7.1

                    	
                      All
      Advances

                    	
                      26

                    
	
                      Section
      7.2

                    	
                      Initial
      Advance

                    	
                      27

                    
	 
      	 
      	 
      
	Section
      8.        Covenants	
                      29

                    
	 
      	 
      	 
      
	
                      Section
      8.1

                    	
                      Maintenance
      of Business

                    	
                      29

                    
	
                      Section
      8.2

                    	
                      Maintenance
      of Properties

                    	
                      29

                    
	
                      Section
      8.3

                    	
                      Taxes
      and Assessments

                    	
                      29

                    
	
                      Section
      8.4

                    	
                      Insurance

                    	
                      30

                    
	
                      Section
      8.5

                    	
                      Financial
      Reports

                    	
                      30

                    
	
                      Section
      8.6

                    	
                      Inspection

                    	
                      32

                    
	
                      Section
      8.7

                    	
                      Borrowings
      and Guaranties

                    	
                      32

                    
	
                      Section
      8.8

                    	
                      Liens

                    	
                      32

                    
	
                      Section
      8.9

                    	
                      Investments,
      Acquisitions, Loans and Advances

                    	
                      34

                    
	
                      Section
      8.10

                    	
                      Mergers,
      Consolidations and Asset Sales

                    	
                      35

                    
	
                      Section
      8.11

                    	
                      Maintenance
      of Subsidiaries

                    	
                      35

                    
	
                      Section
      8.12

                    	
                      Dividends
      and Certain Other Restricted Payments

                    	
                      35

                    
	
                      Section
      8.13

                    	
                      ERISA

                    	
                      35

                    
	
                      Section
      8.14

                    	
                      Compliance
      with Laws

                    	
                      35

                    
	
                      Section
      8.15

                    	
                      Intellectual
      Property

                    	
                      35

                    
	
                      Section
      8.16

                    	
                      Burdensome
      Contracts with Affiliates

                    	
                      36

                    
	
                      Section
      8.17

                    	
                      No
      Changes in Fiscal Year

                    	
                      36

                    
	
                      Section
      8.18

                    	
                      Formation
      of Subsidiaries

                    	
                      36

                    
	
                      Section
      8.19

                    	
                      Change
      in the Nature of Business

                    	
                      36

                    

            

          

        

      

      
        
           

        

        
          -ii-

          
            

          

        

        
           

        

      

      

      
        
          
            	
                    Section
      8.20

                  	
                    Use
      of Proceeds

                  	
                    36

                  
	
                    Section
      8.21

                  	
                    No
      Restrictions

                  	
                    36

                  
	
                    Section
      8.22

                  	
                    Subordinated
      Debt

                  	
                    36

                  
	
                    Section
      8.23

                  	
                    Bank
      Accounts

                  	
                    36

                  
	
                    Section
      8.24

                  	
                    Utilization

                  	
                    35

                  
	
                    Section
      8.25

                  	
                    CTI
      Helium

                  	
                    36

                  
	
                    Section
      8.26

                  	
                    Financial
      Covenants

                  	
                    37

                  
	 
      	 
      	 
      
	
                    Section
      9.       Events of Default and
      Remedies

                  	
                    37

                  
	 
      	 
      	 
      
	
                    Section
      9.1

                  	
                    Events
      of Default

                  	
                    37

                  
	
                    Section
      9.2

                  	
                    Non-Bankruptcy
      Defaults

                  	
                    40

                  
	
                    Section
      9.3

                  	
                    Bankruptcy
      Defaults

                  	
                    40

                  
	
                    Section
      9.4

                  	
                    Collateral
      for Undrawn Letters of Credit

                  	
                    40

                  
	 
      	 
      	 
      
	
                    Section
      10.      Miscellaneous

                  	
                    40

                  
	 
      	 
      
	
                    Section
      10.1

                  	
                    Non-Business
      Day

                  	
                    40

                  
	
                    Section
      10.2

                  	
                    No
      Waiver, Cumulative Remedies

                  	
                    40

                  
	
                    Section
      10.3

                  	
                    Amendments,
      Etc

                  	
                    41

                  
	
                    Section
      10.4

                  	
                    Costs
      and Expenses; Indemnification.

                  	
                    41

                  
	
                    Section
      10.5

                  	
                    Documentary
      Taxes

                  	
                    42

                  
	
                    Section
      10.6

                  	
                    Survival
      of Representations

                  	
                    42

                  
	
                    Section
      10.7

                  	
                    Survival
      of Indemnities

                  	
                    42

                  
	
                    Section
      10.8

                  	
                    Notices

                  	
                    42

                  
	
                    Section
      10.9

                  	
                    Construction

                  	
                    43

                  
	
                    Section
      10.10

                  	
                    Headings

                  	
                    43

                  
	
                    Section
      10.11

                  	
                    Severability
      of Provisions

                  	
                    43

                  
	
                    Section
      10.12

                  	
                    Counterparts

                  	
                    44

                  
	
                    Section
      10.13

                  	
                    Binding
      Nature, Governing Law, Etc

                  	
                    44

                  
	
                    Section
      10.14

                  	
                    Submission
      to Jurisdiction; Waiver of Jury Trial

                  	
                    44

                  
	
                    Section
      10.15

                  	
                    USA
      Patriot Act

                  	
                    44

                  

          

        

      

      

      
        	
                Exhibit
      A

              	
                —

              	
                Term
      Loan Note

              	 
      
	
                Exhibit
      B

              	
                —

              	
                Mortgage
      Loan Note

              	 
      
	
                Exhibit
      C

              	
                —

              	
                Equipment
      Note

              	 
      
	
                Exhibit
      D

              	
                —

              	
                Revolving
      Note

              	 
      
	
                Exhibit
      E

              	
                —

              	
                Applicable
      Rate

              	 
      
	
                Exhibit
      F

              	
                —

              	
                Borrowing
      Base Certificate

              	 
      
	
                Exhibit
      G

              	
                —

              	
                Compliance
      Certificate

              	 
      
	
                Schedule
      0

              	
                —

              	
                Subsidiaries

              	 
      

      

       

      
        
           

        

        
          -iii-

          
            

          

        

        
           

        

      

      Credit Agreement

       

      This
Credit
Agreement is entered into as of April 29, 2010, by and between CTI Industries
Corporation, an Illinois corporation (the “Borrower”) and Harris N.A.,
a national banking association (the “Bank”). All capitalized
terms used herein without definition shall have the same meanings herein as such
terms are defined in Section 0
hereof.

       

      Preliminary Statement

       

      The
Borrower has requested, and the Bank has agreed to extend, certain credit
facilities on the terms and conditions of this Agreement.

       

      Now,
Therefore, in consideration of the mutual agreements contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as
follows:

       

      The
Credits.

       

      
        
          Term Loan. Subject to the
terms and conditions hereof, the Bank agrees to make a term loan to the Borrower
in the principal amount of Five Hundred Eighty Three Thousand Three Hundred
Thirty Three and 50/100 Dollars ($583,333.50) (the “Term Loan Commitment”, and
the term loan made pursuant thereto being referred to herein as the “Term Loan”). The Term Loan
shall be made on the date hereof, at which time the commitment of the Bank to
make the Term Loan shall expire. There shall be only one advance made under the
Term Loan Commitment, and any portion of the Term Loan Commitment not advanced
on the date of such borrowing shall thereupon expire. The Term Loan shall be
made against and evidenced by a promissory note of the Borrower in the form
(with appropriate insertions) attached hereto as Exhibit A (the “Term Loan Note”). The Term
Loan Note shall be dated the date of issuance thereof and be expressed to bear
interest as set forth in Section 0 hereof. The
Term Loan Note, and the Term Loan evidenced thereby, shall mature in equal
principal installments of $58,333.33, commencing on May 30, 2010, and continuing
on the last day of each month thereafter, with a final installment in the amount
of all principal not sooner paid due and payable on the Term Loan Final Maturity
Date.

           

          Mortgage
Loan.  Subject to the terms and conditions hereof, the Bank
agrees to make a term loan to the Borrower in the principal amount of Two
Million Three Hundred Thirty Three Thousand Three Hundred Fifty and 00/100
Dollars ($2,333,350.00) (the “Mortgage Loan Commitment”,
and the term loan made pursuant thereto being referred to herein as “Mortgage Loan”). The
Mortgage Loan shall be made on the date hereof, at which time the commitment of
the Bank to make the Mortgage Loan shall expire. There shall be only one advance
made under the Mortgage Loan Commitment, and any portion of the Mortgage Loan
Commitment not advanced on the date of such borrowing shall thereupon expire.
The Mortgage Loan shall be made against and evidenced by a promissory note of
the Borrower in the form (with appropriate insertions) attached hereto as Exhibit B (the “Mortgage Loan Note”). The
Mortgage Loan Note shall be dated the date of issuance thereof and be expressed
to bear interest as set forth in Section 0 hereof. The
Mortgage Loan Note, and the Mortgage Loan evidenced thereby, shall mature in
equal principal installments of $7,777.83, commencing on May 30, 2010, and
continuing on the last day of each month thereafter, with a final installment in
the amount of all principal not sooner paid due and payable on the Mortgage Loan
Final Maturity Date.

           

          
            
               

            

            
               

              
                

              

            

            
               

            

          

           

          Equipment
Loan.  Subject to the terms and conditions hereof, the Bank
agrees to make one or more equipment loans to the Borrower in an amount not to
exceed (a) Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00)
in the aggregate (the “Equipment Loan Commitment”,
and the equipment loans made pursuant thereto being referred to herein as the
“Equipment Loan”) and
(b) with respect to each Equipment Loan (other than the Equipment Loan to be
made on the date hereof to refinance indebtedness of the Borrower to RBS Asset
Finance, Inc.), 100% of the purchase price of the Equipment being purchased with
the proceeds of such Equipment Loan as demonstrated by an invoice delivered to
the Bank in accordance with Section 1.7, at such times as
the Borrower may from time to time request during the period from and including
the date hereof to but not including the Equipment Loan Commitment Termination
Date, at which time the commitment of the Bank to make Equipment Loans shall
expire.  Any portion of the Equipment Loan Commitment not advanced on
the Equipment Loan Commitment Termination Date shall thereupon
expire.  Principal amounts repaid on the Equipment Loans may not be
borrowed again.  The Equipment Loans shall be made against and
evidenced by a single promissory note of the Borrower in the form (with
appropriate insertions) attached hereto as Exhibit C (the “Equipment Note”). The
Equipment Note shall be dated the date of issuance thereof and be expressed to
bear interest as set forth in Section 0
hereof.  The Equipment Note, and the Equipment Loans evidenced
thereby, shall mature in equal monthly principal installments based upon the
straight line five-year amortization of the aggregate principal balance of the
Equipment Loans as of the Equipment Loan Commitment Termination Date, commencing
on April 30, 2011, and continuing on the last day of each month thereafter, with
a final installment in the amount of all principal not sooner paid due and
payable on the Equipment Loan Final Maturity Date.  Without regard to
the principal amount of the Equipment Note stated on its face, the actual
principal amount at any time outstanding and owing by the Borrower on account of
the Equipment Note shall be the sum of all Equipment Loans made hereunder less
all payments of principal thereof actually received by the Bank.

           

          Revolving
Credit.  Subject to the terms and conditions hereof, the Bank
agrees to extend a revolving credit (the “Revolving Credit”) to the
Borrower which may be availed of by the Borrower from time to time during the
period from and including the date hereof to but not including the Revolving
Credit Termination Date, at which time the commitment of the Bank to extend
credit under the Revolving Credit shall expire. The Revolving Credit may be
utilized by the Borrower in the form of Revolving Loans and Letters of Credit,
all as more fully hereinafter set forth, provided that the aggregate principal
amount of Revolving Loans and Letters of Credit outstanding at any one time
shall not exceed the lesser of a) Nine Million and 00/100 Dollars
($9,000,000.00) (the “Revolving Credit Commitment”,
as such amount may be reduced pursuant to the terms hereof) and
b) the Borrowing Base as then determined and computed (the lesser of (a)
and (b), “Revolving Credit
Availability”). During the period from and including the date hereof to
but not including the Revolving Credit Termination Date, the Borrower may use
the Revolving Credit Commitment by borrowing, repaying, and reborrowing
Revolving Loans in whole or in part and/or by having the Bank issue Letters of
Credit, having such Letters of Credit expire or otherwise terminate without
having been drawn upon or, if drawn upon, reimbursing the Bank for each such
drawing, and having the Bank issue new Letters of Credit, all in accordance with
the terms and conditions of this Agreement.

           

          
            
               

            

            
              -2-

              
                

              

            

            
               

            

          

           

          Revolving Credit
Loans.  Subject to the terms and conditions hereof, the
Revolving Credit may be availed of by the Borrower in the form of loans
(individually a “Revolving
Loan” and collectively the “Revolving Loans”). Each
Revolving Loan shall be in a minimum amount of One Hundred Thousand and 00/100
Dollars ($100,000.00); provided, however, that any
LIBOR Portion of the Revolving Loans shall be in such greater amount as is
required by Section 0 hereof. The
Revolving Loans shall be made against and evidenced by a single promissory note
of the Borrower in the form (with appropriate insertions) attached hereto as
Exhibit D (the
“Revolving Note”). The
Revolving Note shall be dated the date of issuance thereof and be expressed to
bear interest as set forth in Section 0 hereof. The
Revolving Note, and all Revolving Loans evidenced thereby, shall mature and
become due and payable in full on the Revolving Credit Termination Date. Without
regard to the principal amount of the Revolving Note stated on its face, the
actual principal amount at any time outstanding and owing by the Borrower on
account of the Revolving Note shall be the sum of all Revolving Loans made
hereunder less all payments of principal thereof actually received by the
Bank.

           

          Letters
of Credit.

           

          General
Terms.  Subject to the terms and conditions hereof, the
Revolving Credit may be availed of by the Borrower in the form of standby and
commercial letters of credit issued by the Bank for the account of the Borrower
(individually a “Letter of
Credit” and collectively the “Letters of Credit”),
provided that the aggregate amount of Letters of Credit issued and outstanding
hereunder shall not at any one time exceed One Million and 00/100 Dollars
($1,000,000.00). For purposes of this Agreement, a Letter of Credit shall be
deemed outstanding as of any time in an amount equal to the maximum amount which
could be drawn thereunder under any circumstances and over any period of time
plus any unreimbursed drawings then outstanding with respect thereto. If and to
the extent any Letter of Credit expires or otherwise terminates without having
been drawn upon, the availability under the Revolving Credit Commitment shall to
such extent be reinstated.

           

          Term. Each Letter of Credit
issued hereunder shall expire not later than the earlier of i) 12 months
from the date of issuance (or be cancelable not later than 12 months from the
date of issuance and each renewal) or ii) the Revolving Credit Termination
Date.

           

          General
Characteristics.  Each Letter of Credit issued hereunder shall
be payable in U.S. Dollars, conform to the general requirements of the Bank for
the issuance of a standby or commercial letter of credit, as the case may be, as
to form and substance, and be a letter of credit which the Bank may lawfully
issue.

           

          
            
               

            

            
              -3-

              
                

              

            

            
               

            

          

          Applications.  At
the time the Borrower requests a Letter of Credit to be issued (or prior to the
first issuance of a Letter of Credit in the case of a continuing application),
the Borrower shall execute and deliver to the Bank an application for such
Letter of Credit in the form then customarily prescribed by the Bank
(individually an “Application” and
collectively the “Applications”). Subject to
the other provisions of this subsection, the obligation of the Borrower to
reimburse the Bank for drawings under a Letter of Credit shall be governed by
the Application for such Letter of Credit. Anything contained in the
Applications to the contrary notwithstanding, iii) in the event the Bank is
not reimbursed by the Borrower for the amount the Bank pays on any drawing made
under a Letter of Credit issued hereunder by 11:00 a.m. (Chicago time) on the
date when such drawing is paid, the obligation of the Borrower to reimburse the
Bank for the amount of such drawing shall bear interest (which the Borrower
hereby promises to pay on demand) from and after the date the drawing is paid by
the Bank until repayment in full thereof at the fluctuating rate per annum
determined by adding two percent (2%) to the Base Rate as from time to time in
effect (computed on the basis of a year of 360 days for the actual number
of days elapsed), iv) the Borrower shall pay fees in connection with each
Letter of Credit as set forth in Section 0 hereof,
v) except as otherwise provided in Section 0 hereof, prior to the
occurrence of a Default or an Event of Default, the Bank will not call for the
funding of a Letter of Credit by the Borrower prior to being presented with a
drawing thereunder.

           

          Manner and Disbursement of
Loans.  The Borrower shall give written or telephonic notice to
the Bank (which notice shall be irrevocable once given and, if given by
telephone, shall be promptly confirmed in writing) by no later than
11:00 a.m. (Chicago time) on the date the Borrower requests the Bank to
make a Revolving Loan or Equipment Loan hereunder. Each such notice shall
specify the date of the Loan requested (which must be a Business Day) and the
amount of such Loan. A request for an Equipment Loan (other than the Equipment
Loan to be made on the date hereof to refinance indebtedness of the Borrower to
RBS Asset Finance, Inc.) shall be accompanied by copies of invoices for
Equipment issued to the Borrower that have been approved by an authorized
representative of the Borrower.  Each Loan shall initially constitute
part of the Base Rate Portion of the relevant Note except to the extent the
Borrower has otherwise timely elected that such Loan, or any part thereof,
constitute part of a LIBOR Portion as provided in Section 0 hereof. The
Borrower agrees that the Bank may rely upon any written or telephonic notice
given by any person the Bank in good faith believes is an Authorized
Representative without the necessity of independent investigation and, in the
event any telephonic notice conflicts with the written confirmation, such
telephonic notice shall govern if the Bank has acted in reliance thereon.
Subject to the provisions of Section 0 hereof, the
proceeds of each Loan shall be made available to the Borrower at the principal
office of the Bank in Chicago, Illinois, in immediately available funds, in the
case of the initial Loans made hereunder, in accordance with the terms of the
written disbursement instructions of the Borrower and, in the case of each
subsequent Loan, by deposit to the Borrower’s primary operating account
maintained with the Bank or as otherwise agreed upon by the Borrower and the
Bank.

           

          Interest
and Change In Circumstances.

           

          Interest
Rate Options.

           

          Generally.  The
outstanding principal balance of the Loans (all of the indebtedness evidenced by
a single Note bearing interest at the same rate for the same period of time
being hereinafter referred to as a “Portion” of such Note) shall
bear interest with reference to the Base Rate (“Base Rate Portions”) or, at
the option of the Borrower and subject to the terms and conditions hereof, with
reference to an Adjusted LIBOR (“LIBOR Portions”). All of the
indebtedness evidenced by a Note which bears interest with reference to a
particular Adjusted LIBOR for a particular Interest Period shall constitute a
single LIBOR Portion applicable to such Note, and all of the indebtedness
evidenced by a Note which is not part of a LIBOR Portion shall constitute a
single Base Rate Portion applicable to such Note. There shall not be more than
five (5) LIBOR Portions applicable to a Note outstanding at any one time.
Anything contained herein to the contrary notwithstanding, the obligation of the
Bank to create, continue or effect by conversion any LIBOR Portion shall be
conditioned upon the fact that at the time no Default or Event of Default shall
have occurred and be continuing. The Borrower hereby promises to pay interest on
each Portion of the Notes at the rates and times specified in this Section 0.

