Document:

EXHIBIT 10.1

 

THIS WARRANT CONVERSION NOTE WAS
ORIGINALLY ISSUED ON AUGUST 10, 2017, AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
ILLINOIS SECURITIES LAW OF 1953, AS AMENDED, AND IT MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT OR AN OPINION FROM COUNSEL SATISFACTORY TO THE BORROWER THAT SUCH REGISTRATION IS NOT REQUIRED. The transfer of such
security is subject to the conditions specified herein.

 

This Warrant Conversion Note is subject
to the terms of a Subordination and Intercreditor Agreement dated as of July 17, 2012 (as amended, restated or supplemented
from time to time, the “Subordination Agreement”) between BMO Private Equity (U.S.), Inc., a Delaware corporation,
and BMO Harris Bank N.A. (formerly known as Harris N.A.).

 

SENIOR SECURED SUBORDINATED WARRANT CONVERSION
NOTE

 

	Dated:  August 17, 2017	$797,881.31
	Effective Date:  August 10, 2017	 

 

FOR VALUE RECEIVED, CTI
Industries Corporation, an Illinois corporation (referred to herein as the “Borrower”), hereby promises to pay
to the order of BMO Private Equity (U.S.), Inc., a Delaware corporation, or its assignee (the “Holder”), the
principal amount of Seven Hundred Ninety-Seven Thousand Eight Hundred Eighty-One and 31/100 Dollars ($797,881.31) (the “Original
Principal Amount”), together with interest thereon calculated from the effective date hereof (the “Date of Issuance”),
in accordance with the provisions of this instrument (this “Warrant Conversion Note”). For purposes of this
Warrant Conversion Note, the term “Principal Balance” shall mean an amount equal to (a) the sum of (i) the
Original Principal Amount plus (ii) the aggregate amount of Interest (as defined below) capitalized and added to principal
under this Warrant Conversion Note from time to time minus (b) all payments of principal made by the Borrower from
time to time pursuant to the terms of this Warrant Conversion Note.

 

Reference is hereby made
to that certain Note and Warrant Purchase Agreement dated as of July 17, 2012 (as amended, restated or otherwise modified
from time to time, the “Purchase Agreement”), by and between the Borrower and the Holder. This Warrant Conversion
Note was issued pursuant to the terms of the Warrant. This Warrant Conversion Note is the “Warrant Conversion Note”
referred to in the Purchase Agreement. The Purchase Agreement contains terms governing the rights of the Holder of this Warrant
Conversion Note and all provisions of the Purchase Agreement are hereby incorporated herein in full by reference. Except as otherwise
indicated herein, capitalized terms used in this Warrant Conversion Note have the same meanings set forth in the Purchase Agreement.

 

     

     

    

 

		1.	Payment of Interest. Except as otherwise expressly provided herein, the Principal Balance
of this Warrant Conversion Note shall bear interest (computed on the basis of actual days elapsed in a 360-day year) at the rate
of eleven and 50/100 percent (11.50%) per annum (“Interest”). Interest accruing on the Principal Balance of
this Warrant Conversion Note shall be compounded daily and capitalized as principal on each day during the term hereof and shall
be payable in accordance with the payment schedule on Exhibit A attached hereto and made a part hereof (assuming for
purposes of Exhibit A that no portion of the Principal Balance of this Warrant Conversion Note is prepaid and that
this Warrant Conversion Note is not accelerated prior to the Maturity Date). The Interest accruing on the Principal Balance of
this Warrant Conversion Note shall be payable to the Holder in cash upon the payment in full of the entire outstanding Principal
Balance of this Warrant Conversion Note (whether on the Maturity Date or as a result of the acceleration of the maturity thereof),
or if a prepayment of this Warrant Conversion Note is made, on the Principal Balance prepaid, and, if payment in full is not paid
when due, thereafter on demand. Unless prohibited under applicable law, any accrued interest which is not paid on the date on which
it is due and payable shall bear interest at the same rate at which interest is then accruing on the Principal Balance of this
Note and, if applicable, shall be compounded daily and capitalized as principal on each day until such interest is paid. Any accrued
interest which for any reason has not theretofore been paid shall be paid in full on the date on which the final principal payment
on this Note is made. Interest shall accrue on any payment due under this Note until such time as payment therefor is actually
delivered to the Holder. Notwithstanding anything to the contrary contained herein or in the Purchase Agreement, while any Event
of Default exists or after acceleration, the Borrower shall pay interest (after as well as before entry of judgment thereon to
the extent permitted by law) on the Principal Balance of the Warrant Conversion Note at the Default Rate and while in effect such
interest accruing on the Principal Balance of this Warrant Conversion Note shall be compounded daily and capitalized as principal
on each day.

 

		2.	Payment of Principal on Warrant Conversion Note.

 

		(a)	Scheduled Payment. The Principal Balance of this Warrant Conversion Note, plus accrued and
unpaid interest, shall be payable in full on January 18, 2018 (the “Maturity Date”).

 

		(b)	Optional Prepayments. Subject to the terms of Section 2(c) below, the Borrower,
at its option, may prepay all or any portion of this Warrant Conversion Note on any scheduled quarterly payment date set forth
in the Note (as defined in the Purchase Agreement) at a prepayment price of one hundred percent (100%) of the Principal Balance
to be prepaid, plus accrued and unpaid interest to the prepayment date.

 

		(c)	Prepayment Minimum. The Borrower, at its option, may at any time and from time to time prepay
all or any portion of the Principal Balance of this Warrant Conversion Note, in minimum increments of $250,000, plus accrued and
unpaid interest to the prepayment date. Except as provided herein, this Warrant Conversion Note may not be voluntarily prepaid
by the Borrower.

