Document:

EXHIBIT 10.5

 

This Instrument Prepared By

And After Recording Return To:

 

Israel S. Pollack, Esq.

Goldberg Kohn Ltd.

55 East Monroe Street

Suite 3300

Chicago, Illinois 60603

 

Property Address: 22160 N. Pepper Road Barrington, IL

 

PIN(S): 13-21-400-014-0000

 

REAL PROPERTY
MORTGAGE

(Lake County, Illinois)

 

THIS REAL PROPERTY
MORTGAGE ("Mortgage"), made as of December 14, 2017, is made and executed by CTI INDUSTRIES CORPORATION, an
Illinois corporation, having its principal offices at 22160 N. Pepper Road Barrington, Illinois 60010
("Mortgagor"), in favor of PNC BANK, NATIONAL ASSOCIATION, a national banking association, having an
office at c/o PNC Business Credit One North Franklin Street, Chicago, Illinois 60606, as a Lender and
Agent ("Agent") for the certain other "Lenders", such terms are defined in the Loan Agreement
referred to below.

 

RECITALS

 

I.       Mortgagor,
as "Borrower", certain parties as "Credit Parties," Agent and certain "Lenders" are parties
to a certain "Revolving Credit Term Loan and Security Agreement" dated as of December 14, 2017 (said "Revolving
Credit Term Loan and Security Agreement", together with all amendments, supplements, modifications and replacements thereof,
being referred to in this Mortgage as the "Loan Agreement"). Subject to the terms and conditions of the Loan Agreement,
Lenders have made loans to Mortgagor in an aggregate principal amount of up to $24,000,000 (collectively, the "Loans").
The Loans consist of (a) a revolving loan, the outstanding principal balance of which may increase or decrease from time to
time, but at no time shall the outstanding principal balance of such revolving loan exceed $18,000,000 and (b) a term loan
in the original principal sum of $6,000,000. Certain repayment obligations of Mortgagor with respect to the Loans are or may be
evidenced by one or more promissory notes, in the aggregate principal amount of $24,000,000 (said notes, with all allonges, amendments,
supplements, modifications and replacements thereof, being sometimes referred to in this Mortgage as the "Notes").
The final maturity date of the Notes is December 14, 2022. The terms and provisions of the Notes and the Loan Agreement are hereby
incorporated by reference in this Mortgage. Capitalized terms not otherwise defined in this Mortgage shall have the meaning ascribed
to them in the Loan Agreement.

 

     

     

    

 

II.       Among
other things, this Mortgage is given to secure revolving loans and secures not only present indebtedness but also future advances,
whether such future advances are obligatory or are to be made at the option of Lenders, or otherwise as are to be made within twenty
(20) years of the date hereof. The amount of indebtedness secured hereby may increase or decrease from time to time; however the
principal amount of such indebtedness shall not at one time exceed the amount of $48,000,000 plus interest thereon, and other costs,
amounts and disbursements as provided herein and in the other Loan Documents (as defined in the Loan Agreement).

 

GRANTING CLAUSES

 

To secure (i) the
payment of the indebtedness evidenced by the Notes, (ii) the payment and satisfaction of the Obligations (defined in the Loan
Agreement) and (iii) the payment of all amounts due under and the performance and observance of all covenants and conditions
contained in this Mortgage, the Notes, the Loan Agreement, any and all other Loan Documents whether now existing or hereafter created,
absolute or contingent, direct or indirect, liquidated or unliquidated, or otherwise (all indebtedness and liabilities secured
hereby, subject to the limitation hereinafter set forth, being hereinafter sometimes referred to as the "Secured Obligations"
provided that the Secured Obligations shall, in no event, exceed $48,000,000), Mortgagor does hereby convey, mortgage, warrant,
assign, transfer, pledge and deliver to Agent the following described property subject to the terms and conditions herein:

 

(A)       The
land located in Lake County, Illinois, legally described in attached Exhibit A (the "Land");

 

(B)       All
the buildings, structures, improvements and fixtures of every kind or nature now or hereafter situated on the Land and all machinery,
appliances, equipment, furniture and all other personal property of every kind or nature which constitute fixtures with respect
to the Land, together will all extensions, additions, improvements, substitutions and replacements of the foregoing ("Improvements");

 

(C)       All
easements, tenements, rights-of-way, vaults, gores of land, streets, ways, alleys, passages, sewer rights, water courses, water
rights and powers and appurtenances in any way belonging, relating or appertaining to any of the Land or Improvements, or which
hereafter shall in any way belong, relate or be appurtenant thereto, whether now owned or hereafter acquired ("Appurtenances");

 

(D)       (i)        All
judgments, insurance proceeds, awards of damages and settlements which may result from any damage to all or any portion of the
Land, Improvements or Appurtenances or any part thereof or to any rights appurtenant thereto;

 

(ii)       All
compensation, awards, damages, claims, rights of action and proceeds of or on account of (a) any damage or taking, pursuant to
the power of eminent domain, of the Land, Improvements or Appurtenances or any part thereof, (b) damage to all or any portion of
the Land, Improvements or Appurtenances by reason of the taking, pursuant to the power of eminent domain, of all or any portion
of the Land, Improvements, Appurtenances or of other property, or (c) the alteration of the grade of any street or highway on or
about the Land, Improvements, Appurtenances or any part thereof; and, except as otherwise provided herein, Agent is hereby authorized
to collect and receive said awards and proceeds and to give proper receipts and acquittances therefor and, except as otherwise
provided herein, to apply the same toward the payment of the indebtedness and other sums secured hereby; and

 

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(iii)       All
proceeds, products, replacements, additions, substitutions, renewals and accessions of and to the Land, Improvements or Appurtenances;

 

(E)       All
rents, issues, profits, income and other benefits now or hereafter arising from or in respect of the Land, Improvements or Appurtenances
(the "Rents"); it being intended that this Granting Clause shall constitute an absolute and present assignment
of the Rents, subject, however, to the conditional permission given to Mortgagor to collect and use the Rents as provided in this
Mortgage;

 

(F)       Any
and all leases, licenses and other occupancy agreements now or hereafter affecting the Land, Improvements or Appurtenances, together
with all security therefor and guaranties thereof and all monies payable thereunder, and all books and records owned by Mortgagor
which contain evidence of payments made under the leases and all security given therefor (collectively, the "Leases"),
subject, however, to the conditional permission given in this Mortgage to Mortgagor to collect the Rents arising under the Leases
as provided in this Mortgage;

 

(G)       Any
and all after-acquired right, title or interest of Mortgagor in and to any of the property described in the preceding Granting
Clauses; and

 

(H)       The
proceeds from the sale, transfer, pledge or other disposition of any or all of the property described in the preceding Granting
Clauses;

 

All of the mortgaged
property described in the Granting Clauses, together with all real and personal, tangible and intangible property pledged in, or
to which a security interest attaches pursuant to, any of the Loan Documents is sometimes referred to collectively as the "Encumbered
Property." The Rents and Leases are pledged on a parity with the Land and Improvements and not secondarily.

 

ARTICLE ONE

COVENANTS OF MORTGAGOR

 

Mortgagor covenants and
agrees with Agent as follows:

 

1.1.       Performance
under Notes, Mortgage and Other Loan Documents. Mortgagor shall perform, observe and comply with or cause to be performed,
observed and complied with in a complete and timely manner all provisions hereof, of the Loan Agreement and of the Notes, every
other Loan Document and every instrument evidencing or securing the Secured Obligations.

 

    	 	-3-	 

     

    

 

1.2.       General
Covenants and Representations. Mortgagor covenants, represents and warrants that as of the date hereof and at all times thereafter
during the term hereof: (a) Mortgagor is seized of an indefeasible estate in fee simple in that portion of the Encumbered Property
which is real property, and has good and absolute title to it and the balance of the Encumbered Property free and clear of all
liens, security interests, charges and encumbrances whatsoever except for Permitted Encumbrances (defined in the Loan Agreement);
(b) Mortgagor has good right, full power and lawful authority to mortgage and pledge the Encumbered Property as provided herein;
(c) upon the occurrence of an Event of Default (hereinafter defined), Agent may at all times peaceably and quietly enter upon,
hold, occupy and enjoy the Encumbered Property in accordance with the terms hereof; and (d) Mortgagor will maintain and preserve
the lien of this Mortgage as a first and paramount lien on the Encumbered Property subject only to the Permitted Encumbrances until
the Secured Obligations have been paid in full.

 

1.3.       Compliance
with Laws and Other Restrictions. Mortgagor shall cause the Encumbered Property to comply with all applicable restrictive covenants,
zoning and subdivision ordinances and building codes, licenses, health and environmental laws and regulations and all other applicable
laws, ordinances, rules and regulations.