           

          
            
               

            

            
              -4-

              
                

              

            

            
               

            

          

          Base Rate
Portion.  Each Base Rate Portion shall bear interest at the
rate per annum determined by adding the Applicable Rate to the Base Rate as in
effect from time to time, provided that if any Base Rate Portion or any part
thereof is not paid when due (whether by lapse of time, acceleration, or
otherwise), or at the election of the Bank upon notice to the Borrower during
the existence of any other Event of Default, such Portion shall bear interest,
whether before or after judgment until payment in full thereof, at the rate per
annum determined by adding two percent (2%) to the interest rate which would
otherwise be applicable thereto from time to time. Interest on each Base Rate
Portion shall be payable monthly in arrears on the last day of each month in
each year (commencing on the first such date occurring after the date hereof)
and at maturity of the relevant Note, and interest after maturity (whether by
lapse of time, acceleration, or otherwise) shall be due and payable upon demand.
Any change in the interest rate on any Base Rate Portion resulting from a change
in the Base Rate shall be effective on the date of the relevant change in the
Base Rate.

           

          LIBOR
Portions.  Each LIBOR Portion shall bear interest for each
Interest Period selected therefor at a rate per annum determined by adding the
Applicable Rate to the Adjusted LIBOR for such Interest Period, provided
that if any LIBOR
Portion is not paid when due (whether by lapse of time, acceleration, or
otherwise), or at the election of the Bank upon notice to the Borrower during
the existence of any other Event of Default, such Portion shall bear interest,
whether before or after judgment until payment in full thereof, through the end
of the Interest Period then applicable thereto at the rate per annum determined
by adding two percent (2%) to the interest rate which would otherwise be
applicable thereto, and effective at the end of such Interest Period such LIBOR
Portion shall automatically be converted into and added to the Base Rate Portion
of the relevant Note and shall thereafter bear interest at the interest rate
applicable to the Base Rate Portion of such Note after default. Interest on each
LIBOR Portion shall be due and payable on the last day of each Interest Period
applicable thereto and, with respect to any Interest Period applicable to a
LIBOR Portion in excess of 3 months, on the date occurring every
3 months after the date such Interest Period began and at the end of such
Interest Period, and interest after maturity (whether by lapse of time,
acceleration, or otherwise) shall be due and payable upon demand. The Borrower
shall notify the Bank on or before 11:00 a.m. (Chicago time) on the third
Business Day preceding the end of an Interest Period applicable to a LIBOR
Portion whether such LIBOR Portion is to continue as a LIBOR Portion, in which
event the Borrower shall notify the Bank of the new Interest Period selected
therefor; and in the event the Borrower shall fail to so notify the Bank, such
LIBOR Portion shall automatically be converted into and added to the Base Rate
Portion of the relevant Note as of and on the last day of such Interest
Period.

           

          
            
               

            

            
              -5-

              
                

              

            

            
               

            

          

          Minimum
Amounts.  Each LIBOR Portion shall be in an amount equal to Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) or such greater amount
which is an integral multiple of Fifty Thousand and 00/100 Dollars
($50,000.00).

           

          Computation of
Interest.  All interest on the Notes shall be computed on the
basis of a year of 360 days for the actual number of days elapsed.

           

          Manner of Rate
Selection.  The Borrower shall notify the Bank by 11:00 a.m.
(Chicago time) c) at least 3 Business Days prior to the date upon
which the Borrower requests that any LIBOR Portion be created or that any part
of the Base Rate Portion be converted into a LIBOR Portion (each such notice to
specify in each instance the amount thereof and the Interest Period selected
therefor), and d) at least 1 Business Day prior to the date upon which
the Borrower requests that any part of a LIBOR Portion be converted into a Base
Rate Portion. If any request is made to convert a LIBOR Portion of a Note into
another type of Portion available hereunder, such conversion shall only be made
so as to become effective as of the last day of the Interest Period applicable
thereto. All requests for the creation, continuance, and conversion of Portions
under this Agreement shall be irrevocable. Such requests may be written or oral
and the Bank is hereby authorized to honor telephonic requests for creations,
continuances, and conversions received by it from any person the Bank in good
faith believes to be an Authorized Representative without the necessity of
independent investigation, the Borrower hereby indemnifying the Bank from any
liability or loss ensuing from so acting.

           

          Change of
Law.  Notwithstanding any other provisions of this Agreement or
any Note, if at any time the Bank shall determine that any change in applicable
laws, treaties, or regulations, or in the interpretation thereof, makes it
unlawful for the Bank to create or continue to maintain any LIBOR Portion, it
shall promptly so notify the Borrower and the obligation of the Bank to create,
continue, or maintain any such LIBOR Portion under this Agreement shall be
suspended until it is no longer unlawful for the Bank to create, continue, or
maintain such LIBOR Portion. If the continued maintenance of any such LIBOR
Portion is unlawful, the Borrower shall prepay on demand to the Bank the
outstanding principal amount of the affected LIBOR Portion together with all
interest accrued thereon and all other amounts payable to the Bank with respect
thereto under this Agreement; provided, however, the
Borrower may elect to convert the principal amount of the affected Portion into
another type of Portion available hereunder, subject to the terms and conditions
of this Agreement (including, without limitation, Section 0
hereof).

           

          Unavailability of Deposits or
Inability to Ascertain, or Inadequacy of, Adjusted
LIBOR.  Notwithstanding any other provision of this Agreement
or any Note, if the Bank shall determine prior to the commencement of any
Interest Period that deposits in the amount of any LIBOR Portion scheduled to be
outstanding during such Interest Period are not readily available to the Bank in
the relevant market or, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining Adjusted
LIBOR or that LIBOR as determined hereby will not adequately and fairly reflect
the cost to the Bank of funding any LIBOR Portion for such Interest Period or
that the making or funding of LIBOR Portions has become impracticable, then the
Bank shall promptly give notice thereof to the Borrower and the obligations of
the Bank to create, continue, or effect by conversion any such LIBOR Portion in
such amount and for such Interest Period shall be suspended until deposits in
such amount and for the Interest Period selected by the Borrower shall again be
readily available in the relevant market and adequate and reasonable means exist
for ascertaining Adjusted LIBOR.

           

          
            
               

            

            
              -6-

              
                

              

            

            
               

            

          

           

          Taxes and Increased
Costs.  With respect to any LIBOR Portion, if the Bank shall
determine that any change in any applicable law, treaty, regulation, or
guideline (including, without limitation, Regulation D of the Board of Governors
of the Federal Reserve System), or any new law, treaty, regulation, or
guideline, or any interpretation of any of the foregoing, by any governmental
authority charged with the administration thereof or any central bank or other
fiscal, monetary, or other authority having jurisdiction over the Bank or its
lending branch or the LIBOR Portions contemplated by this Agreement (whether or
not having the force of law), shall:

           

          impose,
increase, or deem applicable any reserve, special deposit, or similar
requirement against assets held by, or deposits in or for the account of, or
loans by, or any other acquisition of funds or disbursements by, the Bank which
is not in any instance already accounted for in computing the interest rate
applicable to such LIBOR Portion;

           

          subject
the Bank, any LIBOR Portion or any Note to the extent it evidences a LIBOR
Portion to any tax (including, without limitation, any United States interest
equalization tax or similar tax however named applicable to the acquisition or
holding of debt obligations and any interest or penalties with respect thereto),
duty, charge, stamp tax, fee, deduction, or withholding in respect of this
Agreement, any LIBOR Portion or any Note to the extent it evidences a LIBOR
Portion, except such taxes as may be measured by the overall net income or gross
receipts of the Bank or its lending branches and imposed by the jurisdiction, or
any political subdivision or taxing authority thereof, in which the Bank’s
principal executive office or its lending branch is located;

           

          change
the basis of taxation of payments of principal and interest due from the
Borrower to the Bank hereunder or under any Note to the extent it evidences any
LIBOR Portion (other than by a change in taxation of the overall net income or
gross receipts of the Bank); or

           

          impose on
the Bank any penalty with respect to the foregoing or any other condition
regarding this Agreement, any LIBOR Portion, or its disbursement, or any Note to
the extent it evidences any LIBOR Portion;

           

          and the
Bank shall determine that the result of any of the foregoing is to increase the
cost (whether by incurring a cost or adding to a cost) to the Bank of creating
or maintaining any LIBOR Portion hereunder or to reduce the amount of principal
or interest received or receivable by the Bank (without benefit of, or credit
for, any prorations, exemption, credits, or other offsets available under any
such laws, treaties, regulations, guidelines, or interpretations thereof), then
the Borrower shall pay on demand to the Bank from time to time as specified by
the Bank such additional amounts as the Bank shall reasonably determine are
sufficient to compensate and indemnify it for such increased cost or reduced
amount. If the Bank makes such a claim for compensation, it shall provide to the
Borrower a certificate setting forth the computation of the increased cost or
reduced amount as a result of any event mentioned herein in reasonable detail
and such certificate shall be conclusive if reasonably determined.

           

          
            
               

            

            
              -7-

              
                

              

            

            
               

            

          

          Change in Capital Adequacy
Requirements.  If the Bank shall determine that the adoption
after the date hereof of any applicable law, rule, or regulation regarding
capital adequacy, or any change in any existing law, rule, or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank (or any of its branches) with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the Bank’s capital as a
consequence of its obligations hereunder or for the credit which is the subject
matter hereof to a level below that which the Bank could have achieved but for
such adoption, change, or compliance (taking into consideration the Bank’s
policies with respect to liquidity and capital adequacy) by an amount deemed by
the Bank to be material, then from time to time, within 15 days after
demand by the Bank, the Borrower shall pay to the Bank such additional amount or
amounts reasonably determined by the Bank as will compensate the Bank for such
reduction.

           

          Funding
Indemnity.

           

          In the
event the Bank shall incur any loss, cost, or expense (including, without
limitation, any loss, cost, or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired or contracted to be acquired by
the Bank to fund or maintain any LIBOR Portion or the relending or reinvesting
of such deposits or other funds or amounts paid or prepaid to the Bank) as a
result of:

           

          any
payment of a LIBOR Portion on a date other than the last day of the then
applicable Interest Period for any reason, whether before or after default, and
whether or not such payment is required by any provision of this Agreement;
or

           

          any
failure by the Borrower to create, borrow, continue, or effect by conversion a
LIBOR Portion on the date specified in a notice given pursuant to this
Agreement;

           

          then upon
the demand of the Bank, the Borrower shall pay to the Bank such amount as will
reimburse the Bank for such loss, cost, or expense.

           

          If the
Bank requests reimbursement or payment under this Section, it shall provide to
the Borrower a certificate setting forth the computation of the loss, cost,
expense, or funding indemnity giving rise to the request for reimbursement and
payment in reasonable detail and such certificate shall be conclusive if
reasonably determined.

           

          Lending
Branch.  The Bank may, at its option, elect to make, fund or
maintain Portions of the Loans hereunder at such of its branches or offices as
the Bank may from time to time elect.

           

          Discretion of Bank as to Manner of
Funding.  Notwithstanding any provision of this Agreement to
the contrary, the Bank shall be entitled to fund and maintain its funding of all
or any part of any Note in any manner it sees fit, it being understood, however,
that for the purposes of this Agreement all determinations hereunder (including,
without limitation, determinations under Sections 0, 0, and 0 hereof) shall be made
as if the Bank had actually funded and maintained each LIBOR Portion during each
Interest Period applicable thereto through the purchase of deposits in the
relevant market in the amount of such LIBOR Portion, having a maturity
corresponding to such Interest Period, and, in the case of any LIBOR Portion,
bearing an interest rate equal to the LIBOR for such Interest
Period.

          
            
               

            

            
              -8-

              
                

              

            

            
               

            

          

           

          Fees,
Prepayments, Terminations and Applications.

           

          Fees.

           

          Commitment Fee. For the
period from and including the date hereof to but not including the Revolving
Credit Termination Date, the Borrower shall pay to the Bank a commitment fee at
a per annum rate equal to the Applicable Rate (computed on the basis of a year
of 360 days for the actual number of days elapsed) on the average daily unused
portion of the Revolving Credit Commitment. Such commitment fee shall be payable
quarterly in
arrears on the last day of each March, June, September, and December in each
year (commencing on June 30, 2010) and on the Revolving Credit Termination
Date.

           

          Letter of Credit Fees. On the
last day of each March, June, September, and December in each year (commencing
on June 30, 2010) to and including, and on, the Revolving Credit Termination
Date, the Borrower shall pay to the Bank a letter of credit fee at a per annum
rate equal to the Applicable Rate (computed on the basis of a year of 360 days
for the actual number of days elapsed) on the daily average face amount of
Letters of Credit outstanding during the preceding calendar quarter; provided that, at the
election of the Bank upon notice to the Borrower during the existence of any
Event of Default, such letter of credit fee shall be increased by adding two
percent (2.0%) per annum to the letter of credit fee otherwise applicable
thereto. In addition to the letter of credit fee called for above, the Borrower
further agrees to pay to the Bank such issuing, processing, and transaction fees
and charges as the Bank from time to time customarily imposes in connection with
any issuance, amendment, cancellation, negotiation, and/or payment of letters of
credit and drafts drawn thereunder.

           

          Audit Fees. The Borrower
shall pay to the Bank charges for audits of the Collateral performed by the Bank
or its agents or representatives in such amounts as the Bank may from time to
time request (the Bank acknowledging and agreeing that such charges shall be
computed in the same manner as it at the time customarily uses for the
assessment of charges for similar collateral audits); provided, however, that in
the absence of any Default or Event of Default, the Borrower shall not be
required to pay the Bank for more than one (1) such audit(s) per calendar year
(determined exclusive of pre-closing audits conducted prior to the date of this
Agreement).

           

          Voluntary
Prepayments.  The Borrower shall have the privilege of
prepaying the Loans in whole or in part (but, if in part, then e) if such
Loan or Loans constitutes part of a Base Rate Portion, in an amount not less
than One Hundred
Thousand and 00/100 Dollars ($100,000.00), f) if such Loan or Loans
constitutes part of a LIBOR Portion, in an amount not less than One Hundred
Thousand and 00/100 Dollars ($100,000.00), and g) in each case, in an
amount such that the minimum amount required for a Loan pursuant to Sections 03 and 0 hereof remain outstanding)
at any time upon prior notice to the Bank (such notice if received subsequent to
11:00 a.m. (Chicago time) on a given day to be treated as though received
at the opening of business on the next Business Day) by paying to the Bank the
principal amount to be prepaid and (1) if such a prepayment prepays the
Revolving Note in full and is accompanied by the termination of the Revolving
Credit Commitment in whole, accrued interest thereon to the date of prepayment,
(2) if such a prepayment prepays the Term Loan Note, Mortgage Loan Note, or
Equipment Note (in whole or in part), accrued interest thereon to the date of
prepayment, and (3) in the case of any prepayment of a LIBOR Portion of the
Loans, accrued interest thereon to the date of prepayment plus any amounts due
the Bank under Section 0 hereof.

          
            
               

            

            
              -9-

              
                

              

            

            
               

            

          

           

          Mandatory
Prepayments.  The Borrower covenants and agrees
that:

           

          if at any
time the sum of the principal amount of the Revolving Loans and Letters of
Credit then outstanding shall be in excess of the Borrowing Base as then
determined and computed, the Borrower shall immediately and without notice or
demand pay over the amount of the excess to the Bank as and for a mandatory
prepayment on such Obligations, with each such prepayment first to be applied to
the Revolving Loans until payment in full thereof with any remaining balance to
be held by the Bank as collateral security for the Obligations owing with
respect to Letters of Credit.

           

          concurrently
with the receipt of Net Proceeds with respect to each Issuance by the Borrower
or any of its Subsidiaries, the Borrower shall make a prepayment of the
outstanding principal amount of the Loans equal to 70% of the Net Proceeds of
such Issuance. Such prepayment shall be applied ii) first, to the payment
of the outstanding principal amount of the Equipment Loans until paid in full,
iii) second, to the
payment of the outstanding principal amount of the Term Loan and the Mortgage
Loan on a pro rata basis in proportion to the outstanding balance of each until
paid in full, and iv) third, to the payment
of the outstanding principal amount of the Revolving Loans until paid in
full.

           

          concurrently
with the receipt of Net Proceeds with respect to each Asset Sale (other than an
Asset Sale of the Mortgaged Premises) in excess of $100,000 in the aggregate or
Extraordinary Receipt by the Borrower or any of its Subsidiaries, the Borrower
shall make a prepayment of the outstanding principal amount of the Loans equal
to 100% of the Net Proceeds of such Asset Sale or Extraordinary Receipt. Such
prepayment shall be applied v) first, to the payment
of the outstanding principal amount of the Term Loan and the Mortgage Loan on a
pro rata basis in proportion to the outstanding balance of each until paid in
full, vi) second, to the
payment of the outstanding principal amount of the Equipment Loans until paid in
full, and vii) third, to the payment
of the outstanding principal amount of the Revolving Loans until paid in
full.

           

          concurrently
with the receipt of Net Proceeds with respect to an Asset Sale of the Mortgaged
Premises, the Borrower shall make a prepayment of the outstanding principal
amount of the Loans equal to 100% of the Net Proceeds of such Asset Sale. Such
prepayment shall be applied viii) first, to the payment
of the outstanding principal amount of the Mortgage Loan until paid in full,
ix) second, to the
payment of the outstanding principal amount of the Term Loan until paid in full,
x) third,
to the payment of the outstanding principal amount of the Equipment Loan until
paid in full, and xi) fourth, to the
payment of the outstanding principal amount of the Revolving Loans until paid in
full.

           

          Terminations.  The
Borrower shall have the right, at any time and from time to time, upon
3 Business Days prior notice to the Bank, to terminate without premium or
penalty and in whole or in part (but if in part, then in an amount not less than
One Million and 00/100 Dollars ($1,000,000.00) the Revolving Credit Commitment,
provided that the
Revolving Credit Commitment may not be reduced to an amount less than the
aggregate principal amount of the Revolving Loans and Letters of Credit then
outstanding. Any termination of the Revolving Credit Commitment pursuant to this
Section may not be reinstated.

          
            
               

            

            
              -10-

              
                

              

            

            
               

            

          

           

          Place and Application of
Payments.  All payments of principal, interest, fees, and all
other Obligations payable under the Loan Documents shall be made to the Bank at
its office at 111 West Monroe Street, Chicago, Illinois (or at such other
place as the Bank may specify) no later than 1:00 p.m. (Chicago time) on
the date any such payment is due and payable. Payments received by the Bank
after 1:00 p.m. (Chicago time) shall be deemed received as of the opening
of business on the next Business Day. All such payments shall be made in lawful
money of the United States of America, in immediately available funds at the
place of payment, without set-off or counterclaim and without reduction for, and
free from, any and all present or future taxes, levies, imposts, duties, fees,
charges, deductions, withholdings, restrictions, and conditions of any nature
imposed by any government or any political subdivision or taxing authority
thereof (but excluding any taxes imposed on or measured by the net income of the
Bank). Unless the Borrower otherwise directs, principal payments shall be
applied first to the relevant Base Rate Portion until payment in full thereof,
with any balance applied to the relevant LIBOR Portions in the order in which
their Interest Periods expire. Any amount repaid under the Revolving Credit may,
subject to the terms and conditions hereof, be borrowed, repaid, and borrowed
again. No amount repaid on the Term Loan Note, the Mortgage Note, or the
Equipment Note may be reborrowed, and partial prepayments of the Term Loan Note,
the Mortgage Note, and the Equipment Note (on or after the Equipment Loan
Commitment Termination Date) shall be applied to the several remaining
installments thereof in the inverse order of maturity. The Borrower hereby
irrevocably authorizes the Bank to h) charge from time to time any of the
Borrower’s deposit accounts with the Bank and/or i) make Revolving Loans
from time to time hereunder (and any such Revolving Loan may be made by the Bank
hereunder without regard to the provisions of Section 0 hereof), in
each case for payment of any Obligation then due and payable (whether such
Obligation is for interest then due on a Loan, reimbursement under an
Application or otherwise); provided that the Bank shall
not be under any obligation to charge any such deposit account or make any such
Revolving Loan under this Section, and the Bank shall incur no liability to the
Borrower or any other Person for its failure to do so.