 

     

     

    

 

		(d)	Notice of Prepayments. The Borrower shall give notice (which shall be irrevocable) to the
Holder of this Warrant Conversion Note of each prepayment not later than 1:00 p.m. (Chicago time) on the Business Day that
is not less than two (2) Business Days preceding the date of prepayment, specifying the aggregate Principal Balance to be
prepaid and the prepayment date. Once any such notice has been given, the Principal Balance specified in such notice, together
with all accrued and unpaid interest on the amount of each such prepayment to the date of payment shall become due and payable
on such date of payment.

 

		(e)	Mandatory Prepayments.

 

		(i)	In the event of a Change of Control, the Borrower will, at least thirty (30) days and not more
than sixty (60) days prior to such Change of Control, give written notice thereof to the holder of this Warrant Conversion Note,
which shall contain a written irrevocable notice that the Borrower will prepay (a “Prepayment Notice”), by a
date (the “Prepayment Date”) specified in such notice (which date shall be on or prior to the effective date
of the Change of Control), all of the Obligations under the Warrant Conversion Note held by the holder in full (and not in part)
in cash. Such notice may state that the Borrower’s prepayment is conditioned upon the consummation of such Change of Control.
The Borrower shall pay to the holder the outstanding principal amount of the Warrant Conversion Note, together with all accrued
and unpaid interest thereon.

 

		(ii)	Any notice by the Borrower to prepay the Warrant Conversion Note, and any subsequent prepayment
thereof pursuant to this Section 2(e), shall be accompanied by an officer’s certificate (A) stating the principal amount
of the Warrant Conversion Note to be prepaid, (B) stating the Prepayment Date, (C) stating the accrued interest on the Warrant
Conversion Note to the Prepayment Date to be prepaid, (D) certifying that the conditions of this Section 2(e) have been fulfilled,
and (E) specifying the nature of the Change of Control, the transactions or proposed transactions resulting in such Change of Control
and the date or proposed date of the occurrence of such Change of Control.

 

		3.	Payment Schedule. Set forth as Exhibit A attached hereto is a schedule which
reflects the amount of Interest which accrues and shall be capitalized and added to the Principal Balance pursuant to Section 1
above and the Principal Balance of this Warrant Conversion Note at the beginning and at the end of each day during the term of
this Warrant Conversion Note (assuming for purposes of Exhibit A that no portion of the Principal Balance of this Warrant
Conversion Note is prepaid and that this Warrant Conversion Note is not accelerated prior to the Maturity Date). Upon any voluntary
or mandatory prepayment of the Principal Balance, the Interest reflected on Exhibit A attached hereto shall be recomputed
based upon the remaining Principal Balance. The Holder shall amend Exhibit A hereto to reflect such recomputation and
deliver the same to the Borrower, and such amended Exhibit A shall constitute rebuttable presumptive evidence of the
Principal Balance owing and unpaid on this Warrant Conversion Note and the interest accruing and payable thereafter under this
Warrant Conversion Note. The failure to amend Exhibit A hereto or to deliver the same to the Borrower shall not, however,
affect the obligations of the Borrower to pay the Principal Balance and all accrued and unpaid interest on this Warrant Conversion
Note.

 

     

     

    

 

		4.	Transfer and Exchange; Replacement; Cancellation.

 

		(a)	Transfer and Exchange.

 

		(i)	Subject to the transfer conditions referred to in this Section 4 and in the legends
endorsed hereon, this Warrant Conversion Note and all rights hereunder are transferable by the Holder, in whole or in part, without
charge to the Holder, upon surrender of this Warrant Conversion Note with a properly executed assignment in form and substance
reasonably acceptable to the Borrower at the principal office of the Borrower.

 

		(ii)	Upon surrender of this Warrant Conversion Note for transfer or for exchange, the Borrower, at its
expense, will (subject to the conditions set forth herein) execute and deliver in exchange therefor a new Warrant Conversion Note
or Warrant Conversion Notes, as the case may be, as requested by the Holder or transferee, which aggregates the unpaid Principal
Balance of such Warrant Conversion Note, issued as the Holder or such transferee may request, dated so that there will be no gain
or loss of interest on such surrendered Warrant Conversion Note and otherwise of like tenor. The issuance of new Warrant Conversion
Notes shall be made without charge to the Holder(s) of the surrendered Warrant Conversion Note for any issuance tax in respect
thereof or other cost incurred by the Borrower in connection with such issuance.

 

		(b)	Replacement. Upon receipt of evidence reasonably satisfactory to the Borrower (an affidavit
of the Holder of this Warrant Conversion Note shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation
of this Warrant Conversion Note and, in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory
to the Borrower (provided that if the Holder is a financial institution or other institutional investor, its own agreement shall
be satisfactory), or, in the case of any such mutilation, upon the surrender of this Warrant Conversion Note, the Borrower shall
(at its expense) execute and deliver, in lieu thereof, a new Warrant Conversion Note of the same class and representing the same
rights represented by such lost, stolen, destroyed or mutilated Warrant Conversion Note dated so that there will be no loss of
interest on this Warrant Conversion Note.

 

     

     

    

 

		5.	Payments. All payments to be made to the Holder of this Warrant Conversion Note shall be
made by wire transfer to the Holder in lawful money of the United States of America in same-day available funds. Any payment received
by the Holder of this Warrant Conversion Note after 1:00 p.m. (Chicago time) on any day will be deemed to have been received
on the next following Business Day.