 

1.4.       Taxes
and Other Charges.

 

(a)         Upon
Agent's request, Mortgagor will promptly file, if it has not theretofore filed, such petition, application or other instrument
as is necessary to cause the Land and Improvements to be taxed as a separate parcel or parcels which include no property not a
part of the Encumbered Property.

 

(b)         If
any state, federal, municipal or other governmental law, order, rule or regulation, which becomes effective subsequent to the date
hereof, in any manner changes or modifies existing laws governing the taxation of mortgages or debts secured by mortgages, or the
manner of collecting taxes, so as to impose on Agent a tax by reason of its ownership of any or all of the Loan Documents or measured
by the principal amount of the Notes, requires or has the practical effect of requiring Agent to pay any portion of the real estate
taxes levied in respect of the Encumbered Property to pay any tax levied in whole or in part in substitution for real estate taxes
or otherwise affects materially and adversely the rights of Agent in respect of the Notes, this Mortgage or the other Loan Documents,
the Secured Obligations and all interest accrued thereon shall, upon thirty (30) days' notice, become due and payable forthwith
at the option of Agent, whether or not there shall have occurred an Event of Default, provided, however, that, if Mortgagor may,
without violating or causing a violation of such law, order, rule or regulation, pay such taxes or other sums as are necessary
to eliminate such adverse effect upon the rights of Agent and does pay such taxes or other sums when due, Agent may not declare
due the Secured Obligations by reason of the provisions of this Section 1.4.

 

(c)         If
directed by Agent in writing, Mortgagor shall, in order to secure the performance and discharge of Mortgagor's obligations under
this Section 1.4, but not in lieu of such obligations, deposit with Agent on the first day of each calendar month throughout the
term of the Loans, deposits, in amounts set by Agent from time to time by written notice to Mortgagor, in order to accumulate funds
sufficient to permit Agent to pay all annual ad valorem taxes, assessments and charges of the nature described herein at least
thirty (30) days prior to the date or dates on which they shall become delinquent. The taxes, assessments and charges shall, if
Agent so elects, include, without limitation, water and sewer rents. Mortgagor shall procure and deliver to Agent when issued all
statements or bills for such obligations. Upon demand by Agent, Mortgagor shall deliver to Agent such additional monies as are
required to satisfy any deficiencies in the amounts necessary to enable Agent to pay such taxes, assessments and similar charges
thirty (30) days prior to the date they become delinquent. Agent shall pay such taxes, assessments and other charges as they become
due to the extent of the funds on deposit with Agent from time to time and provided Mortgagor has delivered to Agent the statements
or bills therefor. In making any such payments, Agent shall be entitled to rely on any bill issued in respect of any such taxes,
assessments or charges without inquiry into the validity, propriety or amount thereof and whether delivered to Agent by Mortgagor
or otherwise obtained by Agent. Any deposits received hereunder shall not be, nor be deemed to be, trust funds, but may be commingled
with the general funds of Agent and Agent shall have no obligation to pay interest on amounts deposited with Agent. If any Event
of Default occurs, any part or all of the amounts then on deposit or thereafter deposited with Agent may at Agent's option be applied
to payment of the Secured Obligations in such order as Agent may determine.

 

    	 	-4-	 

     

    

 

(d)         Mortgagor
shall not claim, demand or be entitled to receive any credit against the principal or interest payable under the terms of the Notes
or the Loan Agreement or on any of the Secured Obligations for any of the taxes, assessments or similar impositions assessed against
the Encumbered Property or any part thereof or that are applicable to the Secured Obligations or to Agent's interest in the Encumbered
Property.

 

1.5.       Insurance,
Casualty and Condemnation.

 

(a)         Mortgagor
shall, at its sole expense, obtain for, deliver to, assign to and maintain for the benefit of Agent, until the Secured Obligations
are paid in full, policies of hazard insurance in an amount which shall be not less than 100% of the full insurable replacement
cost of the Encumbered Property (other than the Land) insuring, on a replacement cost basis, the Encumbered Property against loss
or damage on a "special cause of loss" form, such insurable hazards, casualties and contingencies as are included therein
and otherwise as Agent may require, including without limitation fire, windstorm, rainstorm, vandalism, earthquake and, if all
or any part of the Encumbered Property shall at any time be located within an area identified by the government of the United States
or any agency thereof as having special flood hazards and for which flood insurance is available, flood. Mortgagor shall pay promptly
when due any premiums on such insurance policies and on any renewals thereof. Mortgagor shall, at its sole expense, obtain for,
deliver to, assign to and maintain for the benefit of, Agent, until the Secured Obligations are paid in full, such other policies
of insurance as may be required by the terms of the Loan Agreement. The form of such policies and the companies issuing them shall
be acceptable to Agent. If any such policy shall contain a co-insurance clause it shall also contain an agreed amount or stipulated
value endorsement. All such policies and renewals thereof shall be held by Agent and shall contain an "Agent's loss payable"
clause making losses payable to Agent. Losses shall not be payable to any other party without Agent's prior written consent. In
the event of loss, Mortgagor will give immediate written notice to Agent and Agent may make proof of loss if not made promptly
by Mortgagor (for which purpose Mortgagor hereby irrevocably appoints Agent as its attorney-in-fact). In the event of the foreclosure
of this Mortgage or any other transfer of title to the Encumbered Property in full or partial satisfaction of the Secured Obligations,
all right, title and interest of Mortgagor in and to all insurance policies and renewals thereof then in force shall pass to the
purchaser or grantee. All such policies shall provide that they shall not be modified, cancelled or terminated without at least
thirty (30) days' prior written notice to Agent from the insurer.

 

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(b)         Agent
shall be entitled to all compensation, awards, damages, claims, rights of action and proceeds of, or on account of, (i) any damage
or taking, pursuant to the power of eminent domain, of the Encumbered Property or any part thereof, (ii) damage to the Encumbered
Property by reason of the taking, pursuant to the power of eminent domain, of other property, or (iii) the alteration of the grade
of any street or highway on or about the Encumbered Property (any of the foregoing, a "Taking"). Agent is hereby
authorized, at its option, to commence, appear in and prosecute in its own or Mortgagor's name any action or proceeding relating
to any such compensation, awards, damages, claims, rights of action and proceeds and to settle or compromise any claim in connection
therewith. Mortgagor hereby irrevocably appoints Agent as its attorney-in-fact for the purposes set forth in the preceding sentence.
Mortgagor agrees to execute such further assignments of any compensation awards, damages, claims, rights of action and proceeds
as Agent may require.

 

(c)         If
all or any part of the Encumbered Property shall be damaged or destroyed by fire or other casualty or shall be damaged or taken
through any Taking, Mortgagor shall promptly and with all due diligence restore and repair the Encumbered Property whether or not
the proceeds, award or other compensation are sufficient to pay the cost of such restoration or repair. Unless the Loan Agreement
expressly provides that such proceeds, award or other compensation shall be used for another purpose, the entire amount of such
proceeds, award or compensation shall be applied to the Secured Obligations in such order and manner as Agent may elect. To the
extent expressly provided by the Loan Agreement, such proceeds, award or other compensation shall be made available to Mortgagor,
on such reasonable terms and conditions as Agent may impose, for the purpose of financing the cost of restoration or repair with
any excess to be applied to the Secured Obligations. Notwithstanding any other provision of this Mortgage, if an Event of Default
shall be existing at the time of such casualty, taking or other event or if an Event of Default occurs thereafter, Agent shall
have the right to immediately apply all insurance proceeds, awards or compensation to the payment of the Secured Obligations in
such order and manner as Agent may determine.

 

(d)         Intentionally
Omitted.

 

(e)         Non-Impairment
of Agent's Rights. Nothing contained in this Mortgage shall be deemed to limit or otherwise affect any right or remedy of Agent
under any provision of this Mortgage or of any statute or rule of law to pay and, upon Mortgagor's failure to pay the same, Agent
may pay any amount required to be paid by Mortgagor under Sections 1.4 and 1.5. Mortgagor shall pay to Agent on demand the amount
so paid by Agent together with interest at the rate payable under the Loan Agreement after an "Event of Default" as such
term is defined in the Loan Agreement (the "Default Rate") and the amount so paid by Agent together with interest,
shall be added to the Secured Obligations.

 

    	 	-6-	 

     

    

 

1.6.       Care
of the Encumbered Property.

 

(a)         Mortgagor
shall preserve and maintain the Encumbered Property in good and first class condition and repair. Mortgagor shall not, without
the prior written consent of Agent, permit, commit or suffer any waste, impairment or deterioration of the Encumbered Property
or of any part thereof.

 

(b)         Except
as otherwise provided in the Loan Agreement or this Mortgage, no new improvements shall be constructed on the Encumbered Property
and no part of the Encumbered Property shall be removed, demolished or altered in any material manner without the prior written
consent of Agent.

