SEC Contract Filing

Filing Date: 2016-11-14

Document Content:
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>6
<FILENAME>v452160_ex10-5.htm
<DESCRIPTION>EXHIBIT 10.5
<TEXT>
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<P STYLE="margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXHIBIT 10.5</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SUBORDINATION AGREEMENT</B><BR>
(2016&nbsp;CTI&ndash;Shareholder Debt)</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This Subordination Agreement made and entered
into as of October&nbsp;12, 2016, but effective as of September&nbsp;30, 2016 (as amended, restated, supplemented or otherwise
modified from time to time, this &ldquo;<B>Agreement</B>&rdquo;), is by and among <FONT STYLE="text-transform: uppercase">CTI Industries
CORPORATION</FONT>, an Illinois corporation (the &ldquo;<B>Debtor</B>&rdquo;), <FONT STYLE="text-transform: uppercase">Stephen&nbsp;M.&nbsp;Merrick</FONT>,
an individual (&ldquo;<B>Merrick</B>&rdquo;), <FONT STYLE="text-transform: uppercase">John H. Schwan</FONT>, an individual (&ldquo;<B>Schwan</B>&rdquo;
and, together with Merrick, each a &ldquo;<B>Subordinated Creditor</B>&rdquo;), and BMO&nbsp;<FONT STYLE="text-transform: uppercase">Harris
Bank&nbsp;N.A.</FONT>, a national banking association (the &ldquo;<B>Bank</B>&rdquo;).</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><U>RECITALS</U>:</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to that certain Credit Agreement dated as of April 29, 2010 (as amended, restated, supplemented, or otherwise modified from time
to time, the &ldquo;<B>Credit Agreement</B>&rdquo;), by and between the Debtor and the Bank, the Bank has agreed to make available
to the Debtor the Loans, as evidenced by the Notes, on the terms and subject to the conditions set forth in the Credit Agreement.</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to a Promissory Note dated September&nbsp;30, 2016, in the original principal amount of $370,000 made by the Debtor and payable
to Merrick (the &ldquo;<B>2016&nbsp;CTI&ndash;Merrick Note</B>&rdquo;), and a Promissory Note dated September&nbsp;30, 2016, in
the original principal amount of $530,000 made by the Debtor and payable to Schwan (the &ldquo;<B>2016&nbsp;CTI&ndash;Schwan Note</B>&rdquo;
and, together with the 2016&nbsp;CTI&ndash;Merrick Note, each a &ldquo;<B>Subordinated Debt Instrument</B>&rdquo;), the Debtor
is or will be indebted in various amounts to the Subordinated Creditors.</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Debtor&rsquo;s incurring the Subordinated Debt requires the Bank&rsquo;s consent, and it is a condition the Bank&rsquo;s consent
that the Debtor and the Subordinated Creditors deliver this Agreement.</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Therefore,
the Debtor, the Subordinated Creditors, and the Bank now desire to enter into this Agreement.</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><U>AGREEMENTS</U>:</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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:</P>

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