 

		6.	Place of Payment. Payments of principal, interest and other amounts shall be made by wire
transfer of immediately available funds to the following account of the Holder hereof:

 

ABA No.: 071 000 288

Account No.: 181-570-3

Account Name: BMO Private Equity (U.S.), Inc.

Bank: BMO Harris Bank N.A., Chicago, Illinois

Attention: Jason Swanson

 

or to such other account or to the attention
of such other Person as specified by the Holder in a prior written notice to either Borrower.

 

		7.	Business Days. If any payment is due, or any time period for giving notice or taking action
expires, on a day which is not a Business Day, the payment shall be due and payable on, and the time period shall automatically
be extended to, the next Business Day immediately following, and interest shall continue to accrue at the required rate hereunder
until any such payment is made.

 

		8.	Governing Law. This Warrant Conversion Note shall be governed and construed in accordance
with the domestic laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other
than the State of Illinois.

 

		9.	Liabilities. In furtherance and not in limitation of the rights and remedies of the Holder
of this Warrant Conversion Note hereunder or at law, the Holder of this Warrant Conversion Note may proceed under this Warrant
Conversion Note against the Borrower in its absolute and sole discretion for any of the liabilities of the Borrower under this
Warrant Conversion Note or any other liability or obligation of the Borrower arising hereunder.

 

		10.	Events of Default. Upon the occurrence of any “Event of Default,” as described
and specified in the Purchase Agreement, the Holder shall have all of the rights and remedies in accordance with, and as provided
by, the terms hereof and the Purchase Agreement. In addition, the Holder shall be entitled to recover from the Borrower any and
all costs and expenses, including reasonable attorneys’ fees and court costs, incurred in enforcing its rights hereunder.

 

     

     

    

 

		11.	Usury Laws. It is the intention of the Borrower and the Holder of this Warrant Conversion
Note to conform strictly to all applicable usury laws now or hereafter in force, and any interest payable under this Warrant Conversion
Note shall be subject to reduction to an amount not in excess of the maximum legal amount allowed under the applicable usury laws
as now or hereafter construed by the courts having jurisdiction over such matters. If the maturity of this Warrant Conversion Note
is accelerated by reason of an election by the Holder hereof resulting from an Event of Default, voluntary prepayment by the Borrower
or otherwise, then the earned interest may never include more than the maximum amount permitted by law, computed from the date
hereof until payment, and any interest in excess of the maximum amount permitted by law shall be canceled automatically and, if
theretofore paid, shall at the option of the Holder hereof either be rebated to the Borrower or credited on the Principal Balance
of this Warrant Conversion Note, or if this Warrant Conversion Note has been paid, then the excess shall be rebated to the Borrower.
The aggregate of all interest (whether designated as interest, service charges, points or otherwise) contracted for, chargeable,
or receivable under this Warrant Conversion Note shall under no circumstances exceed the maximum legal rate upon the Principal
Balance of this Warrant Conversion Note remaining unpaid from time to time. If such interest does exceed the maximum legal rate,
it shall be deemed a mistake and such excess shall be canceled automatically and, if theretofore paid, at the option of the Holder
hereof either be rebated to the Borrowers or credited on the Principal Balance of this Warrant Conversion Note, or if this Warrant
Conversion Note has been repaid, then such excess shall be rebated to the Borrower.

 

		12.	Warrant Conversion Note in Registered Form. This Warrant Conversion Note is in registered
form within the meaning of that term under Section 163(f) of the Code. The Borrower shall keep at its principal executive
office a register in which the Borrower shall provide for the registration and transfer of the Warrant Conversion Note. The Holder
of this Warrant Conversion Note, at such Holder’s option, may in person or by duly authorized attorney surrender this Warrant
Conversion Note for exchange at the principal office of the Borrower, accompanied by a written opinion of legal counsel who shall
be reasonably satisfactory to the Borrower, addressed to the Borrower and reasonably satisfactory in form and substance to the
Borrower’s counsel, to the effect that the proposed exchange may be effected without registration under the Securities Act
of 1933, as amended, or under any applicable state securities laws, to receive in exchange therefor a new Warrant Conversion Note
or Warrant Conversion Notes, as may be requested by such Holder, of the same series and in the same aggregate unpaid principal
amount as the aggregate unpaid principal amount of the Warrant Conversion Note or Warrant Conversion Notes so surrendered. Each
such new Warrant Conversion Note shall be dated as of the date to which interest has been paid on the unpaid principal amount of
the Warrant Conversion Note or Warrant Conversion Notes so surrendered and shall be in such principal amount and registered in
such name or names as such Holder may designate in writing.

 

     

     

    

 

		13.	Binding Agreement. This Warrant Conversion Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and the benefit of its successors and assigns, including any
subsequent holder of the Warrant Conversion Note. The Borrower may not assign its rights hereunder without the written consent
of the Holder. 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.

 

		14.	Fee Amount. For the avoidance of doubt, the Borrower hereby acknowledges and agrees that,
based on the Date of Issuance of this Warrant Conversion Note, the fee referenced in Section 3 of Amendment No. 5 shall be in an
amount equal to $3,425.17.

 

[SIGNATURE PAGE
FOLLOWS]

 

     

     

    

 

Senior Secured Subordinated Warrant
Conversion Note Signature Page

 

IN WITNESS WHEREOF, the
Borrower has caused this Warrant Conversion Note to be executed and delivered by a duly authorized officer as of the date first
written above.