 

1.7.       Transfer
or Encumbrance of the Encumbered Property. Except as permitted by the Loan Agreement, Mortgagor shall not permit or suffer
to occur any sale, assignment, conveyance, transfer, mortgage, lease (other than leases made in accordance with the provisions
of this Mortgage) or encumbrance of, or any contract for any of the foregoing on an installment basis or otherwise pertaining to,
the Encumbered Property, any part thereof, any interest therein, or in any trust holding title to the Encumbered Property, without
the prior written consent of Agent having been obtained.

 

1.8.       Further
Assurances. At any time and from time to time, upon Agent's request, Mortgagor shall make, execute and deliver, or cause to
be made, executed and delivered, to Agent, and where appropriate shall cause to be recorded, registered or filed, and from time
to time thereafter to be re-recorded, re-registered and refiled at such time and in such offices and places as shall be deemed
desirable by Agent, any and all such further mortgages, security agreements, financing statements, instruments of further assurance,
certificates and other documents as Agent may consider necessary or desirable in order to effectuate or perfect, or to continue
and preserve the obligations under, this Mortgage.

 

1.9.       Assignment
of Rents. The assignment of rents, income and other benefits contained in Section (E) of the Granting Clauses of this Mortgage
shall be fully operative without any further action on the part of either party, and, specifically, Agent shall be entitled, at
its option, upon the occurrence of an Event of Default hereunder, to all rents, income and other benefits from the Encumbered Property,
whether or not Agent takes possession of such property. Such assignment and grant shall continue in effect until the Secured Obligations
are paid in full, the execution of this Mortgage constituting and evidencing the irrevocable consent of Mortgagor to the entry
upon and taking possession of the Encumbered Property by Agent pursuant to such grant, whether or not foreclosure proceedings have
been instituted. Notwithstanding the foregoing, so long as no Event of Default has occurred or is continuing, Mortgagor shall have
the right and authority to continue to collect the rents, income and other benefits from the Encumbered Property as they become
due and payable but not more than thirty (30) days prior to the due date thereof.

 

1.10.       After-Acquired
Property. To the extent permitted by, and subject to, applicable law, the lien of this Mortgage shall automatically attach,
without further act, to all property hereafter acquired by Mortgagor located in or on, or attached to, or used or intended to be
used in connection with, or with the operation of, the Encumbered Property or any part thereof.

 

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1.11.       Leases
Affecting Encumbered Property. Mortgagor shall comply with and perform in a complete and timely manner all of its obligations
as landlord under all leases affecting the Encumbered Property or any part thereof. The assignment contained in Section (E) of
the Granting Clauses shall not be deemed to impose upon Agent any of the obligations or duties of the landlord or Mortgagor provided
in any lease.

 

1.12.       Execution
of Leases. Except as permitted pursuant to the Loan Agreement, Mortgagor shall not permit any Leases to be made of the Encumbered
Property, or to be modified, terminated extended or renewed, without the prior written consent of Agent.

 

1.13.       Expenses.
Without limitation of any obligation of Mortgagor set forth in the Loan Agreement, Mortgagor shall pay when due and payable, and
otherwise on demand made by Agent, all appraisal fees, recording fees, taxes, brokerage fees and commissions, abstract fees, title
insurance fees, escrow fees, attorneys' fees, court costs, documentary and expert evidence, fees of inspecting architects and engineers,
and all other costs and expenses of every character which have been incurred or which may hereafter be incurred by Agent in connection
with this Mortgage or the administration and enforcement of any term or provision of this Mortgage. If Mortgagor fails to pay said
costs and expenses as above provided, Agent may elect, but shall not be obligated, to pay the costs and expenses described in this
Section 1.14, and if Agent does so elect, then Mortgagor will, upon demand by Agent, reimburse Agent for all such expenses
which have been or shall be paid or incurred by it. The amounts paid by Agent shall be added to the Secured Obligations, shall
be immediately due and payable and shall be secured by the lien of this Mortgage and the other Loan Documents.

 

1.14.       Indemnity.
To the extent permitted by law, Mortgagor agrees to hold harmless Agent and the Lenders against and from, and reimburse them for,
all claims, demands, liabilities, losses, damages, judgments, penalties, costs and expenses, including without limitation attorneys'
fees, which may be imposed upon, asserted against, or incurred or paid by it by reason of or in connection with any bodily injury
or death or property damage occurring in or upon or in the vicinity of the Encumbered Property through any cause whatsoever, or
asserted against it on account of any act performed or omitted to be performed hereunder, or on account of any transaction arising
out of or in any way connected with the Encumbered Property, this Mortgage, the other Loan Documents, any of the indebtedness evidenced
by the Notes or any of the Secured Obligations.

 

1.15.       Agent's
Performance of Mortgagor's Obligations. If Mortgagor fails to pay any tax, assessment, encumbrance or other imposition when
due, or to furnish insurance hereunder, or to perform any other covenant, condition or term in this Mortgage, the Notes, the Loan
Agreement or any other Loan Document, Agent may, but shall not be obligated to, pay, obtain or perform the same. All payments made,
whether such payments are regular or accelerated payments, and costs and expenses incurred or paid by Agent in connection therewith
shall be due and payable immediately. The amounts so incurred or paid by Agent shall be added to the Secured Obligations and secured
by the lien of this Mortgage and the other Loan Documents. During the continuance of an Event of Default, Agent is hereby empowered
to enter and to authorize others to enter upon the Encumbered Property or any part thereof for the purpose of performing or observing
any covenant, condition or term that Mortgagor has failed to perform or observe, without thereby becoming liable to Mortgagor or
any person in possession holding under Mortgagor. Performance or payment by Agent of any obligation of Mortgagor shall not relieve
Mortgagor of such obligation or of the consequences of having failed to perform or pay the same and shall not effect the cure of
any Event of Default.

 

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1.16.       Payment
of Superior Liens. To the extent that Agent or the Lenders, after the date hereof, pay any sum due under any provision of law
or instrument or document creating any lien superior or equal in priority in whole or in part to the lien of this Mortgage, Agent
shall have and be entitled to a lien on the premises equal in parity with that discharged, and Agent shall be subrogated to and
receive and enjoy all rights and liens possessed, held or enjoyed by, the holder of such lien, which shall remain in existence
and benefit Agent to secure the Notes, the Loan Agreement and all obligations and liabilities secured hereby. Agent shall be subrogated,
notwithstanding their release of record, to mortgages, trust deeds, superior titles, vendors' liens, mechanics' and materialmen's
liens, charges, encumbrances, rights and equities on the Encumbered Property to the extent that any obligation under any thereof
is paid or discharged with proceeds of disbursements or advances under the Notes or other indebtedness secured hereby.

 

1.17.       Use
of the Encumbered Property. Mortgagor shall not suffer or permit the Encumbered Property, or any portion thereof, to be used
for any purpose other than for the purposes for which it is currently being used and, without limitation of the foregoing, Mortgagor
shall not use or permit the use of the Encumbered Property or any portion thereof for any unlawful purpose.

 

ARTICLE TWO

DEFAULTS

 

2.1.       Event
of Default. The term "Event of Default," wherever used in this Mortgage, shall mean any one or more of the
following events:

 

(a)         The
failure by Mortgagor: (i) to pay or deposit when due any deposit for taxes and assessments due hereunder or any other sums to be
paid by Mortgagor hereunder; or (ii) to keep, perform, or observe any covenant, condition or agreement contained in Sections 1.4,
1.5 or 1.8 hereof; or to keep, perform or observe any other covenant, condition or agreement on the part of Mortgagor in this Mortgage
and such failure continues after written notice for thirty (30) days or longer.

 

(b)         The
occurrence of an "Event of Default" under and as defined in the Loan Agreement or any of the other Loan Documents.

 

ARTICLE THREE

REMEDIES

 

3.1.       Acceleration
of Maturity. If an Event of Default shall have occurred and is continuing, Agent may declare the Secured Obligations to be
immediately due and payable, and upon such declaration the Secured Obligations shall immediately become and be due and payable
without further demand or notice. The foregoing shall not be in limitation of any provision contained in any other Loan Document,
including without limitation any such provision pursuant to which the Secured Obligations become immediately due and payable without
action or election by Agent.

 

    	 	-9-	 

     

    

 

3.2.       Agent's
Power of Enforcement. If an Event of Default shall have occurred and is continuing, Agent may, either with or without entry
or taking possession as provided in this Mortgage or otherwise, and without regard to whether or not the Secured Obligations shall
have been accelerated, and without prejudice to the right of Agent thereafter to bring an action of foreclosure or any other action
for any default existing at the time such earlier action was commenced or arising thereafter, proceed by any appropriate action
or proceeding: (a) to enforce payment of the Notes and/or any other of the Secured Obligations or the performance of any term hereof
or any of the other Loan Documents; (b) to foreclose this Mortgage and to have sold, as an entirety or in separate lots or parcels,
the Encumbered Property; and (c) to pursue any other remedy available to it. Agent may take action either by such proceedings or
by the exercise of its powers with respect to entry or taking possession, or both, as Agent may determine.