           

          Notations.  All
Loans made against a Note, the status of all amounts evidenced by such Note as
constituting part of the relevant Base Rate Portion or a LIBOR Portion, and, in
the case of any LIBOR Portion, the rates of interest and Interest Periods
applicable to such Portions shall be recorded by the Bank on its books and
records or, at its option in any instance, endorsed on a schedule to such Note
and the unpaid principal balance and status, rates and Interest Periods so
recorded or endorsed by the Bank shall be prima facie evidence in any court or
other proceeding brought to enforce such Note of the principal amount remaining
unpaid thereon, the status of the Loan or Loans evidenced thereby and the
interest rates and Interest Periods applicable thereto; provided that the failure of the
Bank to record any of the foregoing shall not limit or otherwise affect the
obligation of the Borrower to repay the principal amount of such Note together
with accrued interest thereon. Prior to any negotiation of a Note, the Bank
shall record on a schedule thereto the status of all amounts evidenced thereby
as constituting part of the relevant Base Rate Portion or a LIBOR Portion and,
in the case of any LIBOR Portion, the rates of interest and the Interest Periods
applicable thereto.

           

          
            
               

            

            
              -11-

              
                

              

            

            
               

            

          

           

          Collateral
and Guaranties.

           

          Collateral.  The
Obligations shall be secured by valid, perfected, and enforceable Liens on all
right, title, and interest of the Borrower in all accounts, instruments,
documents, chattel paper, general intangibles (including, without limitation,
patents, trademarks, tradenames, copyrights, and other intellectual property
rights), investment property, deposit accounts, inventory, equipment, fixtures,
and real estate, whether now owned or hereafter acquired or arising, and all
proceeds thereof. The Borrower acknowledges and agrees that the Liens on the
Collateral shall be valid and perfected first priority Liens (subject to Liens
permitted by this Agreement), in each case pursuant to one or more Collateral
Documents in form and substance satisfactory to the Bank.

           

          Liens on Real
Property.  The Obligations shall be further secured by a valid
and enforceable first priority lien on the Mortgaged Premises pursuant to the
Mortgage. In the event that the Borrower owns or hereafter acquires any other
real property, the Borrower shall execute and deliver to the Bank (or a security
trustee therefor) a mortgage or deed of trust acceptable in form and substance
to the Bank for the purpose of granting to the Bank a Lien on such real property
to secure the Obligations, shall pay all taxes, costs, and expenses incurred by
the Bank in recording such mortgage or deed of trust, and shall supply to the
Bank at the Borrower’s cost and expense a survey, environmental report, hazard
insurance policy, and mortgagee’s policy of title insurance from a title insurer
acceptable to the Bank insuring the validity of such mortgage or deed of trust
and its status as a first Lien (subject to Liens permitted by this Agreement) on
the real property encumbered thereby, and such other instrument, documents,
certificates, and opinions reasonably required by the Bank in connection
therewith.

           

          Guaranties.  The
payment and performance of the Obligations shall (a) at all times be guaranteed
by each direct and indirect domestic Subsidiary of the Borrower pursuant to one
or more guaranty agreements in form and substance acceptable to the Bank (as the
same may be amended, modified, or supplemented from time to time, individually a
“Subsidiary Guaranty”
and collectively the “Subsidiary Guaranties”), and
(b) be guaranteed by each of the Individual Guarantors pursuant to one or more
guaranty agreements in form and substance acceptable to the Bank, as the same
may be amended, modified, or supplemented from time to time (as the same may be
amended, modified, or supplemented from time to time, individually a “Limited Guaranty” and
collectively the “Limited
Guaranties”) to the extent and during the periods set forth
therein.

           

          Further
Assurances.  The Borrower agrees that it shall execute and
deliver such documents and do such acts and things as the Bank may from time to
time request in order to provide for or perfect or protect the Bank’s Lien on
the Collateral.

        

      

       

      Definitions;
Interpretation.

       

      
        Definitions.  The
following terms when used herein shall have the following
meanings:

      

       

      “Account Debtor” means any
Person obligated to make payment on any Receivable.

       

      “Adjusted LIBOR” means a rate
per annum determined by the Bank in accordance with the following formula:
Adjusted LIBOR = LIBOR / (100%-Reserve Percentage).

       

      
        
           

        

        
          -12-

          
            

          

        

        
           

        

      

      “Affiliate” means any Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, another Person. A Person shall be deemed to control another
Person for purposes of this definition if such Person possesses, directly or
indirectly, the power to direct, or cause the direction of, the management and
policies of the other Person, whether through the ownership of voting
securities, common directors, trustees or officers, by contract or otherwise;
provided that, in any
event for purposes of this definition, any Person that owns, directly or
indirectly, 5% or more of the securities having the ordinary voting power for
the election of directors or governing body of a corporation or 5% or more of
the partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person.

       

      “Agreement” means this Credit
Agreement, as the same may be amended, modified, or restated from time to time
in accordance with the terms hereof.

       

      “Applicable Rate” means the
following amounts per annum set forth on Exhibit E opposite the
level (the “Level”)
then in effect and based upon the Senior Leverage Ratio, it being understood
that the Applicable Rate for (a) LIBOR Portions shall be the percentage set
forth under the column “LIBOR Margin”; (b) the Base Rate Portion shall be
the percentage set forth under the column “Base Rate Margin”; (c) the
commitment fee described in Section 3.1(a) shall be
the percentage set forth under the column “Commitment Fee”; and (d) the
letter of credit fee described in Section 3.1(b) shall be
the percentage set forth under the column “Letter of Credit Fee”.  The
Applicable Rate shall be adjusted quarterly, to the extent applicable, on the
third (3rd) Business Day after the Borrower provides or is required to provide
the compliance certificate pursuant to Section 8.5(j) for each
fiscal quarter. Notwithstanding anything contained in this definition to the
contrary, (i) if the Borrower fails to deliver the compliance certificate
in accordance with the provisions of Section 8.5(j), then the
Applicable Rate shall be based upon the previously applicable Level until the
date such compliance certificate is actually delivered, whereupon the Applicable
Rate shall be determined by the then current Level (and if such compliance
certificate indicates a higher Level than previously applicable, the Borrower
shall forthwith pay to the Bank any additional amount if interest and fees that
would have been payable on any prior date had such compliance certificate been
delivered when required); (ii) no reduction to the Applicable Rate shall become
effective at any time when a Default or an Event of Default has occurred and is
continuing; and (iii) until the date on which the compliance certificate is
required to be delivered for the fiscal quarter ending June 30, 2010, the
initial Applicable Rate on the date hereof shall be based upon Level II.
This paragraph shall not limit the rights of the Bank with respect to Section 8.23(a).

       

      “Application” is defined in
Section 1.6
hereof.

       

      “Asset Sale” means any sale,
lease, conveyance, transfer, or other disposition of assets by the Borrower or
any of its Subsidiaries (including by way of merger or consolidation or
sale-leaseback transaction, but not including (a) any asset which is to be
replaced, and is in fact replaced, within sixty (60) days with another asset
performing the same or a similar function, and (b) sales of inventory in
the ordinary course of business), whether in one transaction or a series or
group of transactions.

       

      “Authorized Representative”
means those persons shown on the list of officers provided by the Borrower
pursuant to Section 0 hereof or on
any update of any such list provided by the Borrower to the Bank, or any further
or different officer of the Borrower so named by any Authorized Representative
of the Borrower in a written notice to the Bank.

       

      “Availability” is defined in
Section 1.4
hereof.

       

      “Bank” is defined in the
introductory paragraph hereof.

      
        
           

        

        
          -13-

          
            

          

        

        
           

        

      

       

      “Base Rate” means, for any
day, the rate per annum equal to the greatest of: (a) the rate of interest
announced or otherwise established by the Bank from time to time as its prime
commercial rate as in effect on such day, with any change in the Base Rate
resulting from a change in said prime commercial rate to be effective as of the
date of the relevant change in said prime commercial rate (it being acknowledged
and agreed that such rate may not be the Bank’s best or lowest rate),
(b) the sum of (i) the rate determined by the Bank to be the average
(rounded upward, if necessary, to the next higher 1/100 of 1%) of the rates per
annum quoted to the Bank at approximately 10:00 a.m. (Chicago time) (or as
soon thereafter as is practicable) on such day (or, if such day is not a
Business Day, on the immediately preceding Business Day) by two or more Federal
funds brokers selected by the Bank for sale to the Bank at face value of Federal
funds in the secondary market in an amount equal or comparable to the principal
amount for which such rate is being determined, plus (ii) 1/2 of 1%, and (c)
the LIBOR Quoted Rate for such day plus 1.00%. As used herein,
the term “LIBOR Quoted
Rate” means, for any day, the rate per annum equal to the quotient of
(A) the rate per annum (rounded upwards, if necessary, to the next higher
one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a
one-month interest period which appears on the LIBOR01 Page as of
11:00 a.m. (London, England time) on such day (or, if such day is not a
Business Day, on the immediately preceding Business Day) divided by
(B) one (1) minus the Reserve Percentage.

       

      “Base Rate Portion” is
defined in Section 0
hereof.

       

      “Borrower” is defined in the
introductory paragraph hereof.

       

      “Borrowing Base” means, as of
any time it is to be determined, the sum of: (a) 85% of the then outstanding
unpaid amount of Eligible Receivables; plus (b) the lesser of (i)
$5,000,000 and (ii) 60% of the value (computed at the lower of market or cost
using the first-in/first-out method of inventory valuation applied by the
Borrower in accordance with GAAP) of Eligible Inventory; provided that the Borrowing
Base shall be computed only as against and on so much of the Collateral as is
included on the certificates to be furnished from time to time by the Borrower
pursuant to Section 0 hereof and, if
required by the Bank pursuant to any of the terms hereof or any Collateral
Document, as verified by such other evidence required to be furnished to the
Bank pursuant hereto or pursuant to any such Collateral Document.

       

      “Business Day” means any day
other than a Saturday or Sunday on which the Bank is not authorized or required
to close in Chicago, Illinois and, when used with respect to LIBOR Portions, a
day on which the Bank is also dealing in United States Dollar deposits in
London, England and Nassau, Bahamas.

       

      “Capital Lease” means any
lease of Property which in accordance with GAAP is required to be capitalized on
the balance sheet of the lessee.

       

      “Capitalized Lease
Obligation” means the amount of the liability shown on the balance sheet
of any Person in respect of a Capital Lease determined in accordance with
GAAP.

       

      “Code” means the Internal
Revenue Code of 1986, as amended, and any successor statute
thereto.

       

      “Collateral” means all
properties, rights, interests, and privileges from time to time subject to the
Liens granted to the Bank by the Collateral Documents.

       

      “Collateral Documents” means
the Mortgage, Security Agreement, Pledge Agreement, Patent Security Agreement,
Trademark Security Agreement, Copyright Security Agreement, and all other
mortgages, deeds of trust, security agreements, assignments, financing
statements and other documents as shall from time to time secure the Obligations
or any part thereof.

      
        
           

        

        
          -14-

          
            

          

        

        
           

        

      

      “Commitments” means and
includes the Revolving Credit Commitment, the Equipment Loan Commitment, the
Term Loan Commitment, and the Mortgage Commitment.

       

      “Controlled Group” means all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower or any of its Subsidiaries, are treated as a single employer under
Section 414 of the Code.

       

      “Copyright Security
Agreement” means that certain Copyright Security Agreement dated as of
the date hereof, between the Borrower and the Bank, as the same may be amended,
modified, supplemented, or restated from time to time.

       

      “CTI Balloons” means CTI
Balloons, Ltd., a private limited company incorporated under the laws of England
and Wales and a Wholly-Owned Subsidiary.

       

      “CTI Helium” means CTI
Helium, Inc., an Illinois corporation and a Wholly-Owned
Subsidiary.

       

      “Default” means any event or
condition the occurrence of which would, with the passage of time or the giving
of notice, or both, constitute an Event of Default.

       

      “EBITDA” means, with
reference to any period, (a) Net Income of the Borrower and its Subsidiaries, on
a consolidated basis, for such period plus (b) 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, and (iii) all amounts properly charged for depreciation of
fixed assets and amortization of intangible assets during such
period.

       

      “Eligible Inventory” means
all raw materials and finished goods inventory of the Borrower (other than
packaging, crating and supplies inventory) that: (a) is an asset of the Borrower
to which it has good and marketable title, is freely assignable, and is subject
to a perfected, first priority Lien in favor of the Bank free and clear of any
other Liens; (b) is located in the United States of America at a Permitted
Collateral Location as set forth in the Security Agreement and, in the case of
any location not owned by such Person, which is at all times subject to a lien
waiver agreement from such landlord or other third party in form and substance
satisfactory to the Bank; (c) is not so identified to a contract to sell that it
constitutes a Receivable; (d) is not obsolete or slow moving, and is of good and
merchantable quality free from any defects which might adversely affect the
market value hereof; and (e) is not covered by a warehouse receipt or similar
document.

      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

      “Eligible Receivable” means
each Receivable of the Borrower that: (a) arises out of the sale of finished
goods inventory delivered to and accepted by, or out of the rendition of
services fully performed and accepted by, the Account Debtor on such Receivable,
and such Receivable does not represent a pre-billed Receivable or a progress
billing; (b) is payable in U.S. Dollars and the Account Debtor on such
Receivable is located within the United States of America; (c) is the valid,
binding, and legally enforceable obligation of the Account Debtor obligated
thereon and such Account Debtor is not (i) a Subsidiary or an Affiliate of the
Borrower, (ii) a shareholder, director, officer, or employee of the Borrower or
any Subsidiary, (iii) the United States of America, or any state or political
subdivision thereof, or any department, agency, or instrumentality of any of the
foregoing, unless the Assignment of Claims Act or any similar state or local
statute, as the case may be, is complied with to the satisfaction of the Bank,
(iv) a debtor under any proceeding under the United States Bankruptcy Code, as
amended, or any other comparable bankruptcy or insolvency law, or (v) an
assignor for the benefit of creditors; (d) is not evidenced by an instrument or
chattel paper unless the same has been endorsed and delivered to the Bank; (e)
is an asset of the Borrower to which it has good and marketable title, is freely
assignable, and is subject to a perfected, first priority Lien in favor of the
Bank free and clear of any other Liens; (f) is net of any credit or allowance
given by such Person to such Account Debtor; (g) is not owing from an Account
Debtor who is also a creditor or supplier of such Person, and is not subject to
any offset, counterclaim, or other defense with respect thereto; (h) no surety
bond was required or given in connection with said Receivable or the contract or
purchase order out of which the same arose; (i) is not unpaid more than ninety
(90) days after the original invoice date (which is issued not more than 5 days
subsequent to the shipment date or the date services were fully performed); (j)
is not owed by an Account Debtor who is obligated on Receivables more than 25%
of the aggregate unpaid balance of which have been past due for longer than the
relevant period specified in subsection (i) above unless the Bank has
approved the continued eligibility thereof; and (j) does not arise from a sale
on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment, or any other repurchase or return basis.

       

      “Equipment Loan” is defined
in Section 1.3
hereof.

       

      “Equipment Loan Commitment”
is defined in Section 1.3
hereof.

       

      “Equipment Loan Commitment
Termination Date” means April 29, 2011.

       

      “Equipment Loan Final Maturity Date”
means April 29, 2013, or such earlier date on which the Equipment Loan is
declared to be or becomes due pursuant to Section 0 or 0 hereof.

       

      “Equipment Note” is defined
in Section 1.3
hereof.

       

      “ERISA” means the Employee
Retirement Income Security Act of 1974, as amended, or any successor statute
thereto.

       

      “Event of Default” means any
event or condition identified as such in Section 0
hereof.

       

      “Extraordinary Receipt”
means, the receipt by the Borrower or any of its Subsidiaries of cash
receipts not in the ordinary course of business (including, without limitation,
proceeds of insurance policies), but not including cash receipts of less than
$250,000 from insurance proceeds, to the extent such proceeds are reinvested in
property replacing the property relating to the insurance claim resulting in
such proceeds within sixty (60) days.

       

      “Fixed Charges” means, with
reference to any period, the sum of (a) the aggregate amount of payments
required to be made by the Borrower 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,
(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 interest
expense (including interest on Subordinated Debt but excluding interest on
Intercompany Debt) for such period.

       

      “Fixed Charge Coverage Ratio”
means, with reference to any period, the ratio of (a) the total for such
period (i) EBITDA, minus (ii) federal,
state, and local income taxes paid by the Borrower during such period, minus (iii) the sum of all
dividends declared by the Borrower during such period, minus (iv) the sum of all
payments made in connection with the purchase, redemption, or
other acquisition or retirement of any capital stock or other equity interests
of the Borrower (or any warrants, options or similar instruments to acquire the
same), minus
(v) all capital expenditures which are not financed with Indebtedness for
Borrowed Money, to (b) Fixed Charges
for such period.

       

      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

       

      “Flexo” means Flexo
Universal, S.A. de C.V., a Mexican sociedad anonima de capital variable and a
98.5%-owned Subsidiary of the Borrower.

       

      “GAAP” means generally
accepted accounting principles set forth from time to time in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of comparable
stature and authority within the U.S. accounting profession), which are
applicable to the circumstances as of the date of determination.

       

      “Guaranty” and “Guaranties” each is defined
in Section 0
hereof.

       

      “Indebtedness for Borrowed
Money” means for any Person (without duplication) (a) all
indebtedness created, assumed or incurred in any manner by such Person
representing money borrowed (including by the issuance of debt securities),
(b) all indebtedness for the deferred purchase price of property or
services (other than trade accounts payable arising in the ordinary course of
business which are not more than thirty (30) days past due), (c) all
indebtedness secured by any Lien upon Property of such Person, whether or not
such Person has assumed or become liable for the payment of such indebtedness,
(d) all Capitalized Lease Obligations of such Person, (e) all obligations
of such Person on or with respect to (f) all obligations of such Person on
or with respect to letters of credit, bankers’ acceptances, hedging obligations,
synthetic leases, and other extensions of credit whether or not representing
obligations for borrowed money.  For the avoidance of doubt,
“Indebtedness for Borrowed Money” shall not include obligations in respect of
operating leases (as opposed to Capital Leases).

       

      “Individual Guarantors” means
John Schwan, an individual resident of the State of Illinois, and Stephen M.
Merrick, an individual resident of the State of Illinois.