 

	 	CTI INDUSTRIES CORPORATION
	 	 
	 	By:	/s/ Timothy S. Patterson
	 	Name: Timothy S. Patterson
	 	Title: CFO

 

     

     

    

 

EXHIBIT A

 

(See attached)EXHIBIT 10.2

 

AMENDMENT NO. 11 TO CREDIT AGREEMENT

 

This AMENDMENT NO. 11 TO
CREDIT AGREEMENT (this "Agreement"), effective as of October 17, 2017, is by and between CTI INDUSTRIES CORPORATION,
an Illinois corporation (the “Borrower”) and BMO HARRIS BANK N.A., a national banking association, successor to Harris
N.A. (the “Bank”).

 

RECITALS:

 

WHEREAS, Bank and Borrower
have entered into certain financing arrangements pursuant to that certain Credit Agreement dated as of April 29, 2010 (as amended
hereby, and as the same may have heretofore been or may hereafter be further amended, modified, supplemented, extended, renewed,
restated, replaced or otherwise modified, the "Credit Agreement"), by and among Borrower and Bank;

 

WHEREAS, Borrower has requested
that, subject to the terms and conditions of this Agreement, Bank agrees to amend the Credit Agreement in certain respects; and

 

WHEREAS, Bank is willing
to agree to amend the Credit Agreement in certain respects, in each case, subject to the terms and conditions specified herein.

 

NOW, THEREFORE, in consideration
of the foregoing, and the respective agreements, warranties and covenants contained herein, the parties hereto agree as follows:

 

1.             DEFINITIONS

 

1.1.          Interpretation.
All capitalized terms used herein (including the recitals hereto) will have the respective meanings ascribed thereto in the Credit
Agreement unless otherwise defined herein. The foregoing recitals, together with all exhibits attached hereto, are incorporated
by this reference and made a part of this Agreement. Unless otherwise provided herein, all section and exhibit references herein
are to the corresponding sections and exhibits of this Agreement.

 

2.             ACKNOWLEDGMENTS

 

2.1.          Acknowledgment
of Obligations. Borrower hereby acknowledges, confirms and agrees that as of October 12, 2017, prior to the effectiveness of
this Agreement, (a) Borrower is indebted to Bank in respect of the Mortgage Loan in the aggregate principal amount of $1,664,456.62,
(b) Borrower is indebted to Bank in respect of the Revolving Loans in the aggregate principal amount of $8,211,467.33, and
(c) Borrower is indebted to Bank in respect of the Letters of Credit in the aggregate principal amount of $0. Borrower hereby
acknowledges, confirms and agrees that all such Loans, together with interest accrued and accruing thereon, and all fees, costs,
expenses and other charges now or hereafter payable by Borrower to Bank, are unconditionally owing by Borrower to Bank, without
offset, defense or counterclaim of any kind, nature or description whatsoever.

 

     

     

    

 

2.2.          Acknowledgment
of Security Interests. Borrower hereby acknowledges, confirms and agrees that Bank has, and will continue to have, valid, enforceable
and perfected first-priority continuing liens upon and security interests in the Collateral heretofore granted to and for the benefit
of Bank, pursuant to the Credit Agreement and the Loan Documents or otherwise granted to or held by Bank.

 

2.3.          Binding
Effect of Documents. Borrower hereby acknowledges, confirms and agrees that: (a) this Agreement constitutes a Loan Document,
(b) each of the Credit Agreement and the other Loan Documents to which it is a party has been duly executed and delivered
to Bank by Borrower, and each is and will remain in full force and effect as of the date hereof except as modified pursuant hereto,
(c) the agreements and obligations of Borrower contained in such documents and in this Agreement constitute the legal, valid
and binding Obligations of Borrower, enforceable against it in accordance with their respective terms, and Borrower has no valid
defense to the enforcement of such Obligations, and (d) Bank is and will be entitled to the rights, remedies and benefits provided
for under the Credit Agreement and the other Loan Documents and applicable law.

 

2.4.          Acknowledgement
of Additional Defaults. The parties hereto acknowledge, confirm and agree that any misrepresentation by Borrower, or any failure
of Borrower to comply with the covenants, conditions and agreements contained in this Amendment will constitute an immediate Event
of Default under the Credit Agreement and the other Loan Documents.

 

3.             AMENDMENT
TO CREDIT AGREEMENT

 

In reliance upon the representations
and warranties of Borrower set forth in Section 5 below and subject to the conditions to effectiveness set forth in Section 6 below:

 

3.1.          Section
5.1 of the Credit Agreement is hereby amended by amending and restating the following defined terms as follows:

 

“Mortgage
Loan Final Maturity Date” means November 30, 2017, or such earlier date on which the Mortgage Loan is declared to be
or becomes due pursuant to Section 9.2 or 9.3 hereof.

 

“Revolving
Credit Termination Date” means November 30, 2017, or such earlier date on which the Revolving Credit Commitment is terminated
in whole pursuant to Section 3.4, 9.2, or 9.3 hereof.

 

“Temporary
Overadvance Amount” means (a) on and after October 17, 2017, through and including November 30, 2017, an amount equal
to $1,000,000; and (b) at any other time (including on and after December 1, 2017), an amount equal to $0.

 

    	 	2	 

     

    

 

3.2.          Section
10.8 of the Credit Agreement is hereby amended by amending and restating the following contact information:

 

	To the Lender:	
        BMO Harris Bank N.A.

        115 S. LaSalle St. – 4W

        Chicago, IL 60603

        Attention: Lauren Wittert

        Telephone No.: (312) 461-5188

        Facsimile No.: (312) 461-7958

	 	 
	With copy to:	
        Goldberg Kohn Ltd.