 

3.3.       Agent's
Right to Enter and Take Possession, Operate and Apply Income.

 

(a)         If
an Event of Default shall have occurred and is continuing, Mortgagor, upon demand of Agent, shall forthwith surrender to Agent
the actual possession of the Encumbered Property, and to the extent permitted by law, Agent itself, or by such officers or agents
as it may appoint, is hereby expressly authorized to enter and take possession of all or any portion of the Encumbered Property
and may exclude Mortgagor and its agents and employees wholly therefrom.

 

(b)         If
Mortgagor shall for any reason fail to surrender or deliver the Encumbered Property or any part thereof after Agent's demand, Agent
may obtain a judgment or decree conferring on Agent the right to immediate possession or requiring Mortgagor to deliver immediate
possession of all or part of the Encumbered Property to Agent, to the entry of which judgment or decree Mortgagor hereby specifically
consents. Mortgagor shall pay to Agent, upon demand, all costs and expenses of obtaining such judgment or decree and all such costs
and expenses shall, until paid, be secured by the lien of this Mortgage.

 

(c)         Upon
every such entering upon or taking of possession, Agent, to the extent permitted by law, may hold, store, use, operate, manage
and control the Encumbered Property and conduct the business thereof.

 

3.4.       Leases.
Agent is authorized to foreclose this Mortgage subject to the rights, if any, of any or all tenants of the Encumbered Property,
even if the rights of any such tenants are or would be subordinate to the lien of this Mortgage. Agent may elect to foreclose the
rights of some subordinate tenants while foreclosing subject to the rights of other subordinate tenants.

 

    	 	-10-	 

     

    

 

3.5.       Purchase
by Agent. Upon any foreclosure sale, Agent may bid for and purchase all or any portion of the Encumbered Property and, upon
compliance with the terms of the sale, may hold, retain and possess and dispose of such property in its own absolute right without
further accountability.

 

3.6.       Application
of Indebtedness Toward Purchase Price. Upon any foreclosure sale, Agent may apply any or all of the indebtedness and other
sums due to Agent under the Notes, this Mortgage or any other Loan Document to the price paid by Agent at the foreclosure sale.

 

3.7.       Waiver
of Appraisement, Valuation, Stay, Extension and Redemption Laws. Mortgagor hereby waives any and all rights of redemption.
Mortgagor further agrees, to the full extent permitted by law, that in case of an Event of Default, neither Mortgagor nor anyone
claiming through or under it will set up, claim or seek to take advantage of any reinstatement, appraisement, valuation, stay or
extension laws now or hereafter in force, or take any other action which would prevent or hinder the enforcement or foreclosure
of this Mortgage or the absolute sale of the Encumbered Property or the final and absolute putting into possession thereof, immediately
after such sale, of the purchaser thereat. Mortgagor, for itself and all who may at any time claim through or under it, hereby
waives, to the full extent that it may lawfully so do, the benefit of all such laws, and any and all right to have the assets comprising
the Encumbered Property marshalled upon any foreclosure of the lien hereof and agrees that Agent or any court having jurisdiction
to foreclose such lien may sell the Encumbered Property in part or as an entirety. Mortgagor acknowledges that the transaction
of which this Mortgage is a part is a transaction which does not include either agricultural real estate (as defined in Section
15-1201 of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1101 et seq., Illinois Revised Statutes) (herein called
the "Act") or residential real estate (as defined in Section 15-1219 of the Act), and to the full extent permitted
by law, hereby voluntarily and knowingly waives its rights to reinstatement and redemption as allowed under Section 15-1601 of
the Act.

 

3.8.       Receiver
- Agent in Possession. If an Event of Default shall have occurred and is continuing, Agent, to the extent permitted by law
and without regard to the value of the Encumbered Property or the adequacy of the security for the indebtedness and other sums
secured hereby, shall be entitled as a matter of right and without any additional showing or proof, at Agent's election, to either
the appointment by the court of a receiver (without the necessity of Agent posting a bond) to enter upon and take possession of
the Encumbered Property and to collect all rents, income and other benefits thereof and apply the same as the court may direct
or to be placed by the court into possession of the Encumbered Property as mortgagee in possession with the same power herein granted
to a receiver and with all other rights and privileges of a mortgagee in possession under law. The right to enter and take possession
of and to manage and operate the Encumbered Property, and to collect all rents, income and other benefits thereof, whether by a
receiver or otherwise, shall be cumulative to any other right or remedy hereunder or afforded by law and may be exercised concurrently
therewith or independently thereof. Agent shall be liable to account only for such rents, income and other benefits actually received
by Agent. Notwithstanding the appointment of any receiver or other custodian, Agent shall be entitled as pledgee to the possession
and control of any cash, deposits or instruments at the time held by, or payable or deliverable under the terms of this Mortgage
to Agent.

 

    	 	-11-	 

     

    

 

3.9.       Mortgagor
to Pay the Secured Obligations in Event of Default; Application of Monies by Agent.

 

(a)         Upon
occurrence of an Event of Default and during its continuance, Agent shall be entitled to sue for and to recover judgment against
Mortgagor for the Secured Obligations due and unpaid together with costs and expenses, including, without limitation, the reasonable
compensation, expenses and disbursements of Agent's agents, attorneys and other representatives, either before, after or during
the pendency of any proceedings for the enforcement of this Mortgage; and the right of Agent to recover such judgment shall not
be affected by any taking of possession or foreclosure sale hereunder, or by the exercise of any other right, power or remedy for
the enforcement of the terms of this Mortgage, or the foreclosure of the lien hereof.

 

(b)         In
case of a foreclosure sale of all or any part of the Encumbered Property and of the application of the proceeds of sale to the
payment of the Secured Obligations, Agent shall be entitled to enforce all other rights and remedies under the Loan Documents.

 

(c)         Mortgagor
hereby agrees, to the extent permitted by law, that no recovery of any judgment by Agent under any of the Loan Documents, and no
attachment or levy of execution upon any of the Encumbered Property or any other property of Mortgagor, shall (except as otherwise
provided by law) in any way affect the lien of this Mortgage upon the Encumbered Property or any part thereof or any lien, rights,
powers or remedies of Agent hereunder, but such lien, rights, powers and remedies shall continue unimpaired as before until the
Secured Obligations are paid in full.

 

(d)         Money collected or received by Agent from a foreclosure shall be applied to the payment of the reasonable compensation, expenses
and disbursements of the agents, attorneys and other representatives of Agent, and the balance remaining shall be applied to the
payment of the Secured Obligations, in such order and manner as Agent may elect, and any surplus, after payment of all the Secured
Obligations, shall be paid as provided under applicable law.

 

3.10.       Protective
Advances. All advances, disbursements and expenditures made by Agent before and during a foreclosure, and before and after
judgment of foreclosure, and at any time prior to sale, and, where applicable, after sale, and during the pendency of any related
proceedings, for the following purposes, in addition to those otherwise authorized by this Mortgage or by the Act (collectively,
"Protective Advances"), shall have the benefit of all applicable provisions of the Act, including those provisions
of the Act herein below referred to:

 

(i)       all
advances by Agent in accordance with the terms of this Mortgage to: (A) preserve or maintain, repair, restore or rebuild the
improvements upon the mortgaged real estate; (B) preserve the lien of this Mortgage or the priority thereof; or (C) enforce
this Mortgage, as referred to in Subsection (b)(5) of Section 5/15-1302 of the Act;

 

    	 	-12-	 

     

    

 

(ii)       payments
by Agent of: (A) installments of principal, interest or other obligations in accordance with the terms of any senior mortgage
or other prior lien or encumbrance; (B) installments of real estate taxes and assessments, general and special and all other
taxes and assessments of any kind or nature whatsoever which are assessed or imposed upon the Encumbered Property or any part thereof;
(C) other obligations authorized by this Mortgage; or (D) with court approval, any other amounts in connection with other
liens, encumbrances or interests reasonably necessary to preserve the status of title, as referred to in Section 5/15-1505 of the
Act;

 

(iii)       advances
by Agent in settlement or compromise of any claims asserted by claimants under any senior mortgages or any other prior liens;

 

(iv)       reasonable
attorneys’ fees and other costs incurred: (A) in connection with the foreclosure of this Mortgage as referred to in
Sections 1504 (d)(2) and 5/15-1510 of the Act; (B) in connection with any action, suit or proceeding brought by or against
Agent for the enforcement of the Mortgage or arising from the interest of Agent hereunder; or (C) in the preparation for the
commencement or defense of any such foreclosure or other action related to the Mortgage or the mortgaged real estate;

 

(v)       Agent’s
fees and costs, including reasonable attorneys’ fees, arising between the entry of judgment of foreclosure and the confirmation
hearing as referred to in Subsection (b)(1) of Section 5/15-1508 of the Act;

 

(vi)       expenses
deductible from proceeds of sale as referred to in subsections (a) and (b) of Section 5/15-1512 of the Act;

 

(vii)       expenses
incurred and expenditures made by Agent for any one or more of the following: (A) premiums for casualty and liability insurance
paid by Agent whether or not Agent or a receiver is in possession, if reasonably required, in reasonable amounts, and all renewals
thereof, without regard to the limitation to maintaining of existing insurance in effect at the time any receiver or the Agent
takes possession of the Premises imposed by Subsection (c)(1) of Section 5/15-1704 of the Act; (B) repair or restoration
of damage or destruction in excess of available insurance proceeds or condemnation awards; and (C) payments required or deemed
by Agent to be for the benefit of the Encumbered Property or required to be made by the owner of the mortgaged real estate under
any grant or declaration of easement, easement agreement, agreement with any adjoining land owners or instruments creating covenants
or restrictions for the benefit of or affecting the Encumbered Property.