       

      “Intercompany Debt” means
Indebtedness for Borrowed Money owing (i) from a Borrower to another Borrower or
a Wholly-Owned Subsidiary, or (ii) from a Wholly-Owned Subsidiary to a Borrower
or another Wholly-Owned Subsidiary.

       

      “Interest Period” means, with
respect to any LIBOR Portion, the period commencing on, as the case may be, the
creation, continuation or conversion date with respect to such LIBOR Portion and
ending 1, 2, 3, or 6 months thereafter as selected by the Borrower in its
notice as provided herein; provided that all of the foregoing provisions
relating to Interest Periods are subject to the following:

       

      (i)     
      if any Interest Period would otherwise end
on a day which is not a Business Day, that Interest Period shall be extended to
the next succeeding Business Day, unless in the case of an Interest Period for a
LIBOR Portion the result of such extension would be to carry such Interest
Period into another calendar month in which event such Interest Period shall end
on the immediately preceding Business Day;

       

      (ii)           no
Interest Period may extend beyond the final maturity date of the relevant
Note;

       

      (iii)          the
interest rate to be applicable to each Portion for each Interest Period shall
apply from and including the first day of such Interest Period to but excluding
the last day thereof; and

       

      
        
           

        

        
          -17-

          
            

          

        

        
           

        

      

       

      (iv)           no
Interest Period may be selected if after giving effect thereto the Borrower will
be unable to make a principal payment scheduled to be made during such Interest
Period without paying part of a LIBOR Portion on a date other than the last day
of the Interest Period applicable thereto.

       

      For
purposes of determining an Interest Period, a month means a period starting on
one day in a calendar month and ending on a numerically corresponding day in the
next calendar month, provided,
however, if an Interest Period begins on the last day of a month or if
there is no numerically corresponding day in the month in which an Interest
Period is to end, then such Interest Period shall end on the last Business Day
of such month.

       

      “Issuance” means the issuance
by the Borrower or any of its Subsidiaries of Indebtedness for Borrowed Money
(other than the Loans and indebtedness existing as of the date hereof and
Indebtedness permitted pursuant to Section 8.7), or the
issuance by the Borrower or any of its Subsidiaries of any capital stock or other
equity interests; provided, however, that none
of the following shall constitute an “Issuance”: (a) any capital stock or other
equity interests in any Subsidiary of the Borrower issued to the Borrower
or any other Subsidiary of the Borrower, and (b) any capital stock or other
equity interests in the Borrower sold to, granted to, or issued upon
exercise of any option granted to, any Person who (determined as at the time of
the sale or grant) is an employee pursuant to a stock option (or equivalent)
plan approved by the Bank.

       

      “Letter of Credit” and “Letters of Credit” each is
defined in Section 1.6
hereof.

       

      “LIBOR” means, for each
Interest Period, (a) the LIBOR Index Rate for such Interest Period, if such
rate is available, and (b) if the LIBOR Index Rate cannot be determined,
the arithmetic average of the rates of interest per annum (rounded upward, if
necessary, to the nearest 1/100th of 1%) at which deposits in U.S. Dollars
in immediately available funds are offered to the Bank at 11:00 a.m.
(London, England time) two (2) Business Days before the beginning of such
Interest Period by three (3) or more major banks in the interbank eurodollar
market selected by the Bank for a period equal to such Interest Period and in an
amount equal or comparable to the applicable LIBOR Portion scheduled to be
outstanding from the Bank during such Interest Period. Each determination of
LIBOR made by the Bank shall be conclusive and binding absent manifest
error.

       

      “LIBOR Index Rate” means, for
any Interest Period, the rate per annum (rounded upwards, if necessary, to the
next higher one hundred-thousandth of a percentage point) for deposits in U.S.
Dollars for a period equal to such Interest Period, which appears on the LIBOR01
Page as of 11:00 a.m. (London, England time) on the day two
(2) Business Days before the commencement of such Interest
Period.

       

      “LIBOR Portions” is defined
in Section 0
hereof.

       

      “Lien” means any mortgage,
lien, security interest, pledge, charge, or encumbrance of any kind in respect
of any Property, including the interests of a vendor or lessor under any
conditional sale, Capital Lease or other title retention
arrangement.

       

      “Limited Guaranty” and “Limited Guaranties” each is
defined in Section 0
hereof.

       

       “Loans” means and
includes the Revolving Loans, the Equipment Loans, the Term Loan, and the
Mortgage Loan.

      
        
           

        

        
          -18-

          
            

          

        

        
           

        

      

      “Loan Documents” means this
Agreement, the Notes, the Applications, the Guaranties, the Limited Guaranties,
the Collateral Documents, and each other instrument or document to be delivered
hereunder or thereunder or otherwise in connection therewith.

       

      “Material Adverse Effect”
means (a) a material adverse change in, or material adverse effect upon, the
operations, business, Property, or condition (financial or otherwise) of the
Borrower or of the Borrower and its Subsidiaries taken as a whole, (b) a
material impairment of the ability of the Borrower or any Subsidiary to perform
its obligations under any Loan Document, or (c) a material adverse effect
upon (i) the legality, validity, binding effect or enforceability against
the Borrower or any Subsidiary of any Loan Document or the rights and remedies
of the Bank thereunder or (ii) the perfection or priority of any Lien granted
under any Collateral Document.

       

      “Moody’s” means Moody’s
Investors Service, Inc.

       

      “Mortgage” means that certain
Mortgage and Security Agreement with Assignment of Rents dated as of the date
hereof, between the Borrower and the Bank, as the same may be amended, modified,
supplemented, or restated from time to time.

       

      “Mortgage Loan” is defined in
Section 1.2
hereof.

       

      “Mortgage Loan Commitment” is
defined in Section 1.2
hereof.

       

      “Mortgage Loan Final Maturity Date”
means April 29, 2013, or such earlier date on which the Term Loan is
declared to be or becomes due pursuant to Section 0 or 0 hereof.

       

      “Mortgage Loan Note” is
defined in Section 0
hereof.

       

       “Mortgaged Premises”
means the real property of the Borrower commonly known as 22160 North Pepper
Road, Barrington, Illinois, and all buildings and improvements thereon, and all
rents, issues, and profits therefrom.

       

      “Net Income” means, for any
Person, with reference to any period, the net income (or net loss) of such
Person for such period computed in accordance with GAAP.

       

      “Net Proceeds” means with
respect to any Issuance or Asset Sale, proceeds (including, when received, any
deferred or escrowed payments) received by a Borrower or Subsidiary in cash from
such Issuance or Asset Sale, net of (a) reasonable and customary costs and
expenses actually incurred in connection therewith, including legal fees and
sales commissions; (b) amounts applied to repayment of Indebtedness for Borrowed
Money secured by a permitted Lien senior to the Bank’s Liens on Collateral sold;
(c) transfer or similar taxes; and (d) reserves for indemnities, until such
reserves are no longer needed.

       

      “Notes” means and includes
the Term Loan Note, the Mortgage Loan Note, the Equipment Note, and the
Revolving Note.

       

      “Obligations” means all
obligations of the Borrower to pay principal and interest on the Loans, all
reimbursement obligations owing under the Applications, all fees and charges
payable hereunder, and all other payment obligations of the Borrower arising
under or in relation to any Loan Document, in each case whether now existing or
hereafter arising, due or to become due, direct or indirect, absolute or
contingent, and howsoever evidenced, held, or acquired.

       

      
        
           

        

        
          -19-

          
            

          

        

        
           

        

      

      “Patent Security Agreement”
means that certain Patent Security Agreement dated as of the date hereof,
between the Borrower and the Bank, as the same may be amended, modified,
supplemented, or restated from time to time.

       

      “PBGC” means the Pension
Benefit Guaranty Corporation or any Person succeeding to any or all of its
functions under ERISA.

       

      “Person” means an individual,
partnership, corporation, limited liability company, association, trust,
unincorporated organization, or any other entity or organization, including a
government or agency or political subdivision thereof.

       

      “Plan” means any employee
pension benefit plan covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code that either (a) is
maintained by a member of the Controlled Group for employees of a member of the
Controlled Group or (b) is maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one employer makes
contributions and to which a member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the preceding five
plan years made contributions.

       

      “Pledge Agreement” means that
certain Pledge Agreement dated as of the date hereof, between the Borrower and
the Bank, as the same may be amended, modified, supplemented, or restated from
time to time.

       

      “Portion” is defined in Section 0
hereof.

       

      “Property” means any interest
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible.

       

      “Receivables” means all
rights to the payment of a monetary obligation now or hereafter owing to the
Borrower evidenced by accounts, instruments, chattel paper or general
intangibles.

       

      “Reserve Percentage” means
the maximum reserve percentage, expressed as a decimal, at which reserves
(including, without limitation, any emergency, marginal, special, and
supplemental reserves) are imposed by the Board of Governors of the Federal
Reserve System (or any successor) on “eurocurrency liabilities”,
as defined in such Board’s Regulation D (or any successor thereto), subject
to any amendments of such reserve requirement by such Board or its successor,
taking into account any transitional adjustments thereto. For purposes of this
definition, the relevant Portions of the Loans shall be deemed to be “eurocurrency liabilities” as
defined in Regulation D without benefit or credit for any prorations,
exemptions or offsets under Regulation D. The Reserve Percentage shall be
adjusted automatically on and as of the effective date of any change in any such
reserve percentage. “LIBOR” means, for each
Interest Period, (a) the LIBOR Index Rate for such Interest Period, if such
rate is available, and (b) if the LIBOR Index Rate cannot be determined,
the arithmetic average of the rates of interest per annum (rounded upward, if
necessary, to the nearest 1/100th of 1%) at which deposits in U.S. Dollars
in immediately available funds are offered to the Bank at 11:00 a.m.
(London, England time) 2 Business Days before the beginning of such Interest
Period by 3 or more major banks in the interbank eurodollar market selected by
the Bank for a period equal to such Interest Period and in an amount equal or
comparable to the applicable LIBOR Portion scheduled to be outstanding from the
Bank during such Interest Period. “LIBOR Index Rate” means, for
any Interest Period, the rate per annum (rounded upwards, if necessary, to the
next higher one hundred-thousandth of a percentage point) for deposits in U.S.
Dollars for a period equal to such Interest Period, which appears on the LIBOR01
Page as of 11:00 a.m. (London, England time) on the day 2 Business
Days before the commencement of such Interest Period. “LIBOR01 Page” means the
display designated as “LIBOR01
Page” on the Reuters Service (or such other page as may replace the
LIBOR01 Page on that service or such other service as may be nominated by the
British Bankers’ Association as the information vendor for the purpose of
displaying British Bankers’ Association Interest Settlement Rates for U.S.
Dollar deposits). Each determination of LIBOR made by the Bank shall be
conclusive and binding absent manifest error.

       

      
        
           

        

        
          -20-

          
            

          

        

        
           

        

      

       

      “Revolving Credit” is defined
in Section 1.4
hereof.

       

      “Revolving Credit Commitment”
is defined in Section 1)a)
hereof.

       

      “Revolving Credit Termination
Date” means April 29, 2013, or such earlier date on which the Revolving
Credit Commitment is terminated in whole pursuant to Section 0, 0, or 0 hereof.

       

      “Revolving Loan” and “Revolving Loans” is defined
in Section 1.5
hereof.

       

      “Revolving Note” is defined
in Section 1.5
hereof.

       

      “Security Agreement” means
that certain Security Agreement dated as of the date hereof, between the
Borrower and the Bank, as the same may be amended, modified, supplemented, or
restated from time to time.

       

      “Senior Funded Debt” means,
at any time the same is to be determined, the aggregate of all Indebtedness for
Borrowed Money of the Borrower 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 Borrower or any of its Subsidiaries or which the
Borrower or any of its Subsidiaries has agreed (contingently or otherwise) to
purchase or otherwise acquire or in respect of which the Borrower or any of its
Subsidiaries has otherwise assured a creditor against loss, minus, without duplication,
Subordinated Debt and Intercompany Debt.

       

      “Senior Leverage Ratio” means, as of any
time it is to be determined, the ratio of Senior Funded Debt at such time to EBITDA for the
four fiscal quarters of the Borrower then most recently ended.

       

      “Subordinated Debt” means
Indebtedness for Borrowed Money owing to any Person on terms and conditions, and
in such amounts, acceptable to the Bank and which is subordinated in right of
payment to the prior payment in full of the Obligations pursuant to written
subordination provisions approved in writing by the Bank.

       

      “Subordinated Debt Documents”
means any documents, guaranties, agreements and instruments evidencing, securing
or otherwise pertaining to the Subordinated Debt.

       

      “Subsidiary” means any
corporation or other Person more than 50% of the outstanding ordinary voting
shares or other equity interests of which is at the time directly or indirectly
owned by the Borrower, by one or more of its Subsidiaries, or by the Borrower
and one or more of its Subsidiaries.

       

      “Tangible Net Worth” means,
at any time the same is to be determined, for any entity, the difference
between:  (a) the total assets appearing on such entity’s balance
sheet at such date prepared in accordance with GAAP after deducting adequate
reserves in each case where, in accordance with GAAP, a reserve is proper; and
(b) the total liabilities appearing on such balance sheet; excluding, however, from the
determination of total assets: (i) goodwill, organizational expenses, research
and development expenses, trademarks, trade names, copyrights, patents, patent
applications, licenses and rights in any thereof, covenants not to compete,
training costs and other similar intangibles; (ii) all deferred charges or
unamortized debt discount and expense; (iii) prepaid expenses; (iv) securities
which are not readily marketable; (v) any write-up in the book value of any
assets; (vi) amounts due from officers or Affiliates; and (vii) any asset
acquired subsequent to the date of this Agreement which the Bank, in its sole
discretion, determines to be an intangible asset.

       

      
        
           

        

        
          -21-

          
            

          

        

        
           

        

      

       

      “Term Loan” is defined in
Section 0
hereof.

       

      “Term Loan Commitment” is
defined in Section 0
hereof.

       

      “Term Loan Final Maturity Date”
means January 31, 2011, or such earlier date on which the Term Loan is
declared to be or becomes due pursuant to Section 0 or 0 hereof.

       

      “Term Loan Note” is defined
in Section 0
hereof.

       

      “Trademark Security
Agreement” means that certain Trademark Security Agreement dated as of
the date hereof, between the Borrower and the Bank, as the same may be amended,
modified, supplemented, or restated from time to time.

       

      “Unfunded Vested Liabilities”
means, for any Plan at any time, the amount (if any) by which the present
value of all vested nonforfeitable accrued benefits under such Plan exceeds the
fair market value of all Plan assets allocable to such benefits, all determined
as of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the Controlled
Group to the PBGC or the Plan under Title IV of ERISA.

       

      “Welfare Plan” means a
“welfare plan” as defined in Section 3(1) of ERISA.

       

      “Wholly-Owned Subsidiary”
means a Subsidiary of which all of the issued and outstanding shares of capital
stock (other than directors’ qualifying shares as required by law) or other
equity interests are owned by the Borrower and/or one or more Wholly-Owned
Subsidiaries within the meaning of this definition.

       

      
        Interpretation.  The
foregoing definitions are equally applicable to both the singular and plural
forms of the terms defined. The words “hereof”, “herein”, and “hereunder” and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All references to time of day
herein are references to Chicago, Illinois time unless otherwise specifically
provided. Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, it shall be done in accordance with GAAP except where such principles
are inconsistent with the specific provisions of this
Agreement.

      

       

      Representations
and Warranties.

       

      The
Borrower represents and warrants to the Bank as follows:

       

      
        Organization and
Qualification.  The Borrower is duly organized, validly
existing, and in good standing as a corporation under the laws of the State of
Illinois, has full and adequate power to own its Property and conduct its
business as now conducted, and is duly licensed or qualified and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the nature of the Property owned or leased by it requires such licensing
or qualifying where the failure to do so could reasonably be expected to have a
Material Adverse Effect.

      

      
        
           

        

        
          -22-

          
            

          

        

        
           

        

      

       

      
        Subsidiaries.  Each
Subsidiary is duly organized, validly existing, and in good standing under the
laws of the jurisdiction in which it is incorporated or organized, as the case
may be, has full and adequate power to own its Property and conduct its business
as now conducted, and is duly licensed or qualified and in good standing in each
jurisdiction in which the nature of the business conducted by it or the nature
of the Property owned or leased by it requires such licensing or qualifying
where the failure to do so could reasonably be expected to have a Material
Adverse Effect. Schedule 0 hereto
identifies each Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and outstanding
shares of each class of its capital stock or other equity interests owned by the
Borrower and the Subsidiaries and, if such percentage is not 100% (excluding
directors’ qualifying shares as required by law), a description of each class of
its authorized capital stock and other equity interests and the number of shares
of each class issued and outstanding. All of the outstanding shares of capital
stock and other equity interests of each Subsidiary are validly issued and
outstanding and fully paid and nonassessable and all such shares and other
equity interests indicated on Schedule 0 as owned by the Borrower or
a Subsidiary are owned, beneficially and of record, by the Borrower or such
Subsidiary free and clear of all Liens other than Liens granted to the Bank.
There are no outstanding commitments or other obligations of any Subsidiary to
issue, and no options, warrants or other rights of any Person to acquire, any
shares of any class of capital stock or other equity interests of any
Subsidiary.

      

       

      
        Authority and Validity of
Obligations.  The Borrower has full right
and authority to enter into this Agreement and the other Loan Documents, to make
the borrowings herein provided for, to issue its Notes in evidence thereof, to
grant to the Bank the Liens described in the Collateral Documents, and to
perform all of its obligations hereunder and under the other Loan Documents.
Each Subsidiary has full right and authority to enter into the Loan Documents
executed by it, to guarantee the Obligations, to grant to the Bank the Liens
described in the Collateral Documents executed by it, and to perform all of its
obligations under the Loan Documents executed by it. The Loan Documents
delivered by the Borrower and its Subsidiaries have been duly authorized,
executed, and delivered by such Persons and constitute valid and binding
obligations of the Borrower and its Subsidiaries enforceable against them in
accordance with their terms except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, or similar laws affecting
creditors’ rights generally and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law); and this Agreement and the other Loan Documents do not, nor
does the performance or observance by the Borrower or any Subsidiary of any of
the matters and things herein or therein provided for, j) contravene or
constitute a default under any provision of law or any judgment, injunction,
order or decree binding upon the Borrower or any Subsidiary or any provision of
the organizational documents (e.g., charter, certificate or
articles of incorporation and by-laws, certificate or articles of association
and operating agreement, partnership agreement, or other similar organizational
documents) of the Borrower or any Subsidiary or any covenant, indenture or
agreement of or affecting the Borrower or any Subsidiary or any of their
Property, or k) result in the creation or imposition of any Lien on any
Property of the Borrower or any Subsidiary other than the Liens granted to the
Bank.

      

      
        
           

        

        
          -23-

          
            

          

        

        
           

        

      

       

      
        Use of Proceeds; Margin
Stock.  The Borrower shall use (a) the proceeds of the Term
Loan and the Mortgage Loan to refinance existing Indebtedness with Charter One
Bank, (b) the proceeds of Equipment Loans to refinance indebtedness of the
Borrower to RBS Asset Finance, Inc., and to purchase Equipment identified in
invoices delivered to the Bank in connection with the borrowing thereof, and (c)
the proceeds of the Revolving Loans to refinance existing Indebtedness with
Charter One Bank and for its general working capital purposes and for such other
legal and proper purposes as are consistent with all applicable laws. Neither
the Borrower nor any Subsidiary is engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System), and
no part of the proceeds of any extension of credit made hereunder will be used
to purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock.