        55 East Monroe Street, Suite 3300

        Chicago, Illinois 60603

        Attention: Dimitri G. Karcazes

        Telephone: (312) 201-3976

        Facsimile: (312) 863-7476

 

4.             OTHER
AGREEMENTS

 

4.1.          Agreement
Regarding Borrowing Requests. Notwithstanding anything in the Credit Agreement to the contrary, Borrower hereby agrees not
to request a Revolving Loan, and further agrees that Bank shall have no obligation to make a Revolving Loan, in excess of the amount
necessary, as certified by the Chief Financial Officer of the Borrower in connection with any request for a Revolving Loan, for
the uses of the proceeds thereof on account of disbursements to be made by Borrower in the ordinary course of business during the
next one-week period.

 

4.2.          Updated
Cash Flow Forecasts. On the first Business Day of each week (unless otherwise approved in writing by the Bank), Borrower shall
deliver to Bank an updated 13-week cash flow forecast, in reasonable detail and in form and substance reasonably satisfactory to
the Bank, showing projected cash receipts and disbursements (including referencing line item sources and uses of cash) of the Borrower
and its Subsidiaries over the immediately succeeding 13-week period.

 

4.3.          Updated
Perfection Certificate; Schedules. On or before October 20, 2017, Borrower shall deliver to Bank an updated perfection certificate
and updated schedules to the Credit Agreement and the Security Agreement, each in reasonable detail and in form and substance reasonably
satisfactory to Bank.

 

4.4.          Letter
of Intent. On or before October 20, 2017, Borrower shall deliver to Bank a fully executed letter of intent (in form and substance
acceptable to Bank) from a third-party financial institution (the "Proposed Lender") that provides for the refinance
and payment in full of the Obligations and a closing thereof within a timeframe acceptable to Bank in its sole discretion (the
"Letter of Intent"). Borrower's failure to deliver a Letter of Intent required by this Section 4.4 shall not constitute
an Event of Default; provided, however, that as a result of such failure, Borrower shall be required to comply with the
covenant set forth in Section 4.6 below.

 

    	 	3	 

     

    

 

4.5.          Agreement
to Retain Consultant. If (i) Borrower fails to deliver the Letter of Intent in accordance with Section 4.4 above, or (ii) at
any time following the delivery of the Letter of Intent in accordance with Section 4.4 above, (a) the Proposed Lender notifies
Borrower that it has elected to terminate the Letter of Intent or that the Proposed Lender will not continue to proceed toward
the closing contemplated by the Letter of Intent, or (b) the Borrower is no longer pursuing the transaction contemplated by the
Letter of Intent, as may be determined by the Bank in its reasonable discretion, upon the request by Bank, then within ten (10)
days of the request of Bank, and at the sole expense of Borrower, Borrower shall hire or otherwise retain a consultant (the "Consultant")
acceptable to Bank, pursuant to an engagement letter, including the scope thereof, that has terms and conditions acceptable to
Bank, to advise Borrower with respect to its business and operations and to pursue refinancing options. Borrower shall fully cooperate
with the Consultant and shall authorize the Consultant to provide to Bank information and reports with respect to Borrower as Bank
shall request from time to time, including, but not limited to, information and reports related to Borrower's financial condition,
businesses, assets and liabilities and refinancing efforts and prospects.

 

4.6.          Bank
Representatives. Borrower acknowledges and agrees that Bank may retain consultants or other advisors to assist and advise Bank,
and agrees to provide such representatives access to the Borrower's and Subsidiary Guarantor's books, records, senior management
and executives as such representatives may reasonable request from time to time. All amounts incurred by Bank in connection with
such retentions and engagement of any such representatives shall constitute Obligations and be reimbursed by the Borrower pursuant
to the Credit Agreement.

 

4.7.          Amendment
Fee. In consideration of the transactions contemplated hereby, the Borrower hereby agrees to pay to the Bank an amendment fee
(the "Amendment Fee") in an amount equal to $7,500. The Amendment Fee shall be fully earned as of the date hereof
and shall be due and payable in full on the date hereof. No portion of the Amendment Fee which is paid shall be subject to return
or disgorgement.

 

5.             REPRESENTATIONS
AND WARRANTIES

 

Borrower hereby represents,
warrants and covenants as follows:

 

5.1.          Representations
in the Credit Agreement and the Other Loan Documents. Each of the representations and warranties made by or on behalf of Borrower
to Bank in the Credit Agreement or any of the other Loan Documents was true and correct when made, and is true and correct on and
as of the date of this Agreement with the same full force and effect as if each of such representations and warranties had been
made by Borrower on the date hereof and in this Agreement. All of the information contained in the schedules attached to the Credit
Agreement and the Security Agreement remains true and correct as of the date hereof.

 

    	 	4	 

     

    

 

5.2.          Binding
Effect of Documents. This Agreement has been duly authorized, executed and delivered to Bank by Borrower, is enforceable in
accordance with its terms and is in full force and effect, except as the enforcement thereof may be subject to (i) the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and (ii)
general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law).

 

5.3.          No
Conflict. The execution, delivery and performance of this Agreement by Borrower will not violate any requirement of law or
contractual obligation of Borrower and will not result in, or require, the creation or imposition of any Lien on any of their respective
properties or revenues.

 

6.            CONDITIONS
TO EFFECTIVENESS OF CERTAIN PROVISIONS OF THIS AGREEMENT

 

The effectiveness of the
terms and provisions of this Agreement (other than the terms and provisions of Sections 7.6 and 7.7, which will be effective immediately
upon the execution of this Agreement) is subject to the following conditions precedent:

 

(a)          Bank's
receipt of an original of this Agreement, duly authorized, executed and delivered by Borrower and Bank;

 

(b)          Bank's
receipt of the Consent and Reaffirmation of Guarantors attached hereto as Exhibit 1;

 

(c)          Bank's
receipt of fully executed copies of each of the other documents referenced on the Closing Checklist attached hereto as Exhibit
2, each of which shall be in form and substance acceptable to Bank, and the transactions contemplated by such documents shall
have been consummated in accordance with the terms thereof; and

 

(d)          Bank's
receipt of all fees and other amounts payable on or prior to the closing date of this Amendment, including all attorneys', consultants'
and other professionals' fees and expenses incurred by Bank.