 

    	 	-13-	 

     

    

 

(b)       All
Protective Advances shall be so much additional amounts or obligations secured by the Mortgage, and shall become immediately due
and payable without notice and with interest thereon from the date of the advance until paid at the Default Rate.

 

(c)       This
Mortgage shall be a lien for all Protective Advances as to subsequent purchasers and judgment creditors from the time this Mortgage
is recorded pursuant to Subsection (b)(5) of Section 5/15-1302 of the Act.

 

(d)       All
Protective Advances shall, except to the extent, if any, that any of the same is clearly contrary to or inconsistent with the provisions
of the Act, apply to and be included in the:

 

(i)       determination
of the amount of obligations secured by this Mortgage at any time;

 

(ii)       amount
found due and owing to Agent in the judgment of foreclosure and any subsequent supplemental judgments, orders, adjudications or
findings by the court of any additional amount becoming due after such entry of judgment, it being agreed that in any foreclosure
judgment, the court may reserve jurisdiction for such purpose;

 

(iii)       if
the right of redemption has not been waived by Mortgagor, computation of amount required to redeem, pursuant to Subsections (d)(1)
and (2) of Section 5/15-1603 of the Act;

 

(iv)       determination
of amount deductible from sale proceeds pursuant to Section 5/15-1512 of the Act;

 

(v)       application
of income in the hands of any receiver or mortgagee in possession; and

 

(vi)       computation
of any deficiency judgment pursuant to Subsections (b)(2) and (e) of Section 5/15-1508 and Section 5/15-1511 of the Act.

 

3.11.       Business
Loan. Mortgagor acknowledges and agrees that (a) the proceeds of the Secured Obligations will be used in conformance with
subparagraph (1)(l) of Section 4 of "An Act in relation to the rate of interest and other charges in connection with sales
on credit and the lending of money," approved May 24, 1879, as amended (815 ILCS 205/4 (1)(l); and (b) the Loans constitute
business loans which come within the purview of said Section 4 (815 ILCS 205/4 et seq).

 

    	 	-14-	 

     

    

 

3.12.       Remedies
Cumulative. No right, power or remedy conferred upon or reserved to Agent by the Notes, the Loan Agreement, this Mortgage or
any other Loan Document or any instrument evidencing or securing the Secured Obligations is exclusive of any other right, power
or remedy, but each and every such right, power and remedy shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder or under the Notes or any other Loan Document or any instrument evidencing or securing
the Secured Obligations, or now or hereafter existing at law, in equity or by statute.

 

ARTICLE FOUR

MISCELLANEOUS PROVISIONS

 

4.1.       Heirs,
Successors and Assigns Included in Parties. Whenever Mortgagor or Agent is named or referred to herein, heirs and successors
and assigns of such person or entity shall be included, and all covenants and agreements contained in this Mortgage shall bind
the successors and assigns of Mortgagor, including any subsequent owner of all or any part of the Encumbered Property and inure
to the benefit of the successors and assigns of Agent. Nothing herein shall be construed to permit an assignment, transfer, conveyance,
encumbrance or other disposition otherwise prohibited by this Mortgage or any other Loan Document.

 

4.2.       Notices.
All notices, requests, reports demands or other instruments required or contemplated to be given or furnished under this Mortgage
to Mortgagor or Agent shall be directed to Mortgagor or Agent, as the case may be, in the manner set forth in the Loan Agreement
at the following addresses:

 

	If to Agent:	PNC Bank, National Association 
	 	c/o PNC Business Credit One North Franklin 
	 	Street, Chicago, Illinois 60606
	 	Attention:      Account Manager – CTI Industries
	 	 
	If to Mortgagor:	CTI Industries Corporation
	 	22160 N. Pepper Road
	 	Barrington, Illinois 60010
	 	Attention:       Stephen M. Merrick

 

4.3.       Headings.
The headings of the articles, sections, paragraphs and subdivisions of this Mortgage are for convenience only, are not to be considered
a part hereof, and shall not limit, expand or otherwise affect any of the terms hereof.

 

4.4.       Invalid
Provisions. In the event that any of the covenants, agreements, terms or provisions contained in this Mortgage shall be invalid,
illegal or unenforceable in any respect, the validity of the remaining covenants, agreements, terms or provisions contained herein
(or the application of the covenant, agreement, term held to be invalid, illegal or unenforceable, to persons or circumstances
other than those in respect of which it is invalid, illegal or unenforceable) shall be in no way affected, prejudiced or disturbed
thereby.

 

    	 	-15-	 

     

    

 

4.5.       Changes.
Neither this Mortgage nor any term hereof may be released, changed, waived, discharged or terminated orally, or by any action or
inaction, but only by an instrument in writing signed by the party against which enforcement of the release, change, waiver, discharge
or termination is sought. To the extent permitted by law, any agreement hereafter made by Mortgagor and Agent relating to this
Mortgage shall be superior to the rights of the holder of any intervening lien or encumbrance. Any holder of a lien or encumbrance
junior to the lien of this Mortgage shall take its lien subject to the right of Agent to amend, modify or supplement this Mortgage,
the Notes, the Loan Agreement or any of the other Loan Documents, to extend the maturity of the Secured Obligations or any portion
thereof, to vary the rate of interest chargeable under the Notes and/or the Loan Agreement and to increase the amount of the indebtedness
secured hereby, in each and every case without obtaining the consent of the holder of such junior lien and without the lien of
this Mortgage losing its priority over the rights of any such junior lien.

 

4.6.       Governing
Law. This Mortgage shall be construed, interpreted, enforced and governed by and in accordance with the laws of the State of
Illinois.

 

4.7.       Required
Notices. Mortgagor shall notify Agent promptly of the occurrence of any of the following: (a) receipt of notice from any governmental
authority relating to the violation of any rule, regulation, law or ordinance, the enforcement of which would materially and adversely
affect the Encumbered Property; (b) material default by any tenant in the performance of its obligations under any lease of all
or any portion of the Encumbered Property or receipt of any notice from any such tenant claiming that a default by landlord in
the performance of its obligations under any such lease has occurred; or (c) commencement of any judicial or administrative proceedings
by or against or otherwise adversely affecting Mortgagor or the Encumbered Property.

 

4.8.       Future
Advances. This Mortgage is given to secure not only existing indebtedness, but also future advances (whether such advances
are obligatory or are to be made at the option of Lenders, or otherwise) made by Lenders under the Notes or the Loan Agreement,
to the same extent as if such future advances were made on the date of the execution of this Mortgage. The total amount of indebtedness
that may be so secured may decrease or increase from time to time, but all indebtedness secured hereby shall, in no event, exceed
$48,000,000.

 

4.9.       Release.
Upon full payment and satisfaction of the Secured Obligations, Agent shall issue to Mortgagor an appropriate release deed in recordable
form.

 

4.10.       Attorneys'
Fees. Whenever reference is made herein to the payment or reimbursement of attorneys' fees, such fees shall be deemed to include
reasonable compensation to staff counsel, if any, of Agent in addition to the fees of any other attorneys engaged by Agent.

 

    	 	-16-	 

     

    

 

4.11.       Compliance
with Mortgage Foreclosure Law. In the event that any provision in this Mortgage shall be inconsistent with any provision of
applicable statutory provisions governing the creation, perfection or enforcement of mortgages, such provisions shall take precedence
over the provisions of this Mortgage, but shall not invalidate or render unenforceable any other provision of this Mortgage that
can be construed in a manner consistent with such statutory provisions. If any provision of this Mortgage shall grant to Agent
any rights or remedies upon default of Mortgagor which are more limited than the rights that would otherwise be vested in Agent
under applicable law, Agent shall be vested with such rights to the full extent permitted by law. Without limiting the generality
of the foregoing, all expenses incurred by Agent to the extent reimbursable under Sections 15-1510 and 15-1512 of the Act, whether
incurred before or after any decree or judgment of foreclosure, and whether enumerated in this Mortgage, shall be added to the
indebtedness secured by this Mortgage or by the judgment of foreclosure.