      

       

      
        Financial
Reports.  The consolidated balance sheet of the Borrower and
its Subsidiaries as at December 31, 2009, and the related consolidated
statements of income, retained earnings, and cash flows of the Borrower and its
Subsidiaries for the fiscal year then ended, and accompanying notes thereto,
which financial statements are accompanied by the audit report of Blackman
Kallick, LLP, independent public accountants, and the unaudited interim
consolidated balance sheet of the Borrower and its Subsidiaries as at March 31,
2010, and the related consolidated statements of income, retained earnings, and
cash flows of the Borrower and its Subsidiaries for the three months then
ended, heretofore furnished to the Bank, fairly present the consolidated
financial condition of the Borrower and its Subsidiaries as at said dates and
the consolidated results of their operations and cash flows for the periods then
ended in conformity with GAAP applied on a consistent basis. Neither the
Borrower nor any Subsidiary has contingent liabilities which are material to it
other than as indicated on such financial statements or, with respect to future
periods, on the financial statements furnished pursuant to Section 0
hereof.

      

       

      
        No Material Adverse
Change.  Since December 31, 2009, there has been no change in
the condition (financial or otherwise) or business prospects of the Borrower or
any Subsidiary except those occurring in the ordinary course of business, none
of which individually or in the aggregate have been materially
adverse.

      

       

      
        Full
Disclosure.  The statements and information furnished to the
Bank in connection with the negotiation of this Agreement and the other Loan
Documents and the commitment by the Bank to provide all or part of the financing
contemplated hereby do not contain any untrue statements of a material fact or
omit a material fact necessary to make the material statements contained herein
or therein not misleading, the Bank acknowledging that, as to any projections
furnished to the Bank, the Borrower only represents that the same were prepared
on the basis of information and estimates the Borrower believed to be
reasonable.

      

       

      
        Trademarks, Franchises and
Licenses.  The Borrower and its Subsidiaries own, possess or
have the right to use all necessary patents, licenses, franchises, trademarks,
trade names, trade styles, copyrights, trade secrets, know how, and confidential
commercial and proprietary information to conduct their businesses as now
conducted, without known conflict with any patent, license, franchise,
trademark, trade name, trade style, copyright, or other proprietary right of any
other Person.

      

      
        
           

        

        
          -24-

          
            

          

        

        
           

        

      

       

      
        Governmental Authority and
Licensing.  The Borrower and its Subsidiaries have received all
licenses, permits, and approvals of all federal, state, local, and foreign
governmental authorities, if any, necessary to conduct their businesses, in each
case where the failure to obtain or maintain the same could reasonably be
expected to have a Material Adverse Effect. No investigation or proceeding
which, if adversely determined, could reasonably be expected to result in
revocation or denial of any material license, permit or approval is pending or,
to the knowledge of the Borrower, threatened.

      

       

      
        Good Title.  The
Borrower and its Subsidiaries have good and defensible title (or valid leasehold
interests) to their assets as reflected on the most recent consolidated balance
sheet of the Borrower and its Subsidiaries furnished to the Bank (except for
sales of assets by the Borrower and its Subsidiaries in the ordinary course of
business), subject to no Liens other than such thereof as are permitted by Section 0
hereof.

      

       

      
        Litigation and Other
Controversies.  There is no litigation or governmental or
arbitration proceeding or labor controversy pending, nor to the knowledge of the
Borrower threatened, against the Borrower or any Subsidiary or any of their
Property which if adversely determined could reasonably be expected to have a
Material Adverse Effect.

      

       

      
        Taxes.  All tax
returns required to be filed by the Borrower or any Subsidiary in any
jurisdiction have, in fact, been filed, and all taxes, assessments, fees, and
other governmental charges upon the Borrower or any Subsidiary or upon any of
their Property, income or franchises, which are shown to be due and payable in
such returns, have been paid except such taxes, assessments, fees, and
governmental charges, if any, as are being contested in good faith and by
appropriate proceedings which prevent enforcement of the matter under contest
and as to which adequate reserves established in accordance with GAAP have been
provided. The Borrower does not know of any proposed additional tax assessment
against it or its Subsidiaries for which adequate provisions in accordance with
GAAP have not been made on their accounts. Adequate provisions in accordance
with GAAP for taxes on the books of the Borrower and its Subsidiaries have been
made for all open years, and for the current fiscal period.

      

       

      
        Approvals.  No
authorization, consent, license, or exemption from, or filing or registration
with, any court or governmental department, agency, or instrumentality, nor any
approval or consent of any other Person, is or will be necessary to the valid
execution, delivery, or performance by the Borrower or any Subsidiary of any
Loan Document, except for such approvals which have been obtained prior to the
date of this Agreement and remain in full force and effect.

      

       

      
        Affiliate
Transactions.  Neither the Borrower nor any Subsidiary is a
party to any contracts or agreements with any of its Affiliates on terms and
conditions which are less favorable to the Borrower or such Subsidiary than
would be usual and customary in similar contracts or agreements between Persons
not affiliated with each other.

      

       

      
        Investment
Company.  Neither the Borrower nor any Subsidiary is an
“investment company” or a company “controlled” by an “investment company” within
the meaning of the Investment Company Act of 1940, as
amended.

      

       

      
        
           

        

        
          -25-

          
            

          

        

        
           

        

      

       

      
        ERISA.  The
Borrower and each other member of its Controlled Group has fulfilled its
obligations under the minimum funding standards of, and is in compliance in all
material respects with, ERISA and the Code to the extent applicable to it and
has not incurred any liability to the PBGC or a Plan under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA. Neither the Borrower nor any Subsidiary has any contingent liabilities
with respect to any post-retirement benefits under a Welfare Plan, other than
liability for continuation coverage described in article 6 of Title I
of ERISA.

      

       

      
        Compliance with
Laws.  The Borrower and its Subsidiaries are in compliance with
the requirements of all federal, state and local laws, rules and regulations
applicable to or pertaining to their Property or business operations (including,
without limitation, the Occupational Safety and Health Act of 1970, the
Americans with Disabilities Act of 1990, and laws and regulations establishing
quality criteria and standards for air, water, land and toxic or hazardous
wastes and substances), non-compliance with which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Neither the Borrower nor any Subsidiary has received notice to the effect that
its operations are not in compliance with any of the requirements of applicable
federal, state or local environmental, health and safety statutes and
regulations or are the subject of any governmental investigation evaluating
whether any remedial action is needed to respond to a release of any toxic or
hazardous waste or substance into the environment, which non-compliance or
remedial action, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.

      

       

      
        Other
Agreements.  Neither the Borrower nor any Subsidiary is in
default under the terms of any covenant, indenture or agreement of or affecting
the Borrower, any Subsidiary or any of their Property, which default if uncured
could reasonably be expected to have a Material Adverse
Effect.

      

       

      
        Solvency.  The
Borrower and its Subsidiaries are solvent, able to pay their debts as they
become due, and have sufficient capital to carry on their business and all
businesses in which they are about to engage.

      

       

      
        Broker Fees.  No
broker’s or finder’s fee or commission will be payable with respect hereto or
any of the transactions contemplated thereby; and the Borrower hereby
indemnifies the Bank against, and agrees that it will hold the Bank harmless
from, any claim, demand, or liability for any such broker’s or finder’s fees
alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable attorneys’ fees) arising in connection with any
such claim, demand, or liability.

      

       

      
        No Default.  No
Default or Event of Default has occurred and is continuing.

      

       

      Conditions
Precedent.

       

      The
obligation of the Bank to make any Loan or to issue any Letter of Credit under
this Agreement is subject to the following conditions precedent:

       

      
        All Advances.  As
of the time of the making of each extension of credit (including the initial
extension of credit) hereunder:

      

       

      
        
           

        

        
          -26-

          
            

          

        

        
           

        

      

       

      
        each of
the representations and warranties set forth in Section 0 hereof and in the other
Loan Documents shall be true and correct as of such time, except to the extent
the same expressly relate to an earlier date;

      

       

      
        no
Default or Event of Default shall have occurred and be continuing or would occur
as a result of making such extension of credit;

      

       

      
        after
giving effect to any extension of credit under the Revolving Credit, the
aggregate principal amount of all Revolving Loans and Letters of Credit
outstanding under this Agreement shall not exceed the lesser of i) the
Revolving Credit Commitment and ii) the Borrowing Base;

      

       

      
        in the
case of the issuance of any Letter of Credit, the Bank shall have received a
properly completed Application therefor together with the fees called for
hereby; and

      

       

      
        such
extension of credit shall not violate any order, judgment, or decree of any
court or other authority or any provision of law or regulation applicable to the
Bank (including, without limitation, Regulation U of the Board of Governors
of the Federal Reserve System) as then in effect.

      

       

      The
Borrower’s request for any Loan or Letter of Credit shall constitute its
warranty as to the facts specified in subsections 0 through
0, both inclusive,
above.

       

      
        Initial
Advance.  At or prior to the making of the initial extension of
credit hereunder, the following conditions precedent shall also have been
satisfied:

      

       

      
        the Bank
shall have received the following (and, with respect to all documents, each to
be properly executed and completed) and the same shall have been approved as to
form and substance by the Bank:

      

       

      the
Notes;

       

      the
Mortgage, the Security Agreement, the Pledge Agreement, the Patent Security
Agreement, the Trademark Security Agreement, and the Copyright Security
Agreement from the Borrower, together with (x) any financing statements
requested by the Bank and (y) certificates evidencing 65% of the equity
interests of Flexo, together with undated executed blank stock powers
therefor;

       

      the
Limited Guaranties and the Subsidiary Guaranty of CTI Helium;

       

      a
Subordination Agreement from the Individual Guarantors and CTI Balloons in favor
of the Bank, together with copies of the subordinated note and any other loan
documents executed in connection therewith;

       

      evidence
of the maintenance of insurance by the Borrower as required hereby or by the
Collateral Documents;

       

      copies
(executed or certified as may be appropriate) of resolutions of the Board of
Directors or other governing body of the Borrower authorizing the execution,
delivery, and performance of the Loan Documents;

       

      
        
           

        

        
          -27-

          
            

          

        

        
           

        

      

       

      articles
of incorporation (or equivalent organizational document) of the Borrower
certified by the appropriate governmental office of the state of its
organization;

       

      by-laws
(or equivalent organizational document) for the Borrower certified by an
appropriate officer of the Borrower acceptable to the Bank;

       

      an
incumbency certificate containing the name, title and genuine signature of the
Borrower’s Authorized Representatives;

       

      good
standing certificates for the Borrower, dated as of a date no earlier than 30
days prior to the date hereof, from the appropriate governmental offices in the
state of its incorporation or organization and in each state in which it is
qualified to do business as a foreign organization;

       

      a Phase I
Environmental Report of an independent firm of environmental engineers
acceptable to the Bank concerning the environmental hazards and matters with
respect to the Mortgaged Premises, together with a reliance letter from such
firm acceptable in form and substance to the Bank;

       

      an
appraisal report prepared for the Bank by a state certified appraiser selected
by the Bank, which appraisal report shall describe the fair market value of the
Mortgaged Premises, and which report shall meet or exceed the requirements of
applicable law for appraisals prepared for federally insured depository
institutions;

       

      an ALTA
survey prepared by a state-licensed surveyor on the Mortgaged Premises certified
to the Bank and the title insurance company issuing the title policy referred to
below;

       

      a flood
determination report prepared for the Bank by a flood determination company
selected by the Bank stating whether or not any portion of the Mortgaged
Premises and the improvements thereon are in a federally designated flood hazard
area;

       

      a
mortgagee’s title insurance policy (or a prepaid binding commitment therefor) in
the aggregate amount of not less than $4,000,000 insuring the Lien of the Bank
on the premises subject to the Lien of the Mortgage to be a valid, first
mortgage lien subject to no defects or objections except those permitted by
Section 0 hereof,
together with such endorsements as the Bank may reasonably require;

       

      one or
more pay-off and lien release letters from secured creditors of the Borrower
setting forth, among other things, the total amount of indebtedness outstanding
and owing to them (or outstanding letters of credit issued for their account)
and containing an undertaking to cause to be delivered to the Bank (or
authorizing the Bank or its designee to prepare and file) termination statements
and any other lien release instruments necessary to release their Liens on all
of the Borrower’s assets; and

       

      except to
the extent waived in writing by the Bank, landlords’ lien waivers in connection
with the Property of the Borrower located in leased premises;

       

      
        the Bank
shall have received the initial fees called for hereby;

      

       

      
        
           

        

        
          -28-

          
            

          

        

        
           

        

      

       

      
        the Bank
shall have received such field examination reports, valuations and
certifications as it may require in order to satisfy itself as to the value of
the Collateral, the financial condition of the Borrower and its Subsidiaries,
and the lack of material contingent liabilities of the Borrower and its
Subsidiaries;

      

       

      
        legal
matters incident to the execution and delivery of the Loan Documents and to the
transactions contemplated hereby shall be satisfactory to the Bank and its
counsel; and the Bank shall have received the favorable written opinion of
counsel for the Borrower in form and substance satisfactory to the Bank and its
counsel;

      

       

      
        the Bank
shall have received a Borrowing Base certificate in the form attached hereto as
Exhibit F showing the computation of the Borrowing Base in reasonable detail as
of the close of business not earlier than fourteen (14) days prior to the making
of the initial extension of credit hereunder;

      

       

      
        the Bank
shall have received financing statement, tax and judgment lien search results
against the Property of the Borrower and its Subsidiaries evidencing the absence
of Liens on their Property except as permitted by Section 0
hereof;

      

       

      
        the Liens
granted to the Bank under the Collateral Documents shall have been perfected in
a manner satisfactory to the Bank and its counsel;

      

       

      
        the Bank
shall have received evidence satisfactory to the Bank that the Borrower’s EBITDA
for the twelve-month period ending December 31, 2009 was not less than
$4,000,000; and

      

       

      
        the Bank
shall have received such other agreements, instruments, documents, certificates
and opinions as the Bank may reasonably request.

      

       

      Covenants.

       

      The
Borrower agrees that, so long as any credit is available to or in use by the
Borrower hereunder, except to the extent compliance in any case or cases is
waived in writing by the Bank:

       

      
        Maintenance of
Business.  The Borrower shall, and shall cause each Subsidiary
to, preserve and maintain its existence. The Borrower shall, and shall cause
each Subsidiary to, preserve and keep in force and effect all licenses, permits
and franchises necessary to the proper conduct of its
business.

      

       

      
        Maintenance of
Properties.  The Borrower shall maintain, preserve, and keep
its property, plant, and equipment in good repair, working order and condition
(ordinary wear and tear excepted) and shall from time to
time make all needful and proper repairs, renewals, replacements, additions, and
betterments thereto so that at all times the efficiency thereof shall be fully
preserved and maintained, and shall cause each Subsidiary to do so in respect of
Property owned or used by it.

      

       

      
        Taxes and
Assessments.  The Borrower shall duly pay and discharge, and
shall cause each Subsidiary to duly pay and discharge, all taxes, rates,
assessments, fees, and governmental charges upon or against it or its Property,
in each case before the same become delinquent and before penalties accrue
thereon, unless and to the extent that the same are being contested in good
faith and by appropriate proceedings which prevent enforcement of the matter
under contest and adequate reserves are provided
therefor.

      

      
        
           

        

        
          -29-

          
            

          

        

        
           

        

      

       

      
        Insurance.  The
Borrower shall insure and keep insured, and shall cause each Subsidiary to
insure and keep insured, with good and responsible insurance companies, all
insurable Property owned by it which is of a character usually insured by
Persons similarly situated and operating like Properties against loss or damage
from such hazards and risks, and in such amounts, as are insured by Persons
similarly situated and operating like Properties; and the Borrower shall insure,
and shall cause each Subsidiary to insure, such other hazards and risks
(including employers’ and public liability risks) with good and responsible
insurance companies, as and to the extent usually insured by Persons similarly
situated and conducting similar businesses. The Borrower shall in any event
maintain insurance on the Collateral to the extent required by the Collateral
Documents.  The Bank shall be listed as “Lender’s Loss Payee” and
“Mortgagee” with respect to all property insurance and as an “Additional
Insured” with respect to all liability insurance.  Borrower shall upon
request furnish to the Bank a certificate setting forth in summary form the
nature and extent of the insurance maintained pursuant to this
Section.

      

       

      
        Financial
Reports.  The Borrower shall, and shall cause each Subsidiary
to, maintain a standard system of accounting in accordance with GAAP and shall
furnish to the Bank and its duly authorized representatives such information
respecting the business and financial condition of the Borrower and its
Subsidiaries as the Bank may reasonably request; and without any request, shall
furnish to the Bank:

      

       

      
        as soon
as available, and in any event within fifteen (15) days after the last day of
each calendar month, a Borrowing Base certificate in the form attached hereto as
Exhibit F 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 Borrower and certified to by its chief financial
officer or such other officer acceptable to the Bank;

      

       

      
        as soon
as available, and in any event within forty-five (45) days after the last
day of each calendar month, a copy of the consolidated and consolidating balance
sheet of the Borrower and its Subsidiaries as of the last day of such period and
the consolidated and consolidating statements of income, retained earnings, and
cash flows of the Borrower and its Subsidiaries for the calendar month and the
fiscal year-to-date period then ended, each in reasonable detail showing in
comparative form the figures for the corresponding date and period in the
previous fiscal year, prepared by the Borrower in accordance with GAAP and
certified to by its chief financial officer or such other officer acceptable to
the Bank;

      

       

      
        as soon
as available, and in any event within forty-five (45) days after the last
day of each fiscal quarter of the Borrower, a copy of the consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries as of the last
day of such period and the consolidated and consolidating statements of income,
retained earnings, and cash flows of the Borrower and its Subsidiaries for the
fiscal quarter and the fiscal year-to-date period then ended, each in reasonable
detail showing in comparative form the figures for the corresponding date and
period in the previous fiscal year, prepared by the Borrower in accordance with
GAAP and certified to by its chief financial officer or such other officer
acceptable to the Bank;

      

      
        
           

        

        
          -30-

          
            

          

        

        
           

        

      

       

      
        as soon
as available, and in any event within one hundred twenty (120) days after
the last day of each fiscal year of the Borrower, a copy of the consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries as of the close
of such period and the consolidated and consolidating statements of income,
retained earnings, and cash flows of the Borrower and its Subsidiaries for such
period, and accompanying notes thereto, each in reasonable detail showing in
comparative form the figures for the previous fiscal year, accompanied by an
unqualified opinion thereon of Blackman Kallick, LLP, or another firm of
independent public accountants of recognized standing, selected by the Borrower
and reasonably satisfactory to the Bank, to the effect that the financial
statements have been prepared in accordance with GAAP and present fairly in
accordance with GAAP the consolidated financial condition of the Borrower and
its Subsidiaries as of the close of such fiscal year and the results of their
operations and cash flows for the fiscal year then ended and that an examination
of such accounts in connection with such financial statements has been made in
accordance with generally accepted auditing standards and, accordingly, such
examination included such tests of the accounting records and such other
auditing procedures as were considered necessary in the
circumstances;

      

       

      
        within
the period provided in subsection (d) above, the
written statement of the accountants who certified the audit report thereby
required that in the course of their audit they have obtained no knowledge of
any Default or Event of Default, or, if such accountants have obtained knowledge
of any such Default or Event of Default, they shall disclose in such statement
the nature and period of the existence thereof;

      

       

      
        promptly
after receipt thereof, any additional written reports, management letters or
other detailed information contained in writing concerning significant aspects
of the Borrower’s or any Subsidiary’s operations and financial affairs given to
it by its independent public accountants;

      

       

      
        as soon
as available, and in any event no later than thirty (30) days after the end
of each fiscal year of the Borrower, a copy of the Borrower’s consolidated and
consolidating business plan for the following fiscal year, such business plan to
show the Borrower’s projected consolidated and consolidating revenues, expenses,
and balance sheet on a month-by-month basis, such business plan to be in
reasonable detail prepared by the Borrower and in form reasonably satisfactory
to the Bank;

      

       

      
        promptly
after knowledge thereof shall have come to the attention of any responsible
officer of the Borrower, written notice of iii) any threatened or pending
litigation or governmental or arbitration proceeding or labor controversy
against the Borrower or any Subsidiary or any of their Property which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect or iv) the occurrence of any Default or Event of Default
hereunder;

      

       

      
        promptly
after the sending or filing thereof, copies of any proxy statements, financial
statements or reports that the Borrower has made generally available to its
shareholders; copies of any regular, periodic and special reports or
registration statements or prospectuses that the Borrower files with the
Securities and Exchange Commission or any other Governmental Authority, or any
securities exchange; and copies of any press releases or other statements made
available by the Borrower to the public concerning material changes to or
developments in the business of the Borrower; and

      

      
        
           

        

        
          -31-

          
            

          

        

        
           

        

      

       

      
        as soon
as available, and in any event within forty-five
(45) days after the last day of each fiscal quarter of the Borrower, a
written certificate in the form attached hereto as Exhibit G signed by the chief
financial officer of the Borrower, or such other officer of the Borrower
satisfactory to the Bank, to the effect that to the best of such officer’s
knowledge and belief no Default or Event of Default has occurred during the
period covered by such statements or, if any such Default or Event of Default
has occurred during such period, setting forth a description of such Default or
Event of Default and specifying the action, if any, taken by the Borrower to
remedy the same, together with calculations supporting such statements in
respect of Section 8.23
of this Agreement.