 

7.             MISCELLANEOUS

 

7.1.          Continuing
Effect of Credit Agreement. Except as modified pursuant hereto, no other changes or modifications to the Credit Agreement or
any other Loan Document are intended or implied by this Agreement and in all other respects the Credit Agreement and the other
Loan Documents hereby are ratified, restated and confirmed by all parties hereto as of the date hereof. To the extent of any conflict
between the terms of this Agreement, the Credit Agreement, and the other Loan Documents, the terms of this Agreement will govern
and control. The Credit Agreement and this Agreement will be read and construed as one agreement.

 

7.2.          Costs
and Expenses. In addition to, and without in any way limiting, the obligations of Borrowers set forth in Section 10.4 of the
Credit Agreement, Borrower absolutely and unconditionally agrees to pay to Bank, on demand by Bank at any time, whether or not
all or any of the transactions contemplated by this Agreement are consummated: all reasonable fees, costs and expenses incurred
by Bank and any of its directors, officers, employees or agents (including, without limitation, reasonable fees, costs and expenses
incurred of any counsel to Bank), regardless of whether Bank or any such other Person is a prevailing party, in connection with
(a) the preparation, negotiation, execution, delivery or enforcement of this Agreement, the Credit Agreement, the other Loan
Documents and any agreements, documents or instruments contemplated hereby and thereby, and (b) any investigation, litigation
or proceeding related to this Agreement, the Credit Agreement or any other Loan Document or any act, omission, event or circumstance
in any matter related to any of the foregoing.

 

    	 	5	 

     

    

 

7.3.          Further
Assurances. At Borrower's expense, the parties hereto will execute and deliver such additional documents and take such further
action as may be necessary or desirable to effectuate the provisions of this Agreement.

 

7.4.          Successors
and Assigns; No Third-Party Beneficiaries. This Agreement will be binding upon and inure to the benefit of each of the parties
hereto and their respective successors and assigns. No Person other than the parties hereto and, in the case of Sections 7.6
and 7.7 hereof, the Releasees, shall have any rights hereunder or be entitled to rely on this Agreement and all third-party beneficiary
rights (other than the rights of the Releasees under Sections 7.6 and 7.7 hereof) are hereby expressly disclaimed.

 

7.5.          Survival
of Representations, Warranties and Covenants. All representations, warranties, covenants and releases of Borrower made in this
Agreement or any other document furnished in connection with this Agreement will survive the execution and delivery of this Agreement,
and no investigation by Bank, or any closing, will affect the representations and warranties or the right of Bank to rely upon
them.

 

7.6.          Release.

 

(a)          In
consideration of the agreements of Bank contained herein and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, each of the Borrower and the Subsidiary Guarantor, on behalf of itself and its successors and
assigns, and its present and former members, managers, shareholders, affiliates, subsidiaries, divisions, predecessors, directors,
officers, attorneys, employees, agents, consultants, financial advisors, legal representatives and other representatives (Borrower,
the Subsidiary Guarantor, and all such other Persons being hereinafter referred to collectively as the "Releasing Parties"
and individually as a "Releasing Party"), hereby absolutely, unconditionally and irrevocably releases, remises
and forever discharges Bank, and each of its respective successors and assigns, and its respective present and former shareholders,
members, managers, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents, legal
representatives and other representatives (Bank and all such other Persons being hereinafter referred to collectively as the "Releasees"
and individually as a "Releasee"), of and from any and all demands, actions, causes of action, suits, damages
and any and all other claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever (individually, a "Claim"
and collectively, "Claims") of every kind and nature, known or unknown, suspected or unsuspected, at law or in
equity, which any Releasing Party or any of its successors, assigns or other legal representatives may now or hereafter own, hold,
have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing
whatsoever which arises at any time on or prior to the date of this Agreement, including, without limitation, for or on account
of, or in relation to, or in any way in connection with this Agreement, the Credit Agreement, any of the other Loan Documents or
any of the transactions hereunder or thereunder.

 

    	 	6	 

     

    

 

(b)          Borrower
and the Subsidiary Guarantor understands, acknowledges and agrees that the release set forth above may be pleaded as a full and
complete defense to any Claim and may be used as a basis for an injunction against any action, suit or other proceeding which may
be instituted, prosecuted or attempted in breach of the provisions of such release.

 

(c)          Borrower
and the Subsidiary Guarantor agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which
may hereafter be discovered will affect in any manner the final, absolute and unconditional nature of the release set forth above.

 

(d)          As
to each and every claim released hereunder, Borrower and the Subsidiary Guarantor hereby represents that it has received the advice
of legal counsel with regard to the releases contained herein. As to each and every claim released hereunder, Borrower and the
Subsidiary Guarantor also waives the benefit of each other similar provision of applicable federal or state law (including without
limitation the laws of the state of Illinois), if any, pertaining to general releases after having been advised by its legal counsel
with respect thereto.