 

4.12.       Collateral
Protection. Unless Mortgagor provides Agent with evidence of the insurance coverage required by this Mortgage, Agent may purchase
insurance at Mortgagor's expense to protect Agent's interests in the Encumbered Property. This insurance may, but need not, protect
Mortgagor's interest. The coverage that Agent purchases may not pay any claim that Mortgagor may make or any claim that is made
against Mortgagor in connection with the Encumbered Property. Mortgagor may later cancel any insurance purchased by Agent, but
only after providing Agent with evidence that Mortgagor has obtained insurance as required by this Mortgage. If Agent purchases
insurance for the Encumbered Property, Mortgagor will be responsible for the costs of such insurance, including interest and any
other charges that may be imposed in connection with the placement of such insurance, until the effective date of the cancellation
or expiration of such insurance. Without limitation of any other provision of this Mortgage, the cost of such insurance shall be
added to the indebtedness secured hereby. The cost of the insurance may be more than the cost of insurance Mortgagor may be able
to obtain on its own.

 

4.13.       Loan
Agreement. The Loans are governed by terms and provisions set forth in the Loan Agreement and in the event of any conflict
between the terms of this Mortgage and the terms of the Loan Agreement, the terms of the Loan Agreement shall control.

 

[The
balance of this page is intentionally blank; signature page follows.]

 

    	 	-17-	 

     

    

 

IN WITNESS WHEREOF, Mortgagor
has caused this instrument to be executed by its duly authorized officers as of the day and year first above written.

 

	 	CTI INDUSTRIES CORPORATION.,
	 	an Illinois corporation
	 	 	 
	 	By:	/s/ Stephen M. Merrick
	 	Print Name:	Stephen M. Merrick
	 	Title:	CEO

 

Signature Page to Real Property Mortgage Lake County, Illinois

 

     

     

    

 

ACKNOWLEDGMENT

 

	STATE  OF  ___________ 	)	 
	 	) SS	 
	COUNTY  OF  _________ 	)	 

 

I, _____________________________,
a Notary Public in and for and residing in said County and State, DO HEREBY CERTIFY THAT ________________________________________
the ______________________ of CTI Industries Corporation, an Illinois corporation, personally known to me to be the same person
whose name is subscribed to the foregoing instrument as such ____________ and appeared before me this day in person and acknowledged
that _he signed and delivered said instrument as h___ own free and voluntary act and as the free and voluntary act of said corporation.

 

GIVEN under my hand and
notarial seal this ____ day of _________, 2017.

 

	 	_______________________________
	 	Notary Public

 

	My Commission Expires:	 
	 	 
	____________________________	 

 

Acknowledgement Page to Real Property Mortgage Lake County,
Illinois

 

     

     

    

 

EXHIBIT
A

 

Legal Description

 

THAT PART OF THE SOUTH 1/2 OF SECTION 21, TOWNSHIP 43 NORTH,
RANGE 9, EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:

 

COMMENCING AT A POINT IN THE EAST LINE OF THE WEST 1/2 OF THE
SOUTH EAST 1/4 OF SAID SECTION 21, 691.81 FEET NORTH OF THE SOUTHEAST CORNER THEREOF; THENCE WEST PARALLEL WITH THE SOUTH LINE
OF SAID SOUTH EAST 1/4 746.66 FEET; THENCE NORTH PARALLEL WITH THE EAST LINE OF THE SAID WEST 1/2 OF THE SOUTH EAST 1/4 291.81
FEET; THENCE EAST PARALLEL WITH THE SOUTH LINE OF SAID SOUTH EAST 1/4 746.66 FEET TO THE EAST LINE OF THE WEST 1/2 OF THE SOUTH
EAST 1/4; THENCE SOUTH 291.81 FEET TO THE POINT OF BEGINNING, IN LAKE COUNTY, ILLINOIS.

 

APN: 13-21-400-014-0000EXHIBIT 10.6

 

SUBORDINATION AGREEMENT

 

This SUBORDINATION
AGREEMENT made and entered into as of December 14, 2017 (as amended, restated, supplemented or otherwise modified from time to
time, this "Agreement"), is by and among CTI INDUSTRIES CORPORATION, an Illinois corporation (the "Debtor"),
the Subordinated Creditors (as defined in Section 1 below), and PNC BANK, NATIONAL ASSOCIATION, in its capacity as Agent (the "Agent")
for the Lenders referred to below.

 

RECITALS:

 

A.           Pursuant
to that certain Revolving Credit, Term Loan and Security Agreement of even date herewith (as amended, restated, supplemented, or
otherwise modified from time to time, the "Credit Agreement"), by and among the Debtor, certain affiliates of
the Debtor, the lenders (the "Lenders") from time to time party thereto and the Agent, the Agent and Lenders have
agreed to make available to the Debtor the "Advances" and other financial accommodations on the terms and subject to
the conditions set forth in the Credit Agreement.

 

B.           Pursuant
to certain existing and/or future notes, agreements, and instruments (collectively, the "Subordinated Debt Instruments"),
including, without limitation, the notes identified on Schedule I hereto, the Debtor is or will be indebted in various amounts
to the Subordinated Creditors.

 

AGREEMENTS:

 

In consideration of
the Recitals and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties
agree as follows:

 

1.           Definitions.
Capitalized terms not otherwise defined herein (including the Recitals) have the meaning assigned to such terms in the Credit Agreement.
As used herein, the following terms have the following meanings:

 

(a)       "Enforcement
Action" means (a) to take from or for the account of any Credit Party, by set-off or in any other manner, the whole
or any part of any moneys which may now or hereafter be owing by any Credit Party with respect to the Subordinated Debt, (b) to
sue for payment of, or to initiate or participate with others in any suit, action or proceeding against any Credit Party to (i) enforce
payment of or to collect the whole or any part of the Subordinated Debt or (ii) commence judicial enforcement of any of the
rights and remedies under the Subordinated Debt Documents or applicable law with respect to the Subordinated Debt, (c) to
accelerate the Subordinated Debt, (d) to exercise any put option or to cause any Credit Party to honor any redemption or mandatory
prepayment obligation under any Subordinated Debt Document, or (e) to take any action under the provisions of any state or
federal law, including, without limitation, the Uniform Commercial Code, or under any contract or agreement, to enforce, foreclose
upon, take possession of or sell any property or assets of any Credit Party, including any collateral for the Superior Debt.

 

     

     

    

 

(b)       "Subordinated
Creditor" means, individually, each individual or entity who from time to time executes a counterpart signature page to
this Agreement as a Subordinated Creditor; and "Subordinated Creditors" means, collectively, all such individuals.
As of the date of execution of this Agreement, the only Subordinated Creditor is John H. Schwan.

 

(c)       "Subordinated
Debt" means all of the indebtedness, obligations and liabilities of the Debtor to the Subordinated Creditors.

 

(d)       "Subordinated
Debt Documents" means each Subordinated Debt Instrument, any other guaranties with respect to the Subordinated Debt and
all other documents, agreements and instruments now existing or hereinafter entered into evidencing or pertaining to all or any
portion of the Subordinated Debt, as the same may be amended, restated, supplemented or otherwise modified from time to time, as
permitted hereunder.

 

(e)       "Superior
Debt" means all liabilities, indebtedness and obligations of the Debtor to the Agent or any Lender, whether direct or
indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and whether created directly or acquired
by assignment or otherwise, whether before or after the filing of an insolvency proceeding together with any interest, fees, costs
and expenses accruing thereon after the commencement of an insolvency proceeding, without regard to whether or not such interest,
fees, costs and expenses are allowed, including, but not limited to, all "Obligations" under and as defined in the Credit
Agreement.

 

2.           Subordination.

 

(a)       Subordination
of the Subordinated Debt. Each Subordinated Creditor postpones and subordinates to the extent and in the manner provided in
this Agreement all of such Subordinated Creditor's Subordinated Debt to the payment of all of the Superior Debt. Except as expressly
set forth herein, until the payment in full of the Superior Debt and the termination of all commitments under the Credit Agreement,
no payment or distribution of property, claims or interests of any kind or character whatsoever in respect of any Subordinated
Debt shall be made by or on behalf of Company or accepted by Subordinated Creditor. Each Subordinated Creditor shall insure that
any instrument or document evidencing such Subordinated Creditor's Subordinated Debt shall bear the following legend:

 

Payment of the indebtedness evidenced
by this instrument or document and the rights of the holder hereof are subordinated and subject to the rights of PNC Bank, National
Association, as Agent for certain Lenders, to the extent provided in a Subordination Agreement dated as of December 14, 2017, from
the payee to said lender.