      

       

      
        Inspection.  The
Borrower shall, and shall cause each Subsidiary to, permit the Bank and its duly
authorized representatives and agents to visit and inspect any of the
Properties, books and financial records of the Borrower and each Subsidiary, to
examine and make copies of the books of accounts and other financial records of
the Borrower and each Subsidiary, to perform audits of the Collateral, and to
discuss the affairs, finances and accounts of the Borrower and each Subsidiary
with, and to be advised as to the same by, its officers, employees, and
independent public accountants (and by this provision the Borrower hereby
authorizes such accountants to discuss with the Bank the finances and affairs of
the Borrower and of each Subsidiary) at such reasonable times and reasonable
intervals as the Bank may designate.

      

       

      
        Borrowings and
Guaranties.  The Borrower shall not, nor shall it permit any
Subsidiary to, issue, incur, assume, create, or have outstanding any
Indebtedness for Borrowed Money, or be or become liable as endorser, guarantor,
surety, or otherwise for any debt, obligation, or undertaking of any other
Person, or otherwise agree to provide funds for payment of the obligations of
another, or supply funds thereto or invest therein or otherwise assure a
creditor of another against loss, or apply for or become liable to the issuer of
a letter of credit which supports an obligation of another, or subordinate any
claim or demand it may have to the claim or demand of any other Person; provided, however, that the
foregoing shall not restrict nor operate to prevent:

      

       

      
        the
Obligations of the Borrower owing to the Bank under the Loan Documents and other
indebtedness and obligations of the Borrower owing to the
Bank;

      

       

      
        purchase
money indebtedness and Capitalized Lease Obligations of the Borrower and its
Subsidiaries in an amount not to exceed $1,200,000 in the aggregate at any one
time outstanding;

      

       

      
        obligations
of the Borrower and its Subsidiaries arising out of interest rate and foreign
currency hedging agreements entered into with financial institutions in the
ordinary course of business and not for speculation;

      

       

      
        endorsement
of items for deposit or collection of commercial paper received in the ordinary
course of business;

      

       

      
        indebtedness
of CTI Balloons to National Westminster Bank plc in an aggregate principal
amount not to exceed £100,000.00;

      

      
        
           

        

        
          -32-

          
            

          

        

        
           

        

      

      
        indebtedness
of the Borrower and Flexo to the Individual Guarantors existing on the date
hereof in an aggregate principal amount not to exceed $3,035,000 on the date
hereof, as reduced by payments thereon, and provided that any indebtedness of
the Borrower to the Individual Guarantors shall be Subordinated
Debt;

      

       

      
        unsecured
Intercompany Debt existing on the date hereof and identified on Schedule
8.7;

      

       

      
        unsecured
Intercompany Debt incurred after the date hereof in an amount not to exceed
$500,000 in the aggregate at any one time outstanding; and

      

       

      
        unsecured
indebtedness of the Borrower and its Subsidiaries not otherwise permitted by
this Section in an amount not to exceed $100,000 in the aggregate at any one
time outstanding.

      

       

      
        Liens.  The
Borrower shall not, nor shall it permit any Subsidiary to, create, incur or
permit to exist any Lien of any kind on any Property owned by any such Person;
provided, however, that
the foregoing shall not apply to nor operate to prevent:

      

       

      
        Liens
arising by statute in connection with worker’s compensation, unemployment
insurance, old age benefits, social security obligations, taxes, assessments,
statutory obligations, or other similar charges (other than Liens arising under
ERISA), good faith cash deposits in connection with tenders, contracts, or
leases to which the Borrower or any Subsidiary is a party or other cash deposits
required to be made in the ordinary course of business, provided in each case
that the obligation is not for borrowed money and that the obligation secured is
not overdue or, if overdue, is being contested in good faith by appropriate
proceedings which prevent enforcement of the matter under contest and adequate
reserves have been established therefor;

      

       

      
        mechanics’,
workmen’s, materialmen’s, landlords’, carriers’, or other similar Liens arising
in the ordinary course of business with respect to obligations which are not due
or which are being contested in good faith by appropriate proceedings which
prevent enforcement of the matter under contest;

      

       

      
        the
pledge of assets for the purpose of securing an appeal, stay or discharge in the
course of any legal proceeding, provided that the aggregate amount of
liabilities of the Borrower and its Subsidiaries secured by a pledge of assets
permitted under this subsection, including interest and penalties thereon, if
any, shall not be in excess of $250,000 at any one time
outstanding;

      

       

      
        Liens on
equipment of the Borrower or any Subsidiary created solely for the purpose of
securing indebtedness permitted by Section 0 hereof,
representing or incurred to finance the purchase price of such Property,
provided that no such Lien shall extend to or cover other Property of the
Borrower or such Subsidiary other than the respective Property so acquired, and
the principal amount of indebtedness secured by any such Lien shall at no time
exceed the original purchase price of such Property, as reduced by repayments of
principal thereon;

      

       

      
        any
interest or title of a lessor under any operating lease;

      

       

      
        easements,
rights-of-way, restrictions, and other similar encumbrances against real
property incurred in the ordinary course of business which, in the aggregate,
are not substantial in amount and which do not materially detract from the value
of the Property subject thereto or materially interfere with the ordinary
conduct of the business of the Borrower or any
Subsidiary;

      

      
        
           

        

        
          -33-

          
            

          

        

        
           

        

      

       

      
        Liens
securing the indebtedness described in Section 8.7(e);
and

      

       

      
        Liens
granted in favor of the Bank pursuant to the Collateral
Documents.

      

       

      
        Investments, Acquisitions, Loans and
Advances.  The Borrower shall not, nor shall it permit any
Subsidiary to, directly or indirectly, make, retain, or have outstanding any
investments (whether through purchase of stock or obligations or otherwise) in,
or loans or advances to, any other Person, or acquire all or any substantial
part of the assets or business of any other Person or division thereof; provided, however, that the
foregoing shall not apply to nor operate to prevent:

      

       

      
        investments
in direct obligations of the United States of America or of any agency or
instrumentality thereof whose obligations constitute full faith and credit
obligations of the United States of America, provided that any such obligations
shall mature within one year of the date of issuance thereof;

      

       

      
        investments
in commercial paper rated at least P-1 by Moody’s and at least A-1 by S&P
maturing within one year of the date of issuance thereof;

      

       

      
        investments
in certificates of deposit issued by the Bank or by any United States commercial
bank having capital and surplus of not less than $100,000,000 which have a
maturity of one year or less;

      

       

      
        investments
in repurchase obligations with a term of not more than 7 days for
underlying securities of the types described in subsection 0 above
entered into with any bank meeting the qualifications specified in subsection 0 above,
provided all such agreements require physical delivery of the securities
securing such repurchase agreement, except those delivered through the Federal
Reserve Book Entry System;

      

       

      
        investments
in money market funds that invest solely, and which are restricted by their
respective charters to invest solely, in investments of the type described in
the immediately preceding subsections 0, 0, 0, and 0 above;

      

       

      
        the
Borrower’s ownership interest existing on the date of this Agreement in its
Subsidiaries;

      

       

      
        investments
constituting Intercompany Debt permitted under Section 8.7;
and

      

       

      
        other
investments, loans and advances in addition to those otherwise permitted by this
Section in an amount not to exceed $100,000 in the aggregate at any one time
outstanding.

      

       

      In
determining the amount of investments, acquisitions, loans, and advances
permitted under this Section, investments and acquisitions shall always be taken
at the original cost thereof (regardless of any subsequent appreciation or
depreciation therein), and loans and advances shall be taken at the principal
amount thereof then remaining unpaid.

       

      
        
           

        

        
          -34-

          
            

          

        

        
           

        

      

      
        Mergers, Consolidations and Asset
Sales.  The Borrower shall not, nor shall it permit any
Subsidiary to, be a party to any merger or consolidation, or engage in any Asset
Sale, including as part of a sale and leaseback transaction, or in any event
sell or discount (with or without recourse) any of its notes or accounts
receivable; provided,
however, that this Section shall not apply to nor operate to
prevent:

      

       

      
        the sale,
transfer, or other disposition of any tangible personal property that, in the
reasonable business judgment of the Borrower or its Subsidiary, has become
uneconomical, obsolete, or worn out, and which is disposed of in the ordinary
course of business; and

      

       

      
        the sale,
transfer, lease, or other disposition of Property of the Borrower or any
Subsidiary (including any disposition of Property as part of a sale and
leaseback transaction) aggregating for the Borrower and its Subsidiaries not
more than $100,000 during any fiscal year of the Borrower.

      

       

      
        Maintenance of
Subsidiaries.  The Borrower shall not assign, sell or transfer,
nor shall it permit any Subsidiary to issue, assign, sell or transfer, any
shares of capital stock of a Subsidiary; provided, however, that the
foregoing shall not operate to prevent l) the issuance, sale and transfer
to any person of any shares of capital stock of a Subsidiary solely for the
purpose of qualifying, and to the extent legally necessary to qualify, such
person as a director of such Subsidiary, and m) Liens on the capital stock
of Subsidiaries granted to the Bank pursuant to the Collateral
Documents.

      

       

      
        ERISA.  The
Borrower shall, and shall cause each Subsidiary to, promptly pay and discharge
all obligations and liabilities arising under ERISA of a character which if
unpaid or unperformed could reasonably be expected to result in the imposition
of a Lien against any of its Property. The Borrower shall, and shall cause each
Subsidiary to, promptly notify the Bank of: n) the occurrence of any
reportable event (as defined in ERISA) with respect to a Plan, o) receipt
of any notice from the PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor, p) its intention to terminate or
withdraw from any Plan, and q) the occurrence of any event with respect to
any Plan which would result in the incurrence by the Borrower or any Subsidiary
of any material liability, fine or penalty, or any material increase in the
contingent liability of the Borrower or any Subsidiary with respect to any
post-retirement Welfare Plan benefit.

      

       

      
        Compliance with
Laws.  The Borrower shall, and shall cause each Subsidiary to,
comply in all respects with the requirements of all federal, state, local, and
foreign laws, rules, regulations, ordinances and orders applicable to or
pertaining to its Property or business operations, where any such
non-compliance, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect or result in a Lien upon any of its
Property.

      

       

      
        Intellectual
Property.  The Borrower shall, and shall cause each Subsidiary
to, possess and maintain all Intellectual Property necessary to the conduct of
their respective businesses and own all right, title and interest in and to, or
have a valid license for, all such Intellectual Property, except to the extent
the failure to so possess, maintain, own or have does not, and reasonably could
not be expected to, result in, either individually or in the aggregate, a
Material Adverse Effect. The Borrower shall not, nor shall it permit any
Subsidiary to, take any action, or fail to take any action, which would result
in the invalidity, abandonment, misuse or unenforceability of any of its
Intellectual Property or which would infringe upon or misappropriate any rights
of other Persons, except to the extent such invalidity, abandonment, misuse,
unenforceability, infringement, or misappropriation does not, and reasonably
could not be expected to, result in, individually or in the aggregate, a
Material Adverse Effect.

      

      
        
           

        

        
          -35-

          
            

          

        

        
           

        

      

       

      
        Burdensome Contracts with
Affiliates.  The Borrower shall not, nor shall it permit any
Subsidiary to, enter into any contract, agreement or business arrangement with
any of its Affiliates on terms and conditions which are less favorable to the
Borrower or such Subsidiary than would be usual and customary in similar
contracts, agreements or business arrangements between Persons not affiliated
with each other.

      

       

      
        No Changes in Fiscal
Year.  The fiscal year of the Borrower and its Subsidiaries
ends on December 31 of each year; and the Borrower shall not, nor shall it
permit any Subsidiary to, change its fiscal year from its present
basis.

      

       

      
        Formation of
Subsidiaries.  The Borrower shall not, nor shall it permit any
Subsidiary to, form or acquire any other Subsidiary.

      

       

      
        Change in the Nature of
Business.  The Borrower shall not, nor shall it permit any
Subsidiary to, engage in any business or activity if as a result the general
nature of the business of the Borrower or any Subsidiary would be changed in any
material respect from the general nature of the business engaged in by it as of
the date hereof.

      

       

      
        Use of
Proceeds.  The Borrower shall use the credit extended under
this Agreement solely for the purposes set forth in, or otherwise permitted by,
Section 0
hereof.

      

       

      
        No
Restrictions.  Except as provided herein, the Borrower shall
not, nor shall it permit any Subsidiary to, directly or indirectly create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of the Borrower or any
Subsidiary to: r) pay dividends or make any other distribution on any
Subsidiary’s capital stock or other equity interests owned by the Borrower or
any other Subsidiary, s) pay any indebtedness owed to the Borrower or any
other Subsidiary, t) make loans or advances to the Borrower or any other
Subsidiary, u) transfer any of its Property to the Borrower or any other
Subsidiary, or v) guarantee the Obligations and/or grant Liens on its
assets to the Bank as required by the Loan Documents.

      

       

      
        Subordinated
Debt.  The Borrower shall not, nor shall it permit any
Subsidiary to, w) amend or modify any of the terms or conditions relating
to Subordinated Debt, x) make any voluntary prepayment of Subordinated Debt
or effect any voluntary redemption thereof, or y) make any payment on
account of Subordinated Debt which is prohibited under the terms of any
instrument or agreement subordinating the same to the
Obligations.

      

       

      
        Bank Accounts.  The
Borrower shall not establish any new deposit accounts or other bank accounts,
other than deposit accounts or other bank accounts established at or with the
Bank, without the prior written consent of the Bank.

      

       

      
        
           

        

        
          -36-

          
            

          

        

        
           

        

      

       

      
        Financial
Covenants.

      

       

      
        Senior Leverage Ratio. As of
the last day of each fiscal quarter of the Borrower (commencing June 30, 2010),
the Borrower shall not permit the Senior Leverage Ratio for the four fiscal
quarters of the Borrower then ended to be more than the amount set forth below
for such fiscal quarter:

      

       

      
        
          
            	
                    Fiscal Quarter Ending

                  	 	
                    Level

                  
	 
      	 	 
      
	
                    March
      31, 2010, June 30, 2010,

                    September
      30, 2010, and

                    December
      31, 2010

                  	 	
                    3.50
      to 1.00

                  
	 
      	 	 
      
	
                    March
      31, 2011 and

                    June
      30, 2011

                  	 	
                    3.25
      to 1.00

                  
	 
      	 	 
      
	
                    September
      30, 2011 and

                    December
      31, 2011

                  	 	
                    3.00
      to 1.00

                  
	 
      	 	 
      
	
                    March
      31, 2012 and

                    each
      fiscal quarter thereafter

                  	 	
                    2.75
      to 1.00

                  

          

        

      

      

      
        Fixed Charge Coverage Ratio.
As of the last day of each fiscal quarter of the Borrower (commencing with the
fiscal quarter ending June 30, 2010), the Borrower shall not permit the Fixed
Charge Coverage Ratio for the four fiscal quarters of the Borrower then ended to
be less than 1.10 to 1.00.

      

       

      
        Tangible Net Worth. The
Borrower shall not permit the sum of (x) Tangible Net Worth at any time plus (y) the outstanding
principal balance of Subordinated Debt at such time to be less than the sum of
(i) $7,106,400 plus
(ii) an amount equal to 50% of the cumulative Net Income of the Borrower and its
Subsidiaries for each fiscal year of the Borrower commencing with the fiscal
year of the Borrower ending on December 31, 2010.

      

       

      Events
of Default and Remedies.