 

(e)          Borrower
and the Subsidiary Guarantor hereunder hereby specifically acknowledges and agrees that: (i) none of the provisions of this
Section 7.6 shall be construed as or constitute an admission of any liability on the part of Releasees; (ii) the provisions
of this Section 7.6 shall constitute an absolute bar to any Claim of any kind, whether any such Claim is based on contract, tort,
warranty, mistake or any other theory, whether legal, statutory or equitable; and (iii) any attempt to assert a Claim barred
by the provisions of this Section 7.6 shall subject Borrower and the Subsidiary Guarantor hereunder to the provisions of applicable
law setting forth the remedies for the bringing of groundless, frivolous or baseless claims or causes of action

 

7.7.          Covenant
Not to Sue. Each Releasing Party hereby absolutely, unconditionally and irrevocably covenants and agrees with and in favor
of each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis
of any Claim released, remised and discharged by any Releasing Party pursuant to Section 7.6 above. If any Releasing Party
violates the foregoing covenant, Borrower, for itself and its successors and assigns, and its present and former members, managers,
shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents, legal representatives
and other representatives, agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation,
all attorneys' fees and costs incurred by any Releasee as a result of such violation.

 

7.8.          Severability.
Any provision of this Agreement held by a court of competent jurisdiction to be invalid or unenforceable will not impair or invalidate
the remainder of this Agreement.

 

    	 	7	 

     

    

 

7.9.          Reviewed
by Attorneys. Borrower and the Subsidiary Guarantor represent and warrant to Bank that each (a) understands fully the
terms of this Agreement and the consequences of the execution and delivery of this Agreement, (b) has been afforded an opportunity
to discuss this Agreement with, and have this Agreement reviewed by, such attorneys and other persons as Borrower may wish, and
(c) has entered into this Agreement and executed and delivered all documents in connection herewith of its own free will and
accord and without threat, duress or other coercion of any kind by any Person. The parties hereto acknowledge and agree that neither
this Agreement nor the other documents executed pursuant hereto will be construed more favorably in favor of one than the other
based upon which party drafted the same, it being acknowledged that all parties hereto contributed substantially to the negotiation
and preparation of this Agreement and the other documents executed pursuant hereto or in connection herewith.

 

7.10.         Disgorgement.
If Bank is, for any reason, compelled by a court or other tribunal of competent jurisdiction to surrender or disgorge any payment,
interest or other consideration described hereunder to any person because the same is determined to be void or voidable as a preference,
fraudulent conveyance, impermissible set-off or for any other reason, such indebtedness or part thereof intended to be satisfied
by virtue of such payment, interest or other consideration will be revived and continue as if such payment, interest or other consideration
had not been received by Bank, and Borrower will be liable to, and will indemnify, defend and hold Bank harmless for, the amount
of such payment or interest surrendered or disgorged. The provisions of this Section will survive repayment of the Obligations
or any termination of the Credit Agreement or any other Loan Document.

 

7.11.         Relationship.
Borrower agrees that the relationship between Bank and Borrower is that of creditor and debtor and not that of partners or joint
venturers. This Agreement does not constitute a partnership agreement or any other association between Bank and Borrower. Borrower
acknowledges that Bank has acted at all times only as a creditor to Borrower within the normal and usual scope of the activities
normally undertaken by a creditor and in no event has Bank attempted to exercise any control over Borrower or its business or affairs.
Borrower further acknowledges that Bank has not taken or failed to take any action under or in connection with its respective rights
under the Credit Agreement or any of the other Loan Documents that in any way or to any extent has interfered with or adversely
affected Borrower's ownership of Collateral.

 

7.12.         Governing
Law: Consent to Jurisdiction and Venue. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE CREDIT AGREEMENT AND ANY OF THE OTHER
LOAN DOCUMENTS, THIS AGREEMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THEREUNDER WILL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN
COOK COUNTY, ILLINOIS WILL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND BANK PERTAINING
TO THIS AGREEMENT OR THE CREDIT AGREEMENT OR THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE CREDIT AGREEMENT OR ANY OF THE LOAN DOCUMENTS; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT WILL BE DEEMED
OR OPERATE TO PRECLUDE BANK FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS,
TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR
OF BANK. EACH PARTY HEREUNDER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY SUCH COURT, AND HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
EACH PARTY HEREUNDER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE
OF SUCH PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH IN THE CREDIT AGREEMENT
AND THAT SERVICE SO MADE WILL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
THE SAME HAS BEEN POSTED.

 

    	 	8	 

     

    

 

7.13.        Waivers.

 

(a)          Mutual
Waiver of Jury Trial. THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE BETWEEN BANK AND BORROWER ARISING OUT OF, CONNECTED WITH, RELATED OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR THE CREDIT AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.

 

(b)          Waivers
by Borrower. Borrower hereby waive any rights Borrower may have upon payment in full of the Obligations to require Bank to
terminate its security interest in the Collateral, other collateral or in any other property of Borrower until termination of the
Credit Agreement in accordance with its terms and the execution by Borrower of an agreement indemnifying Bank from any loss or
damage Bank may incur as the result of dishonored checks or other items of payment received by Bank from Borrower or any account
debtor and applied to the obligations and releasing and indemnifying, in the same manner as described in Sections 7.6 and 7.7 
of this Agreement, the Releasees from all claims arising on or before the date of such termination. Borrower acknowledges that
the foregoing waiver is a material inducement to Bank in entering this Agreement and that Bank is relying upon the foregoing waiver
in its future dealings with Borrower.

 

7.14.        Counterparts.
This Agreement may be executed and delivered via facsimile or email (in .pdf format) transmission with the same force and effect
as if an original were executed and may be executed in any number of counterparts, but all of such counterparts shall together
constitute but one and the same agreement.

 

7.15.        Time
is of the Essence. Time is of the essence respecting each and every covenant, condition and provision of this Agreement to
be performed by Borrower.

 

[signatures on following page]

 

    	 	9	 

     

    

 

IN WITNESS WHEREOF, this
Agreement is executed and delivered as of the day and year first above written.