 

The Debtor's and each Subordinated Creditor's
books shall be marked to evidence subordination of all of the Subordinated Debt to the Superior Debt. The Agent is authorized to
examine such books from time to time and to make any notations required by this Agreement. All instruments and documents evidencing
the Subordinated Debt shall, upon request, be delivered to the Agent properly assigned or endorsed to the Agent. Nothing contained
in this Agreement shall affect the validity of the Subordinated Debt.

 

    	 	-2-	 

     

    

 

(b)       Subordination
of the Liens Securing the Subordinated Debt. Each Subordinated Creditor (i) acknowledges that, as of the date hereof, such
Subordinated Creditor has no lien, security interest in, or other right to, any property of the Debtor, and (ii) covenants that
it will not obtain any lien, security interest in, or other right to, any property of the Debtor without the Agent's prior written
consent. To the extent that, notwithstanding the foregoing acknowledgment and covenant, any Subordinated Creditor acquires any
lien, security interest in, or other right to, any of the Subordinated Creditor Collateral (as hereinafter defined), each Subordinated
Creditor expressly subordinates all of its rights in any property of the Debtor, real or personal, now or later securing the Subordinated
Debt (the "Subordinated Creditor Collateral"), to all present and future rights of the Agent in any of the Subordinated
Creditor Collateral to secure the Superior Debt, without regard to the time or order of attachment or perfection of any security
interest, the time or order of filing any financing statement, or the giving or failure to give any notice of the acquisition or
expected acquisition of any purchase money security interest. Each Subordinated Creditor consents to the creation and continuance
of all present and future security interests of the Agent in the Subordinated Creditor Collateral to secure the Superior Debt and
to the enforcement of those security interests, including the removal of the Subordinated Creditor Collateral from the real property
of the Debtor. Each Subordinated Creditor agrees that it will not at any time contest the validity, perfection, priority or enforceability
of the Superior Debt, the Credit Agreement and related loan documents, or the liens and security interests of the Agent in the
collateral securing the Superior Debt. This subordination as to the Subordinated Creditor Collateral is intended to define the
rights and duties of the Agent and the Subordinated Creditors; it is not intended that any third party shall benefit from it. If
the effect of any provision of this subordination would be to give any third party a priority status to which that party would
not otherwise be entitled, that provision shall, to the extent necessary to avoid that priority, be given no effect and the rights
and priorities of the Agent and the Subordinated Creditors shall be determined in accordance with applicable law.

 

3.           Payments
on Subordinated Debt.

 

(a)       Limitations.
Except as permitted by Section 3(c), until all the Superior Debt is paid in full: (i) the Debtor shall not, directly or indirectly,
make any payments on account of or (other than the liens securing the Subordinated Creditor Collateral) grant a security interest
in, mortgage, assign, or transfer, any properties to secure or satisfy any part of the Subordinated Debt; (ii) no Subordinated
Creditor shall demand or accept from the Debtor or any other person any such payment or collateral or cancel, set off or otherwise
discharge any part of the Subordinated Debt; and (iii) neither the Debtor nor any Subordinated Creditor shall otherwise take or
permit any action prejudicial to or inconsistent with the Agent's priority position over the Subordinated Creditors created by
this Agreement.

 

(b)       Payments
Received. If any payment (other than a payment permitted by this Agreement) on account of or any collateral for any part of
the Subordinated Debt is received by any Subordinated Creditor, such payment or collateral shall be delivered forthwith to the
Agent by such Subordinated Creditor for application to the Superior Debt, in the form received except for the addition of any endorsement
or assignment necessary to effect transfer of all rights therein to the Agent. The Agent is irrevocably authorized (but not required),
and each Subordinated Creditor does hereby irrevocably appoint the Agent, or any of its officers or employees on behalf of the
Agent as the attorney-in-fact for such Subordinated Creditor in connection with the Subordinated Debt, to supply any required endorsement
or assignment which may have been omitted. Until so delivered any such payment or collateral shall be held by the recipient in
trust for the Agent and shall not be commingled with other funds or property of the recipient.

    	 	-3-	 

     

    

 

 

(c)       Permitted
Payments. The Debtor shall be permitted to make, and the Subordinated Creditors shall be permitted to accept from the Debtor,
(i) regularly scheduled interest payments on the Subordinated Debt to the extent paid-in-kind (but not paid in cash), (ii) non-cash
principal reductions resulting from the exercise of warrants by the Subordinated Creditors and corresponding conversion of Subordinated
Debt into Equity Interests of Debtor, and (iii) cash payments of interest and principal on the Subordinated Debt in an aggregate
amount not to exceed $130,000 during any calendar year so long as, in each case, both before and after giving effect to any such
payment (A) no Default or Event of Default exists or would result therefrom and (B) Undrawn Availability is greater than or equal
to $2,500,000.

 

4.           Collection
of the Subordinated Debt, Bankruptcy, Etc. Until all of the Superior Debt is paid in full, no Subordinated Creditor shall,
without the prior written consent of the Agent, take any Enforcement Action with respect to the Subordinated Debt. The Agent is
irrevocably authorized (but not required), and each Subordinated Creditor does hereby irrevocably appoint the Agent, or any of
its officers or employees on behalf of the Agent as the attorney-in-fact for such Subordinated Creditor in connection with the
Subordinated Debt, at its option, at any meeting of the creditors of the Debtor or in any such proceeding or any proceeding initiated
by the Debtor:

 

(a)       to
enforce claims comprising the Subordinated Debt either in its own name or in the name of the Subordinated Creditors, by proof of
debt, proof of claim, suit or otherwise;

 

(b)       to
collect any assets of the Debtor distributed, divided or applied by way of dividend or payment, or any securities issued, on account
of the Subordinated Debt and apply the same, or the proceeds of any realization upon the same the Agent in its discretion elects
to effect, to the Superior Debt until all of the Superior Debt has been paid in full, rendering any surplus to the Subordinated
Creditors;

 

(c)       to
vote claims comprising the Subordinated Debt to accept or reject any plan of partial or complete liquidation, reorganization, arrangement,
composition or extension; and

 

(d)       to
take generally any action in connection with any such meeting or proceeding which any Subordinated Creditor might otherwise take.

 

    	 	-4-	 

     

    

 

5.           Warranties
and Representations Concerning Subordinated Debt. The Debtor and the Subordinated Creditors jointly and severally represent
and warrant that (a) no part of Subordinated Debt is evidenced by any instrument, security or other writing which has not previously
been or is not concurrently being deposited with the Agent (if requested by the Agent), (b) the Subordinated Creditors are the
lawful owner of the Subordinated Debt and no part thereof has been assigned to or subordinated or subjected to any other security
interest in favor of anyone other than the Agent, and (c) as of the date hereof, the aggregate outstanding principal balance of
indebtedness from the Debtor to John H. Schwan is $1,498,822.01. Until all of the Superior Debt has been paid in full, (i) no Subordinated
Creditor shall assign or subordinate any part of the Subordinated Debt except to or in favor of the Agent; and (ii) except as set
forth in Section 8 hereof, neither the Debtor nor the Subordinated Creditors shall agree to any amendment, supplement, waiver,
or other modification of any of the terms of the Subordinated Debt.

 

6.           Waivers;
Subrogation.

 

(a)       The
Subordinated Creditors jointly and severally waive (i) any defense based on the adequacy of a remedy at law which might be asserted
as a bar to the remedy of specific performance hereof in any action brought therefor by the Agent, (ii) presentment, notice and
protest in connection with all negotiable instruments evidencing the Superior Debt or the Subordinated Debt to which they may be
parties, notice of the acceptance of this Agreement by the Agent, notice of any loans made, increases in the amount of, or interest
rate on the Superior Debt, extensions granted or other action taken or postponement of the time of payment or any other indulgence
in connection with the Superior Debt, to any substitution, exchange or release of collateral therefor and to the addition or release
of any person primarily or secondarily liable thereon and (iii) all rights, if any, to require a marshalling of the Debtor's assets
by the Agent or to require that the Agent first resort to some or any portion of any collateral for the Superior Debt before foreclosing
upon, selling or otherwise realizing on any other portion thereof. No waiver is made by the Agent of any of its rights hereunder
unless the same is in writing, and each waiver, if any, is a waiver only with respect to the specific instance involved.

 

(b)       No
Subordinated Creditor shall exercise any rights against any Credit Party which such Subordinated Creditor may acquire by way of
subrogation or otherwise, until the payment in full of all Superior Debt and the termination of all commitments under the Credit
Agreement. If any amount is paid to any Subordinated Creditor on account of subrogation rights under this Agreement at any time
prior to the payment in full of all Superior Debt and the termination of all commitments under the Credit Agreement, the amount
shall be held in trust for the benefit of the Agent and Lenders and shall be promptly paid to the Agent to be credited and applied
to the Superior Debt, whether matured, unmatured, absolute or contingent, in accordance with the provisions of the Credit Agreement.