       

      
        Events of
Default.  Any one or more of the following shall constitute an
“Event of Default”
hereunder:

      

       

      
        default
in the payment when due of all or any part of any Obligation payable by the
Borrower hereunder or under any other Loan Document (whether at the stated
maturity thereof or at any other time provided for in this Agreement), or
default shall occur in the payment when due of any other indebtedness or
obligation (whether direct, contingent or otherwise) of the Borrower owing to
the Bank; or

      

       

      
        default
in the observance or performance of any covenant set forth in Section 8.1, 8.4, 8.7, 8.8, 8.9,
8.10, 8.11, 8.16, 8.17, 8.18, 8.20, 8.21, or 8.23, hereof or of any
provision of any Loan Document requiring the maintenance of insurance on the
Collateral subject thereto or dealing with the use or remittance of proceeds of
Collateral; or

      

       

      
        
           

        

        
          -37-

          
            

          

        

        
           

        

      

      
        default
in the observance or performance of any other provision hereof or of any other
Loan Document which is not remedied within thirty (30) days after the
earlier of i) the date on which such failure shall first become known to
any officer of the Borrower or ii) written notice thereof is given to the
Borrower by the Bank; or

      

       

      
        any
representation or warranty made by the Borrower or any Subsidiary herein or in any other Loan
Document, or in any statement or certificate furnished by it pursuant hereto or
thereto, or in connection with any extension of credit made hereunder, proves
untrue in any material respect as of the date of the issuance or making thereof;
or

      

       

      
        any event
occurs or condition exists (other than those described in subsections 0 through
0 above) which is
specified as an event of default under any of the other Loan Documents, or any
of the Loan Documents shall for any reason not be or shall cease to be in full
force and effect, or any of the Loan Documents is declared to be null and void,
or any of the Collateral Documents shall for any reason fail to create a valid
and perfected first priority Lien in favor of the Bank in any Collateral
purported to be covered thereby except as expressly permitted by the terms
thereof, or the Borrower or any Subsidiary takes any action for the purpose of
terminating, repudiating or rescinding any Loan Document executed by it or any
of its obligations thereunder; or

      

       

      
        default
shall occur under the Subordinated Debt Documents, or default shall occur under
any Indebtedness for Borrowed Money issued, assumed or guaranteed by the
Borrower or any Subsidiary aggregating more than $250,000, or under any
indenture, agreement or other instrument under which the same may be issued, and
such default shall continue for a period of time sufficient to permit the
acceleration of the maturity of any such Indebtedness for Borrowed Money
(whether or not such maturity is in fact accelerated), or any such Indebtedness
for Borrowed Money shall not be paid when due (whether by lapse of time,
acceleration or otherwise); or

      

       

      
        any
judgment or judgments, writ or writs, or warrant or warrants of attachment, or
any similar process or processes in an aggregate amount in excess of $250,000
shall be entered or filed against the Borrower or any Subsidiary or against any
of their Property and which remains unvacated, unbonded, unstayed or unsatisfied
for a period of 30 days; or

      

       

      
        the
Borrower or any member of its Controlled Group shall fail to pay when due an
amount or amounts aggregating in excess $250,000 which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice
of intent to terminate a Plan or Plans having aggregate Unfunded Vested
Liabilities in excess of $250,000 (collectively, a “Material Plan”) shall be
filed under Title IV of ERISA by the Borrower or any other member of its
Controlled Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate
or to cause a trustee to be appointed to administer any Material Plan or a
proceeding shall be instituted by a fiduciary of any Material Plan against the
Borrower or any member of its Controlled Group to enforce Section 515 or
4219(c)(5) of ERISA and such proceeding shall not have been dismissed within
30 days thereafter; or a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or

      

       

      
        
           

        

        
          -38-

          
            

          

        

        
           

        

      

       

      
        dissolution
or termination of the existence of the Borrower or any Subsidiary;
or

      

       

      
        the
Borrower or any Subsidiary shall iii) have entered involuntarily against it
an order for relief under the United States Bankruptcy Code, as amended,
iv) not pay, or admit in writing its inability to pay, its debts generally
as they become due, v) make an assignment for the benefit of creditors,
vi) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it or
any substantial part of its Property, vii) institute any proceeding seeking
to have entered against it an order for relief under the United States
Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it,
viii) take any action in furtherance of any matter described in parts iii) through vii) above, or ix) fail
to contest in good faith any appointment or proceeding described in Section 0 hereof;
or

      

       

      
        a
custodian, receiver, trustee, examiner, liquidator or similar official shall be
appointed for the Borrower or any Subsidiary or any substantial part of any of
their Property, or a proceeding described in Section 1)y)vii) shall be instituted
against the Borrower or any Subsidiary, and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period
of 60 days; or

      

       

      
        the
occurrence of any of the following: x) the Individual Guarantors shall
ceases to collectively own and control, directly, free and clear of all Liens,
at least forty percent (40%) of the issued and outstanding voting shares of the
capital stock or other equity interests of the Borrower at any time or the
voting power to elect a majority of the Borrower’s board of directors;
(1) the granting by either of the Individual Guarantors, directly or
indirectly, of a security interest in its ownership interest in the Borrower;
(2) John Schwan and Stephen M. Merrick shall cease to hold the titles of
Chairman and Chief Financial Officer, respectively, of the Borrower; (iii) the
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (other
than the Individual Guarantors) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 5% or more of either (x) the
then outstanding shares of common stock of the Borrower or (y) the combined
voting power of the then outstanding voting securities of the Borrower entitled
to vote generally in the election of Directors; or (3) the Borrower ceases
to directly own free and clear of all Liens (other than Liens permitted pursuant
to Section 0) 100%
of the issued and outstanding shares of the capital stock or other equity
interests of its Subsidiaries, except as a result of intercompany mergers or
liquidations otherwise expressly permitted under this
Agreement;

      

       

      
        the
subordination provisions of any Subordinated Debt or any Subordination Agreement
relating thereto shall for any reason be revoked or invalid or otherwise cease
to be in full force and effect in any material respect, or the Obligations shall
for any reason not have the priority contemplated by the subordination
provisions of the Subordinated Debt or Subordination Agreement relating thereto;
or

      

       

      
        the
occurrence of a Material Adverse Effect.

      

      
        
           

        

        
          -39-

          
            

          

        

        
           

        

      

       

      
        Non-Bankruptcy
Defaults.  When any Event of Default described in
Section 0 (other than in subsection iii) or 0 of Section 0) has
occurred and is continuing, the Bank may, by notice to the Borrower, take one or
more of the following actions:

      

       

      
        terminate
the obligation of the Bank to extend any further credit hereunder on the date
(which may be the date thereof) stated in such notice;

      

       

      
        declare
the principal of and the accrued interest on the Notes to be forthwith due and
payable and thereupon the Notes, including both principal and interest and all
fees, charges and other Obligations payable hereunder and under the other Loan
Documents, shall be and become immediately due and payable without further
demand, presentment, protest or notice of any kind; and

      

       

      
        enforce
any and all rights and remedies available to it under the Loan Documents or
applicable law.

      

       

      
        Bankruptcy
Defaults.  When any Event of Default described in
subsection iii) or 0 of Section 0 has occurred and is continuing, then
the Notes, including both principal and interest, and all fees, charges and
other Obligations payable hereunder and under the other Loan Documents, shall
immediately become due and payable without presentment, demand, protest or
notice of any kind, and the obligation of the Bank to extend further credit
pursuant to any of the terms hereof shall immediately terminate. In addition,
the Bank may exercise any and all remedies available to it under the Loan
Documents or applicable law.

      

       

      
        Collateral for Undrawn Letters of
Credit.  When any Event of Default, other than an Event of
Default described in subsection iii) or 0 of Section 0, has occurred
and is continuing, the Borrower shall, upon demand of the Bank, and when any
Event of Default described in subsection iii) or 0 of Section 0 has
occurred the Borrower shall, without notice or demand from the Bank, immediately
pay to the Bank the full amount of each Letter of Credit then outstanding, the
Borrower agreeing to immediately make such payment and acknowledging and
agreeing that the Bank would not have an adequate remedy at law for failure of
the Borrower to honor any such demand and that the Bank shall have the right to
require the Borrower to specifically perform such undertaking whether or not any
draws have been made under any such Letters of Credit.

      

       

      Miscellaneous.

       

      
        Non-Business
Day.  If any payment hereunder becomes due and payable on a day
which is not a Business Day, the due date of such payment shall be extended to
the next succeeding Business Day on which date such payment shall be due and
payable. In the case of any payment of principal falling due on a day which is
not a Business Day, interest on such principal amount shall continue to accrue
during such extension at the rate per annum then in effect, which accrued amount
shall be due and payable on the next scheduled date for the payment of
interest.

      

       

      
        No Waiver, Cumulative
Remedies.  No delay or failure on the part of the Bank or on
the part of the holder of the Obligations in the exercise of any power or right
shall operate as a waiver thereof or as an acquiescence in any default, nor
shall any single or partial exercise of any power or right preclude any other or
further exercise thereof or the exercise of any other power or right. The rights
and remedies hereunder of the Bank and of the holder of the Obligations are
cumulative to, and not exclusive of, any rights or remedies which any of them
would otherwise have.

      

       

      
        
           

        

        
          -40-

          
            

          

        

        
           

        

      

       

      
        Amendments,
Etc.  No amendment, modification, termination or waiver of any
provision of this Agreement or of any other Loan Document, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Bank. No notice to or demand on the
Borrower in any case shall entitle the Borrower to any other or further notice
or demand in similar or other circumstances.

      

       

      
        Costs
and Expenses; Indemnification.

      

       

      
        The
Borrower agrees to pay on demand the costs and expenses of the Bank in
connection with the negotiation, preparation, execution and delivery of this
Agreement, the other Loan Documents and the other
instruments and documents to be delivered hereunder or thereunder, and in
connection with the recording or filing of any of the foregoing, and in
connection with the transactions contemplated hereby or thereby, and in
connection with any consents hereunder or waivers or amendments hereto or
thereto, including the reasonable fees and expenses of counsel for the Bank with
respect to all of the foregoing (whether or not the transactions contemplated
hereby are consummated). The Borrower further agrees to pay to the Bank or any
other holder of the Obligations all costs and expenses (including court costs
and attorneys’ fees), if any, incurred or paid by the Bank or any other holder
of the Obligations in connection with any Default or Event of Default or in
connection with the enforcement of this Agreement or any of the other Loan
Documents or any other instrument or document delivered hereunder or thereunder
(including, without limitation, all such costs and expenses incurred in
connection with any proceeding under the United States Bankruptcy Code involving
the Borrower or any guarantor). The Borrower further agrees to indemnify the
Bank, and any security trustee, and their respective directors, officers and
employees, against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all expenses of
litigation or preparation therefor, whether or not the indemnified Person is a
party thereto) which any of them may pay or incur arising out of or relating to
any Loan Document or any of the transactions contemplated thereby or the direct
or indirect application or proposed application of the proceeds of any extension
of credit made available hereunder, other than those which arise from the gross
negligence or willful misconduct of the party claiming indemnification. The
Borrower, upon demand by the Bank at any time, shall reimburse the Bank for any
legal or other expenses incurred in connection with investigating or defending
against any of the foregoing except if the same is directly due to the gross
negligence or willful misconduct of the party to be indemnified. The obligations
of the Borrower under this Section shall survive the termination of this
Agreement.

      

      
        
           

        

        
          -41-

          
            

          

        

        
           

        

      

      
        The
Borrower unconditionally agrees to forever indemnify, defend and hold harmless,
and covenants not to sue for any claim for contribution against, the Bank for
any damages, costs, loss or expense, including without limitation, response,
remedial or removal costs, arising out of any of the following: xi) any
presence, release, threatened release or disposal of any hazardous or toxic
substance or petroleum by the Borrower or any Subsidiary or otherwise occurring
on or with respect to their Property, xii) the operation or violation of
any environmental law, whether federal, state, or local, and any regulations
promulgated thereunder, by the Borrower or any Subsidiary or otherwise occurring
on or with respect to their Property, xiii) any claim for personal injury
or property damage in connection with the Borrower or any Subsidiary or
otherwise occurring on or with respect to their Property, and xiv) the
inaccuracy or breach of any environmental representation, warranty or covenant
by the Borrower or any Subsidiary made herein or in any mortgage, deed of trust,
security agreement or any other instrument or document evidencing or securing
any indebtedness, obligations, or liabilities of the Borrower or any Subsidiary
owing to the Bank or setting forth terms and conditions applicable thereto or
otherwise relating thereto, except for damages arising from the Bank’s willful
misconduct or gross negligence. This indemnification shall survive the payment
and satisfaction of all Obligations owing to the Bank and the termination of
this Agreement, and shall remain in force beyond the expiration of any
applicable statute of limitations and payment or satisfaction in full of any
single claim under this indemnification. This indemnification shall be binding
upon the successors and assigns of the Borrower and shall inure to the benefit
of Bank and its directors, officers, employees, agents, and collateral trustees,
and their successors and assigns.

      

       

      
        Documentary
Taxes.  The Borrower agrees to pay on demand any documentary,
stamp or similar taxes payable in respect of this Agreement or any other Loan
Document, including interest and
penalties, in the event any such taxes are assessed, irrespective of when such
assessment is made and whether or not any credit is then in use or available
hereunder.

      

       

      
        Survival of
Representations.  All representations and warranties made
herein or in any of the other Loan Documents or in certificates given pursuant
hereto or thereto shall survive the execution and delivery of this Agreement and
the other Loan Documents, and shall continue in full force and effect with
respect to the date as of which they were made as long as any credit is in use
or available hereunder.

      

       

      
        Survival of
Indemnities.  All indemnities and other provisions relative to
reimbursement to the Bank of amounts sufficient to protect the yield of the Bank
with respect to the Loans, including, but not limited to, Sections 0 and 0 hereof, shall survive the
termination of this Agreement and the payment of the Notes.

      

       

      
        Notices.  Except as
otherwise specified herein, all notices hereunder shall be in writing
(including, without limitation, notice by telecopy) and shall be given to the
relevant party at its address or telecopier number set forth below, or such
other address or telecopier number as such party may hereafter specify by notice
to the other given by courier, by United States certified or registered mail, by
telecopy or by other telecommunication device capable of creating a written
record of such notice and its receipt. Notices hereunder shall be
addressed:

      

       

      
        	
                To
      the Borrower:

              	
                CTI
      Industries Corporation

                22160
      N. Pepper Road

                Lake
      Barrington, Illinois  60010

              
	 	Attention:
                      
                Telephone:

                Facsimile:

              	
                Stephen
      M. Merrick

                (847)
      382-1000

                (847)
      382-1219

              

      

       

      
        
           

        

        
          -42-

          
            

          

        

        
           

        

      

      

      
        	
                With
      a copy to:

              	
                Vanasco,
      Genelly & Miller

                33
      North LaSalle Street

                Suite
      2200

                Chicago,
      Illinois 60602

              
	 	      
                Attention:

                Telephone:

                Facsimile:

              	
                Gerald
      Miller, Esq.

                (312)
      786-5100

                (312) 786-5111

              
	 
      	 
      	 
	
                To
      the Lender:

              	
                Harris
      N.A.

                111
      West Monroe Street – 5W

                Chicago,
      Illinois 60603

                                    

              
	 	      
                Attention:

                Telephone:

                Facsimile:

              	
                Timothy
      J. Moran

                (312)
      461-2633

                (312)
      502-3922

              
	 
      	 
      	 
	
                With
      copy to:

              	
                McGuireWoods
      LLP

                77
      West Wacker Drive, Suite 4100

                Chicago,
      Illinois 60601

                              

              
	 	      
                Attention:

                Telephone:

                Facsimile:

              	
                Arthur
      B. Muir

                (312)
      750-3595

                (312)
      698-4568

              
	 
      	 
      	 

      

      Each such
notice, request or other communication shall be effective xv) if given by
telecopier, when such telecopy is transmitted to the telecopier number specified
in this Section and a confirmation of such telecopy has been received by the
sender, xvi) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or xvii) if given by any other means, when delivered
at the addresses specified in this Section; provided that any notice given
pursuant to Section 0 or Section 0 hereof shall be
effective only upon receipt.

       

      
        Construction.  The
provisions of this Agreement relating to Subsidiaries (other than restrictions
on the creation, formation, or acquisition thereof) shall only apply during such
times as the Borrower has one or more Subsidiaries. Nothing
contained herein shall be deemed or construed to permit any act or omission
which is prohibited by the terms of any of the other Loan Documents, the
covenants and agreements contained herein being in addition to and not in
substitution for the covenants and agreements contained in the other Loan
Documents.

      

       

      
        Headings.  Section
headings used in this Agreement are for convenience of reference only and are
not a part of this Agreement for any other purpose.

      

       

      
        Severability of
Provisions.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other
jurisdiction.

      

      
        
           

        

        
          -43-

          
            

          

        

        
           

        

      

       

      
        Counterparts.  This
Agreement may be executed in any number of counterparts, and by different
parties hereto on separate counterpart signature pages, and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.

      

       

      
        Binding Nature, Governing Law,
Etc.  This Agreement shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Bank and the
benefit of its successors and assigns, including any subsequent holder of the
Obligations. The Borrower may not assign its rights hereunder without the
written consent of the Bank. This Agreement constitutes the entire understanding
of the parties with respect to the subject matter hereof and any prior
agreements, whether written or oral, with respect thereto are superseded hereby.
This
Agreement and the rights and duties of the parties hereto shall be governed by,
and construed in accordance with, the internal laws of the State of Illinois
without regard to principles of conflicts of laws.

      

       

      
        Submission to Jurisdiction; Waiver
of Jury Trial.  The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Northern District of
Illinois and of any Illinois State court sitting in the City of Chicago for
purposes of all legal proceedings arising out of or relating to this Agreement,
the other Loan Documents or the transactions contemplated hereby or thereby. The
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. The
Borrower and the Bank each hereby irrevocably waive any and all right to trial
by jury in any legal proceeding arising out of or relating to any Loan Document
or the transactions contemplated thereby.

      

       

      
        USA Patriot Act. The Bank hereby
notifies the Borrower that pursuant to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to
obtain, verify, and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow the Bank to identify the Borrower in accordance with the
Act.

      

       

      [Signature
Page to Follow]

      
        
           

        

        
          -44-

          
            

          

        

        
           

        

      

      This
Credit Agreement is entered into between us for the uses and purposes
hereinabove set forth as of the date first above written.

       

      
        
          	 
      	
                  “Borrower”

                
	 
      	 
      
	 
      	
                  CTI
      Industries Corporation

                
	 
      	 
      	 
      
	 
      	
                  By:

                	
                  /s/ Stephen M. Merrick

                
	 	 	Executive
      Vice-President and Chief Financial Officer
	 
      	
                   

                
	 
      	 
      	 
      
	 
      	
                  “Bank”

                
	 
      	 
      
	 
      	
                  Harris
      N.A.

                
	 
      	 
      
	 
      	
                  By:

                	
                  /s/ Timothy J. Moran

                
	 
      	 
      	
                  Senior
      Vice-President

                

        

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      Exhibit A

       

      Term
Loan Note

       

      
        	 
      	
                Chicago,
      Illinois

              
	
                $[_______________]

              	
                [_______________,
      2010]

              

      

       

      For
Value Received, the
undersigned, CTI Industries Corporation, an
Illinois corporation (the “Borrower”), hereby promises
to pay to the order of Harris
N.A. (the “Bank”) at
its office at 111 West Monroe Street, Chicago, Illinois, the principal sum
of [_______________________ and ___/100 Dollars
($___________)], payable
in principal installments in the amounts and at the times set forth in
Section 0 of the Credit Agreement hereinafter mentioned, with a final
installment of all principal not sooner paid due and payable on the Term Loan
Final Maturity Date.

       

      This Note
evidences the Term Loan made to the Borrower by the Bank under the Term Loan
Commitment provided for under that certain Credit Agreement dated as of [___________], 2010, between
the Borrower and the Bank (said Credit Agreement, as the same may be amended,
modified or restated from time to time, being referred to herein as the “Credit Agreement”), and the
Borrower hereby promises to pay interest at the office described above on the
Term Loan evidenced hereby at the rates and at the times and in the manner
specified therefor in the Credit Agreement.

       

      This Note
is issued by the Borrower under the terms and provisions of the Credit Agreement
and is secured by,
among other things, the Collateral Documents, and this Note and the holder
hereof are entitled to all of the benefits and security provided for thereby or
referred to therein, to which reference is hereby made for a statement thereof.
This Note may be declared to be, or be and become, due prior to its expressed
maturity, voluntary prepayments may be made hereon, and certain prepayments are
required to be made hereon, all in the events, on the terms and with the effects
provided in the Credit Agreement. All capitalized terms used herein without
definition shall have the same meanings herein as such terms are defined in the
Credit Agreement.