 

	 	BORROWERS
	 	 
	 	CTI INDUSTRIES CORPORATION
	 	 
	 	By 	/s/ Stephen M. Merrick
	 	Name  	Stephen M. Merrick
	 	Title  	President  
	 	 
	 	GUARANTOR
	 	 
	 	CTI SUPPLY, INC.
	 	 
	 	By  	/s/ Stephen M. Merrick
	 	Name  	Stephen M. Merrick
	 	Title  	President

 

Signature
Page to Amendment No. 11 to Credit Agreement 

 

     

     

    

 

	 	BANK
	 	BMO HARRIS BANK, N.A.
	 	 
	 	By   	/s/ Pam Wicker
	 	Name   	Pam Wicker
	 	Title 	Director

 

Signature Page to Amendment No. 11 to Credit Agreement

 

     

     

    

 

EXHIBIT 1

to

AMENDMENT NO. 11 TO CREDIT AGREEMENT

 

CONSENT AND REAFFIRMATION OF SUBSIDIARY
GUARANTOR

 

The undersigned ("Guarantor")
hereby (i) acknowledges receipt of a copy of the foregoing Amendment No. 11 to Credit Agreement (the "Agreement";
capitalized terms used but not otherwise defined herein have the meanings ascribed to such terms in the Credit Agreement (as defined
in the Agreement)); (ii) consents to Borrower's execution and delivery of the Agreement; (iii) agrees to be bound by the Agreement,
including, without limitation, Sections 7.6 and 7.7 of the Agreement as if Guarantor were a party thereto; (iv) affirms that
nothing contained in the Agreement, except as specifically stated therein, will modify in any respect whatsoever any Loan Document
to which it is a party; and (v) reaffirms its obligations under (a) that certain Guaranty of Subsidiary Guarantor dated
as of April 29, 2010, by and among Guarantor and Bank and (b) each of the other Loan Documents to which it is a party (as modified
by the Agreement, collectively, the "Reaffirmed Loan Documents") and confirms that such obligations are unconditional
and not subject to any defense, setoff, counterclaim or other adverse claim. Although Guarantor has been informed of the matters
set forth herein and has acknowledged and agreed to same, Guarantor understands that Bank has no obligation to inform Guarantor
of such matters in the future or to seek Guarantor's acknowledgment or agreement to future amendments, waivers or consents, and
nothing herein creates such a duty.

 

The undersigned further agrees
that after giving effect to the Agreement, each Reaffirmed Loan Document remains in full force and effect.

 

	 	CTI SUPPLY, INC.
	 	 
	 	By:  	/s/ Stephen M. Merrick
	 	Title:  	President

 

Exhibit 1 to Amendment No. 11 to Credit Agreement

 

     

     

    

 

EXHIBIT 2

to

ELEVENTH AMENDMENT TO CREDIT AGREEMENT

 

CLOSING CHECKLIST

 

CLOSING DATE: October [__], 2017

 

parties
to the transaction

 

	BANK:	 	
        BMO HARRIS BANK, N.A.

        115 S. LaSalle St. – 4W

        Chicago, IL 60603

        Attention: Lauren Wittert

        Telephone No.: (312) 461-5188

        Facsimile No.: (312) 461-7958

	 	 	 
	BANK'S COUNSEL:	 	
        GOLDBERG KOHN LTD.

        55 East Monroe Street, Suite 3300

        Chicago, Illinois 60603

        Attn:Dimitri G. Karcazes and Danielle Wildern Juhle

        Telephone No.: (312) 201-3976

        Facsimile No.: (312) 863-7476

	 	 	 
	BORROWER:	 	
        CTI INDUSTRIES CORPORATION

        22160 N. Pepper Road

        Lake Barrington, Illinois 60010

        Attn: Stephen M. Merrick

        Telephone: (847) 382-1000

        Facsimile: (847) 382-1219

 

	BORROWER'S COUNSEL:	 	
        VANASCO, GENERALLY & MILLER

        33 North LaSalle Street, Suite 2200

        Chicago, Illinois 60602

        Attn: Gerald Miller

        Telephone No.: (312) 786-5100

        Facsimile No.: (312) 786-5111

 

Exhibit 2 to Amendment No. 11 to Credit Agreement

 

     

     

    

 

		A.	Loan and Security Documents

 

		(1)	Amendment No. 11 to Credit Agreement

 

		(2)	Security Agreement (CTI Supply, Inc.)

 

		(3)	Amendment No. 2 to Pledge Agreement

 

		(a)	Stock Power Agreement

 

		(b)	Irrevocable Proxy Agreement

 

		(c)	CTI Supply, Inc. Stock Certificate

 

		(4)	Amendment No. 1 Patent and Trademark Agreement (Borrower)

 

		(5)	Copyright Security Agreement (Borrower)

 

		(6)	Amendment No. 1 to Mortgage and Security Agreement with
Assignment of Rents

 

		(a)	Date Down Endorsement

 

		(7)	Amendment No. 6 to Note and Warrant Purchase Agreement

 

		(8)	Consent under Subordination and Intercreditor Agreement

 

		(9)	Secretary's Certificate (CTI Industries Corporation)

 

		(a)	Articles of Incorporation

 

		(b)	Bylaws

 

		(c)	Resolutions

 

		(d)	Incumbency

 

		(10)	Secretary's Certificate (CTI Supply, Inc.)

 

		(a)	Articles of Incorporation

 

		(b)	Bylaws

 

		(c)	Resolutions

 

		(d)	Incumbency

 

Exhibit 2 to Amendment No. 11 to Credit Agreement

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