 

7.           Duration;
Reinstatement.

 

(a)       The
terms of this Agreement, the subordination effected hereby, and the rights and the obligations of any Subordinated Creditor, Debtor
and the Agent arising hereunder shall not be affected, modified or impaired in any manner or to any extent by: (i) any amendment
or modification of or supplement to the Credit Agreement or any Subordinated Debt Document; (b) the validity or enforceability
of any of such documents or any liens or security interests granted thereunder; or (c) any exercise or non-exercise of any
right, power or remedy under or in respect of the Superior Debt or the Subordinated Debt or any of the instruments or documents
referred to in clause (i) above. Each Subordinated Creditor hereby acknowledges that the provisions of this Agreement are
intended to be enforceable at all times, whether before the commencement of, after the commencement of, in connection with or premised
on the occurrence of a bankruptcy or other similar wind-up, liquidation or insolvency proceeding. This Agreement may be terminated
by the Subordinated Creditor only if all of the Superior Debt is finally paid in full.

 

    	 	-5-	 

     

    

 

(b)       This
Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Superior Debt is rescinded or must otherwise be restored or returned by the Agent or any Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of Debtor or any of its affiliates, or upon or as a result of the appointment
of a receiver, intervenor or conservator of, or trustee or similar officer for, Debtor or any of its affiliates or any substantial
part of the assets of either or both of them, or otherwise, all as though such payments had not been made.

 

8.           Waiver
and Amendment of Subordinated Debt. Each of the Subordinated Creditors hereby waives any default that may have occurred and
be continuing under any of the Subordinated Debt or any notes or other documents executed in connection therewith. The Debtor and
each of the Subordinated Creditors hereby agrees that any Subordinated Debt that was due and payable prior to the date hereof shall
henceforth be due and payable on demand (but in all cases subject to the terms of this Agreement), and each of the notes governing
such Subordinated Debt shall be deemed to be so amended.

 

9.           Default.
If any representation or warranty in this Agreement or in any instrument evidencing the Superior Debt proves to have been materially
false when made or in the event of a breach by the Debtor or any Subordinated Creditor in the performance of any of the terms of
this Agreement or upon the occurrence of any event of default under any instrument or agreement evidencing the Superior Debt, the
Agent may, at its option, declare all Superior Debt to be forthwith due and payable, without presentment, demand, protest, or notice
of any kind, notwithstanding any time or credit otherwise allowed. At any time any Subordinated Creditor fails to comply with any
provision applicable to such Subordinated Creditor, the Agent may demand specific performance of this Agreement, whether or not
the Debtor has complied with this Agreement, or exercise any other remedy available at law or equity.

 

10.           The
Agent's Duties Limited. The rights granted to the Agent in this Agreement are solely for its protection and nothing herein
contained imposes on the Agent any duties with respect to any property of the Debtor or any Subordinated Creditor received hereunder
beyond reasonable care in their custody and preservation while in the Agent 's possession. The Agent has no duty to preserve rights
against prior parties in any instrument or chattel paper received hereunder.

 

11.           Authority.
The Debtor and the Subordinated Creditors jointly and severally represent and warrant that they have authority to enter into this
Agreement and the persons signing for each party are authorized and directed to do so.

 

12.           Modification.
This Agreement may only be modified in writing signed by the Agent, the Debtor and each Subordinated Creditor.

 

    	 	-6-	 

     

    

 

13.           Additional
Documentation. The Debtor and each Subordinated Creditor shall execute and deliver to the Agent such further instruments and
shall take such further action as the Agent may at any time or times reasonably request in order to carry out the provisions and
intent of this Agreement.

 

14.           Expenses.
The Debtor agrees to pay the Agent on demand all expenses of every kind, including actual attorney's fees, which the Agent may
incur in enforcing or protecting any of their rights under this Agreement.

 

15.           Persons
Bound. This Agreement benefits the Agent and its successors and assigns, and binds the Debtor, each Subordinated Creditor and
their respective successors and assigns (including, without limitation, a receiver, trustee or debtor-in-possession of or for Debtor).

 

16.           Notices.
All notices, demands and communications provided for herein or made hereunder shall be delivered, or mailed first class with postage
prepaid, or telefaxed, addressed in each case as follows, until some other address shall have been designated in a written notice
given in like manner, and shall be deemed to have been given when so delivered, mailed or telefaxed:

 

 

	If to the Debtor:	CTI Industries Corporation
	 	22160 North Pepper Road
	 	Barrington, Illinois 60010
	 	Attention:      Stephen M. Merrick
	 	Telephone:      (847) 620-1308
	 	Facsimile:      (847) 382-1219
	 	 
	with a copy to:	Vanasco, Genelly & Miller
	 	33 North LaSalle Street, Suite 2200 Chicago, Illinois 60602
	 	Attention:      Gerald Miller
	 	Telephone:      (312) 786-5100
	 	Facsimile:      (312) 786-5111
	 	 
	If to the Subordinated Creditors:	John H. Schwan
	 	22160 North Pepper Road
	 	Barrington, Illinois 60010
	 	Facsimile: (847) 382-1219

 

    	 	-7-	 

     

    

 

	If to the Agent:	PNC Bank, National Association
	 	c/o PNC Business Credit
	 	One North Franklin Street
	 	Chicago, Illinois 60606
	 	Attention:      Account Manager – CTI Industries
	 	Telephone:      (312) 454-2920
	 	Facsimile:      (312) 454-2919
	 	 
	with copy to:	Goldberg Kohn Ltd.
	 	55 E. Monroe, Suite 3300
	 	Chicago, Illinois 60603
	 	Attention:      Jeffrey Dunlop
	 	Telephone:      (312) 863-7128
	 	Facsimile:      (312) 863-7828

 

17.           Counterparts.
This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any
of the parties hereto may execute this Agreement by signing any such counterpart. Delivery of an executed counterpart of a signature
page hereto by facsimile or other electronic transmission (i.e. pdf) shall be effective as delivery of a manually executed counterpart
thereof.

 

18.           Law
Governing. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTIONS
5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THEREOF.

 

19.           Submission
to Jurisdiction; Waiver of Service and Venue. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST DEBTOR OR SUBORDINATED CREDITOR ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH OF DEBTOR AND EACH SUBORDINATED CREDITOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
IRREVOCABLY (a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NON-EXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (b) WAIVES ANY DEFENSE
OF FORUM NON CONVENIENS; (c) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 16 HEREOF;
(d) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE PARTY
IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (e) AGREES
THAT THE AGENT AND LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST THE APPLICABLE PARTY IN THE COURTS OF ANY OTHER JURISDICTION.

 

    	 	-8-	 

     

    

 

20.           Waiver
of Right to Trial by Jury. EACH OF DEBTOR AND EACH SUBORDINATED CREDITOR, ON THE ONE HAND, AND THE AGENT, ON THE OTHER HAND,
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH OF DEBTOR AND EACH SUBORDINATED CREDITOR, ON THE ONE HAND, AND THE AGENT, ON THE
OTHER HAND, HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY.

 

[SIGNATURE PAGE FOLLOWS]

 

    	 	-9-	 

     

    

 

IN WITNESS WHEREOF,
the Debtor has executed this Subordination Agreement as of the date first written above.

 

	 	DEBTOR:	 
	 	 	 
	 	CTI INDUSTRIES CORPORATION,	 
	 	an Illinois corporation	 
	 	 	 	 
	 	By:	/s/ Stephen M. Merrick	 
	 	Name:	Stephen M. Merrick	 
	 	Title:	CEO	 

 

Signature Page to Subordination Agreement

 

     

     

    

 

IN WITNESS WHEREOF,
the undersigned Subordinated Creditors have executed this Subordination Agreement as of the date first written above.

 

	 	SUBORDINATED CREDITORS
	 	 
	 	JOHN H. SCHWAN,	 
	 	an Individual	 
	 	 	 
	 	/s/ John H. Schwan	 

 

Signature Page to Subordination Agreement

 

     

     

    

 

IN WITNESS WHEREOF,
the Agent has executed this Subordination Agreement as of the date first written above.

 

	 	AGENT:	 
	 	 	 
	 	PNC BANK, N.A.,	 
	 	as Agent	 
	 	 	 
	 	By:	/s/ James Clifton	 
	 	Name:	James Clifton	 
	 	Title:	Senior Vice President	 

 

Signature Page to Subordination Agreement

 

     

     

    

 

SCHEDULE I TO SUBORDINATION AGREEMENT

 

Existing Subordinated Notes

 

Promissory Note dated as of December 14,
2017 made by CTI Industries Corporation, an Illinois corporation, to the order of John H. Schwan or his assigns in the original
principal amount of One Million Four Hundred Ninety-Eight Thousand Eight Hundred Twenty-Two and 01/100 Dollars ($1,498,822.01).

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