       

      The
Borrower hereby promises to pay all costs and expenses (including attorneys’
fees) suffered or incurred by the holder hereof in collecting this Note or
enforcing any rights in any collateral therefor. The Borrower hereby waives
presentment for payment and demand. This
Note shall be construed in accordance with, and governed by, the internal laws
of the State of Illinois without regard to principles of conflicts of
laws.

       

      
        
          
            
              
                
                  	 
      	
                          CTI
      Industries Corporation

                        
	 
      	 
      	 
      
	 
      	
                          By:

                        	   
        
	 
      	
                          Name:

                        	  
        
	 
      	
                          Title:

                        	  
        

                

              

            

          

        

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      Exhibit B

       

      Mortgage
Loan Note

       

      Chicago,
Illinois

      
        	
                $[_______________]

              	
                [_______________,
      2010]

              

      

      

       

      For
Value Received, the
undersigned, CTI Industries Corporation, an Illinois corporation
(the “Borrower”),
hereby promises to pay to the order of Harris
N.A. (the “Bank”) at
its office at 111 West Monroe Street, Chicago, Illinois, the principal sum
of [_______________________ and ___/100 Dollars
($___________)], payable
in principal installments in the amounts and at the times set forth in
Section 1.2 of the Credit Agreement hereinafter mentioned, with a final
installment of all principal not sooner paid due and payable on the Mortgage
Loan Final Maturity Date.

       

      This Note
evidences the Mortgage Loan made to the Borrower by the Bank under the Mortgage
Loan Commitment provided for under that certain Credit Agreement dated as of
[___________], 2010,
between the Borrower and the Bank (said Credit Agreement, as the same may be
amended, modified or restated from time to time, being referred to herein as the
“Credit Agreement”),
and the Borrower hereby promises to pay interest at the office described above
on the Mortgage Loan evidenced hereby at the rates and at the times and in the
manner specified therefor in the Credit Agreement.

       

      This Note
is issued by the Borrower under the terms and provisions of the Credit Agreement
and is secured by,
among other things, the Collateral Documents, and this Note and the holder
hereof are entitled to all of the benefits and security provided for thereby or
referred to therein, to which reference is hereby made for a statement thereof.
This Note may be declared to be, or be and become, due prior to its expressed
maturity, voluntary prepayments may be made hereon, and certain prepayments are
required to be made hereon, all in the events, on the terms and with the effects
provided in the Credit Agreement. All capitalized terms used herein without
definition shall have the same meanings herein as such terms are defined in the
Credit Agreement.

       

      The
Borrower hereby promises to pay all costs and expenses (including attorneys’
fees) suffered or incurred by the holder hereof in collecting this Note or
enforcing any rights in any collateral therefor. The Borrower hereby waives
presentment for payment and demand. This
Note shall be construed in accordance with, and governed by, the internal laws
of the State of Illinois without regard to principles of conflicts of
laws.

       

      
        
          
            
              
                	 
      	
                        CTI
      Industries Corporation

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	  
        
	 
      	
                        Name:

                      	 
        
	 
      	
                        Title:

                      	 
        

              

            

          

        

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      Exhibit C

       

      Equipment Note

       

      
        	 
      	
                Chicago,
      Illinois

              
	
                $2,500,000.00

              	
                [_______________,
      ________]

              

      

       

      For
Value Received, the
undersigned, CTI Industries Corporation, an Illinois corporation
(the “Borrower”),
hereby promises to pay to the order of Harris
N.A. (the “Bank”) at
its office at 111 West Monroe Street, Chicago, Illinois, the principal sum
of the lesser of (i) Two
Million Five Hundred Thousand and no/100 Dollars ($2,500,000.00) and
(ii) the aggregate principal balance of Equipment Loans advanced to the
Borrower by the Bank under the Equipment Loan Commitment provided for in the
Credit Agreement hereafter mentioned, payable in principal installments in the
amounts and at the times set forth in Section 1.3 of the Credit Agreement
hereinafter mentioned, with a final installment of all principal not sooner paid
due and payable on the Equipment Loan Final Maturity Date.

       

      This Note
evidences Equipment Loans made and to be made to the Borrower by the Bank under
the Equipment Loan Commitment provided for under that certain Credit Agreement
dated as of [___________], 2010, between
the Borrower and the Bank (said Credit Agreement, as the same may be amended,
modified or restated from time to time, being referred to herein as the “Credit Agreement”), and the
Borrower hereby promises to pay interest at the office described above on such
Equipment Loans evidenced hereby at the rates and at the times and in the manner
specified therefor in the Credit Agreement.

       

      This Note
is issued by the Borrower under the terms and provisions of the Credit Agreement
and is secured by, among other things, the Collateral Documents, and this Note
and the holder hereof are entitled to all of the benefits and security provided
for thereby or referred to therein, to which reference is hereby made for a
statement thereof. This Note may be declared to be, or be and become, due prior
to its expressed maturity, voluntary prepayments may be made hereon, and certain
prepayments are required to be made hereon, all in the events, on the terms and
with the effects provided in the Credit Agreement. All capitalized terms used
herein without definition shall have the same meanings herein as such terms are
defined in the Credit Agreement.

       

      The
Borrower hereby promises to pay all costs and expenses (including attorneys’
fees) suffered or incurred by the holder hereof in collecting this Note or
enforcing any rights in any collateral therefor. The Borrower hereby waives
presentment for payment and demand. This
Note shall be construed in accordance with, and governed by, the internal laws
of the State of Illinois without regard to principles of conflicts of
laws.

       

      
        
          
            
              
                	 
      	
                        CTI
      Industries Corporation

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	 
        
	 
      	
                        Name:

                      	 
        
	 
      	
                        Title:

                      	 
        

              

            

          

        

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      Exhibit D

       

      Revolving Note

       

      
        	 
      	
                Chicago,
      Illinois

              
	
                $[_______________]

              	
                [_______________,
      ________]

              

      

       

      On the
Revolving Credit Termination Date, for value received, the undersigned, CTI
Industries
Corporation, an Illinois corporation (the “Borrower”), hereby promises
to pay to the order of Harris
N.A. (the “Bank”) at
its office at 111 West Monroe Street, Chicago, Illinois, the principal sum of
(i) Nine
Million and no/100 Dollars ($9,000,000.00), or (ii) such lesser
amount as may at the time of the maturity hereof, whether by acceleration or
otherwise, be the aggregate unpaid principal amount of all Revolving Loans owing
from the Borrower to the Bank under the Revolving Credit provided for in the
Credit Agreement hereinafter mentioned.

       

      This Note
evidences Revolving Loans made and to be made to the Borrower by the Bank under
the Revolving Credit provided for under that certain Credit Agreement dated as
of [___________], 2010,
between the Borrower and the Bank (said Credit Agreement, as the same may be
amended, modified or restated from time to time, being referred to herein as the
“Credit Agreement”),
and the Borrower hereby promises to pay interest at the office described above
on such Revolving Loans evidenced hereby at the rates and at the times and in
the manner specified therefor in the Credit Agreement.

       

      This Note
is issued by the Borrower under the terms and provisions of the Credit Agreement
and is secured by, among other things, the Collateral Documents, and this Note
and the holder hereof are entitled to all of the benefits and security provided
for thereby or referred to therein, to which reference is hereby made for a
statement thereof. This Note may be declared to be, or be and become, due prior
to its expressed maturity, voluntary prepayments may be made hereon, and certain
prepayments are required to be made hereon, all in the events, on the terms and
with the effects provided in the Credit Agreement. All capitalized terms used
herein without definition shall have the same meanings herein as such terms are
defined in the Credit Agreement.

       

      The
Borrower hereby promises to pay all costs and expenses (including attorneys’
fees) suffered or incurred by the holder hereof in collecting this Note or
enforcing any rights in any collateral therefor. The Borrower hereby waives
presentment for payment and demand. This
Note shall be construed in accordance with, and governed by, the internal laws
of the State of Illinois without regard to principles of conflicts of
laws.

       

      
        
          
            
              
                	 
      	
                        CTI
      Industries Corporation

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	   
      
	 
      	
                        Name:

                      	     
      
	 
      	
                        Title:

                      	    
      

              

            

          

        

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      Exhibit E

       

      Applicable
Rate

       

      
        
          
            
              
                
                  
                    
                      
                        	
                                Level

                              	 	
                                Senior

                                Leverage Ratio

                              	 	
                                LIBOR 

                                Margin

                              	 	 	
                                Base Rate

                                Margin

                              	 	 	
                                Commitment

                                Fee

                              	 	 	
                                Letter of

                                Credit Fee

                              	 
	
                                I

                              	 	
                                Greater
      than or equal to

                                3.25
      to 1.00

                              	 	 	3.75	%	 	 	1.25	%	 	 	0.50	%	 	 	2.50	%
	
                                II

                              	 	
                                Less
      than 3.25 to 1.00

                                but
      greater than

                                2.25
      to 1.00

                              	 	 	3.25	%	 	 	0.75	%	 	 	0.25	%	 	 	2.25	%
	
                                III

                              	 	
                                Less
      than or equal to

                                2.25
      to 1.00

                              	 	 	3.00	%	 	 	0.50	%	 	 	0.25	%	 	 	2.00	%

                      

                    

                  

                

              

            

          

        

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      Exhibit F

       

      Borrowing Base Certificate

       

      To:         Harris
N.A.

       

      Pursuant
to the terms of the Credit Agreement dated as of April 29, 2010, between CTI
Industries Corporation, an Illinois corporation, and you (the “Credit Agreement”), we
submit this Borrowing Base Certificate to you and certify that the information
set forth below and on any attachments to this certificate is true, correct and
complete as of the date of this certificate.

       

      
        	
                I.

              	
                Borrowing
      Base

              

      

       

      
        	
                A.

              	
                Accounts
      in Borrowing Base

              

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	 	 	 
	
                                    1.           
      Gross Accounts

                                  	 
      	 
      
	 
      	 
      	 
      
	
                                    2.           
      Less

                                  	 
      	 
      
	 
      	 
      	 
      
	
                                    (a)           Owed
      by an account debtor who is not located within the U.S.)

                                  	 
        	 
      
	 
      	 
      	 
      
	
                                    (b)        
        Owed by an account debtor who is a Subsidiary, Affiliate,
      shareholder, director, officer, or employee

                                  	 
        	 
      
	 
      	 
      	 
      
	
                                    (c)           Owed
      by an account debtor who is in an insolvency or reorganization
      proceeding

                                  	 
        	 
      
	 
      	 
      	 
      
	
                                    (d)           Unpaid
      more than ninety (90) days after the original invoice date

                                  	 
        	 
      
	 
      	 
      	 
      
	
                                    (e)           Ineligible
      because of 25% taint factor

                                  	 
        	 
      
	 
      	 
      	 
      
	
                                    (f)           Otherwise
      ineligible

                                  	 
      	 
      
	 
      	 
      	 
      
	
                                    Total
      Deductions

                                    (sum
      of lines I.A.2(a) through I.A.2(f))

                                  	 
      	 
      
	 
      	 
      	 
      
	
                                    3.           
      Eligible Accounts (line I.A.1 minus I.A.2)

                                  	 
      	 
      
	 
      	 
      	 
      
	
                                    4.            
      Accounts in Borrowing Base

                                    (line
      I.A.3 x 0.85)

                                  	 
      	 
      

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

      
        	
                B.

              	
                Inventory
      in Borrowing Base

              

      

       

      
        
          
            
              
                
                  
                    
                      	
                              1.          
      Gross inventory of Finished Goods and Raw 

                              Materials

                            	 
      	 
      
	 
      	 
      	 
      
	
                              2.           Less

                            	 
      	 
      
	 
      	 
      	 
      
	
                              (a)           Finished
      Goods and Raw Materials not located at approved locations

                            	   
      	 
      
	 
      	 
      	 
      
	
                              (b)           Obsolete,
      slow moving, or not merchantable

                            	   
      	 
      
	 
      	 
      	 
      
	
                              (c)           Otherwise
      ineligible

                            	 
        	 
      
	 
      	 
      	 
      
	
                              Total Deductions

                              (sum
      of lines I.B.2(a) through I.B.2(c))

                            	 
      	  
      
	 
      	 
      	 
      
	
                              3.           Eligible
      Inventory (line I.B.1 minus line I.B.2)

                            	 
      	 
      
	 
      	 
      	 
      
	
                              4.          
      Eligible Inventory included in Borrowing Base determination (line
      I.B.3 x 0.60)

                            	 
      	 
      

                    

                  

                

              

            

          

        

      

       

      
        	
                C.

              	
                Inventory
      in Borrowing Base

              

      

      
        
          
            
              	 
      	 
      	 
      
	
                      1.          
      Inventory Cap $5,000,000

                    	 
      	  
      
	 
      	 
      	 
      
	
                      2.          
      Eligible Inventory Line I.B.4

                    	 
      	 
        
	 
      	 
      	 
      
	
                      3.          
      Eligible Inventory in Borrowing Base

                      (Lesser
      of lines I.C.1 and I.C.2)

                    	 
      	 
        

            

          

        

      

       

      
        	
                D.

              	
                Total
      Borrowing Base

              

      

      
        
          
            	 	 	 
	
                    (sum
      of lines I.A.4 and I.C.3)

                  	 
      	 
        

          

        

      

       

      
        	
                E.

              	
                Revolving
      Credit Advances

              

      

      
        
          
            
              
                
                  
                    	 	 	 
	
                            1.          
      Revolving Loans

                          	 
      	 
      
	 	 	 
	
                            2.          
      Letters of Credit

                          	 
      	 
      
	 	 	 
	
                            Total
      Revolving Credit Outstanding

                            (line
      I.E.1 plus line I.E.2)

                          	 
      	 
      

                  

                

              

            

          

        

      

       

      
        
          	
                  F.

                	
                  Unused
      Availability

                
	 	 

        

      

      
        	
                (line
      I.D minus I.E)

              	 
      	 
      

      

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

      II.           Accounts
Receivable Aging

       

      
        
          
            
              
                
                  	
                          General
      Ledger Activity

                        	
                          Accounts
      Receivable Aging

                        
	 	 	 	 
	
                          A/R
      at _____________

                        	
                          $_________

                        	
                          Current

                        	
                          _____________ 
      

                        
	 	 	 	 
	
                          Add _________ 
      Sales

                        	
                          $_________                      

                        	
                          30-60
      Days

                        	
                          _____________

                        
	 	 	 	 
	
                          Less _________
      Cash

                        	
                          (_________)

                        	
                          60-90
      Days

                        	
                          _____________

                        
	 	 	 	 
	
                          Less 
      _________________

                        	
                          (_________)

                        	
                          Over
      90 Days

                        	
                          _____________

                        
	 	 	 	 
	
                          A/R
      at ____________

                        	
                          $ ________

                        	
                           Total

                        	
                          $___________

                        

                

              

            

          

        

      

       

      
        	
                III.

              	
                Accounts
      Payable Aging

              

      

       

      Current          
   _________________

      
      

      30-60
Days        _________________

       

      60-90
Days        _________________

       

      Total _________________

       

      
        	
                 
      

              	
                IV.Withholding
      taxes have been paid through ______________________(date)

              

      

       

      Dated as
of this ____ day of __________________, ____.

       

      
        
          
            
              
                	 
      	
                        CTI
      Industries Corporation

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	 
        
	 
      	
                        Name:

                      	 
        
	 
      	
                        Title:

                      	 
        

              

            

          

        

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      Exhibit G

       

      Compliance Certificate

       

      To:          Harris
N.A.

       

      This
Compliance Certificate is furnished to Harris N.A. (the “Bank”) pursuant to that
certain Credit Agreement dated as of April 29, 2010, between CTI Industries
Corporation, an Illinois corporation (the “Borrower”), and the Bank (the
“Credit Agreement”).
Unless otherwise defined herein, the terms used in this Compliance Certificate
have the meanings ascribed thereto in the Credit Agreement.

       

      The
Undersigned hereby certifies that:

       

      1.           I
am the duly elected _____________________________________ of the
Borrower;

       

      2.           I
have reviewed the terms of the Credit Agreement and I have made, or have caused
to be made under my supervision, a detailed review of the transactions and
conditions of the Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;

       

      3.           The
examinations described in paragraph 2 did not disclose, and I have no
knowledge of, the existence of any condition or the occurrence of any event
which constitutes a Default or Event of Default during or at the end of the
accounting period covered by the attached financial statements or as of the date
of this Certificate, except as set forth below;

       

      4.           The
financial statements required by Section 0 of the Credit Agreement and
being furnished to you concurrently with this certificate are, to the best of my
knowledge, true, correct and complete as of the dates and for the periods
covered thereby; and

       

      5.           The
Attachment hereto sets forth financial data and computations evidencing the
Borrower’s compliance with certain covenants of the Credit Agreement, all of
which data and computations are, to the best of my knowledge, true, complete and
correct and have been made in accordance with the relevant Sections of the
Credit Agreement.

       

      Described
below are the exceptions, if any, to paragraph 3 by listing, in detail, the
nature of the condition or event, the period during which it has existed and the
action which the Borrower has taken, is taking, or proposes to take with respect
to each such condition or event:

       

      _________________________________________________________________________________________

      _________________________________________________________________________________________

      _________________________________________________________________________________________

      _________________________________________________________________________________________

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      The
foregoing certifications, together with the computations set forth in the
Attachment hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this _________ day of
__________________, ___.

       

      
        
          
            
              
                	 
      	
                        CTI
      Industries Corporation

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	 
        
	 
      	
                        Name:

                      	 
        
	 
      	
                        Title:

                      	 
        

              

            

          

        

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      Attachment to Compliance Certificate

       

      CTI
Industries Corporation

       

      Compliance
Calculations for Credit Agreement

       

      Dated as
of ________________

       

      Calculations
as of _____________, ___

       

      
        
          
            
              	 
      

            

          

        

        

          
            
               

            

            
              
              

              
                

              

            

            
               

            

          

Schedule 0

      

       

      Subsidiaries

       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    Name

                                  	
                                    Jurisdiction
      of 

                                    Incorporation 

                                  	 	
                                    Percentage
      

                                    Ownership

                                  	 
	 	 	 	 	 	 
	
                                    CTI
      Helium, Inc.

                                  	
                                    Illinois

                                  	 	 	
                                     

                                  	 
	 	 	 	 	 	 
	
                                    CTI
      Balloons Limited

                                  	
                                    England

                                  	 	 	
                                    

                                      100%

                                    

                                  	 
	 	 	 	 	 	 
	
                                    Flexo
      Universal S.A. de C.V.

                                  	
                                    Mexico

                                  	 	 	
                                    

                                      100%

                                    

                                  	 
	 	 	 	 	 	 
	
                                    CTI
      Europe

                                  	
                                    Germany

                                  	 	 	
                                    

                                      98.5%

                                    

                                  	 
	 	 	 	 	 	 
	
                                    CTI
      Mexico S.A. de C.V.

                                  	
                                    Mexico
      - inactive

                                  	 	 	

                                    52% 

                                  	 
	 	 	 	 	 	 
	
                                    CTF
      International S.A. de C.V.

                                  	
                                    Mexico
      - inactive

                                  	 	 	  	 

                          

                        

                      

                    

                  

                

              

            

          

        

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      Schedule 8.7

       

      Existing
Intercompany Debt

      

      [to be
attached]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00173-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00173-of-00352.parquet"}]]