EXHIBIT 10.1

PROMISSORY NOTE

FOR VALUE RECEIVED, and subject to the terms and conditions set forth herein, CTI Industries Corporation, an Illinois corporation (the " Maker "), hereby unconditionally promises to pay to the order of Stephen M. Merrick or his assigns (the " Noteholder ", and together with the Maker, the " Parties "), the principal amount of Three Hundred Seventy Thousand Dollars ($370,000) (the " Loan "), together with all accrued interest thereon, as provided in this Promissory Note (the " Note ", as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2.     Final Payment Date; Optional Prepayments .

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

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

3.     Interest .

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

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

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

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

4.     Payment Mechanics .

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

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

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

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

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

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

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

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

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

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

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

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

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

6.3       Bankruptcy .  

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

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

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

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

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

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

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

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

8.     Miscellaneous .

8.1       Notices .  

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

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

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

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

8.4       Submission to Jurisdiction .  

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

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

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

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

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

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

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

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

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

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

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

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

EXHIBIT 10.2

PROMISSORY NOTE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2.     Final Payment Date; Optional Prepayments .

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

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

3.     Interest .

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

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

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

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

4.     Payment Mechanics .

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

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

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

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

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

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

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

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

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

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

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

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

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

6.3        Bankruptcy .  

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

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

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

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

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

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

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

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

8.     Miscellaneous .

8.1        Notices .  

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

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

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

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

8.4        Submission to Jurisdiction .  

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

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

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

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

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

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

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

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

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

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

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

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

EXHIBIT 10.3

Amendment No. 9
to Credit Agreement

This Amendment No. 9 to Credit Agreement is dated as of October 12, 2016, but effective as of September 30, 2016, and is between CTI Industries Corporation , an Illinois corporation (the “ Borrower ”); CTI Supply, Inc. , an Illinois corporation f/k/a CTI Helium, Inc., and a Wholly-Owned Subsidiary of the Borrower, in its capacity as a guarantor (the “ Subsidiary Guarantor ”); and BMO  Harris Bank N.A. , a national banking association, successor to Harris N.A. (the “ Bank ”).

The Borrower and the Bank entered into a Credit Agreement dated as of April 29, 2010 (as amended, modified, or supplemented before the effective date of this agreement, the “ Credit Agreement ”), under which the Bank has extended certain credit facilities to the Borrower.

In connection with the Credit Agreement, the Subsidiary Guarantor entered into a Guaranty dated as of April 29, 2010 (the “ Subsidiary Guaranty ”), under which, among other things, the Subsidiary Guarantor guarantees the prompt and complete payment and performance of the Obligations.

The parties now desire to amend the Credit Agreement in certain respects.

The parties therefore agree as follows:

1.           Definitions . Defined terms used but not defined in this agreement are as defined in the Credit Agreement.

2.           Amendments to Credit Agreement . (a) The definition of “CTI Helium” in section 5.1 of the Credit Agreement is hereby amended to read in its entirety as follows:

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

(b)          The definition of “Fixed Charges” in section 5.1 of the Credit Agreement is hereby amended to read in its entirety as follows:

“             “Fixed Charges” means, with reference to any period, the sum of (a) the aggregate amount of payments made or required to be made by the Borrower and its Subsidiaries, on a consolidated basis, during such period in respect of principal on all Indebtedness for Borrowed Money (whether at maturity, as a result of mandatory sinking fund redemption, scheduled payments or otherwise) other than (i) Revolving Loans, (ii) Intercompany Debt, and (iii) in the case of Subordinated Debt, principal reductions caused by the exercise of warrants by the holders of such debt and principal reductions made prior to the date of this Agreement, plus (b) total cash interest expense (including interest on Subordinated Debt but excluding interest on Intercompany Debt) for such period.”

(c)          The definition of “Total Funded Debt” in section 5.1 of the Credit Agreement is hereby amended to read in its entirety as follows:

“             “Total Funded Debt” means, at any time the same is to be determined, the aggregate of all Indebtedness for Borrowed Money of the Borrower and its Subsidiaries, on a consolidated basis, at such time, plus all Indebtedness for Borrowed Money of any other person or entity which is directly or indirectly guaranteed by the Borrower or any of its Subsidiaries or which the Borrower or any of its Subsidiaries has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which the Borrower or any of its Subsidiaries has otherwise assured a creditor against loss. For purposes of this Agreement, “Total Funded Debt” includes the 2016 CTI–Merrick Debt and the 2016 CTI–Schwan Debt, but “Total Funded Debt” does not include any Excluded VIE Debt or the Subordinated Debt owing to John H. Schwan and Stephen M. Merrick described in Section 8.7(f) .”

(d)          Section 5.1 of the Credit Agreement is hereby further amended by inserting each of the following new definitions in the appropriate alphabetical order:

“             “2016 CTI–Merrick Debt ” means the Indebtedness for Borrowed Money of the Borrower owing to Stephen M. Merrick evidenced by a Promissory Note dated September 30, 2016, in the original principal amount of $370,000 made by the Borrower and payable to Stephen M. Merrick.

“2016 CTI–Schwan Debt ” means the Indebtedness for Borrowed Money of the Borrower owing to John H. Schwan evidenced by a Promissory Note dated September 30, 2016, in the original principal amount of $530,000 made by the Borrower and payable to John H. Schwan.

“2016 Walmart Promotional Program” means a program and arrangement pursuant to which the Borrower will provide and sell to Walmart in November 2016 approximately 4,000 half-pallets of vacuum-sealing machines and rolls of film for sale at Walmart stores .

“Amendment No. 9 Effective Date” means September 30, 2016, which is the effective date of an Amendment No. 9 to Credit Agreement dated as of October 12, 2016, but effective as of September 30, 2016, between the Borrower, CTI Helium, and the Bank.”

(e)          Section 8.5(a) of the Credit Agreement is hereby amended to read in its entirety as follows:

“            (a)          (i) from and after the Amendment No. 9 Effective date through and including the earlier of (A) the date as of which all Receivables from the 2016 Walmart Promotional Program have been paid to the Borrower (as determined by the Bank in its sole and absolute discretion based, in part, on delivery to the Bank of invoice documentation and proof of payment remittance from Walmart) and (B) February 28, 2017, as soon as available, and in any event by the first Business Day of each week, a Borrowing Base certificate in the form attached hereto as Exhibit F showing the computation of the Borrowing Base in reasonable detail as of the close of business on the last day of the immediately preceding week, together with an accounts receivable and accounts payable aging and an inventory report supporting the computation of the Borrowing Base, prepared by the Borrower and certified to by its chief financial officer or such other officer acceptable to the Bank; and (ii) thereafter, as soon as available, and in any event within fifteen (15) days after the last day of each calendar month, a Borrowing Base certificate in the form attached hereto as Exhibit F showing the computation of the Borrowing Base in reasonable detail as of the close of business on the last day of such month, together with an accounts receivable and accounts payable aging and an inventory report supporting the computation of the Borrowing Base, prepared by the Borrower and certified to by its chief financial officer or such other officer acceptable to the Bank;”

(f)          Section 8.7 of the Credit Agreement is hereby amended as follows: (1) by deleting “and” from the end of section 8.7(h); (2) by renumbering existing section 8.7(i) as a new section 8.7(k); and (3) by inserting the following as new sections 8.7(i) and 8.7(j):

“             (i)          the 2016 CTI–Merrick Debt existing on the Amendment No. 9 Effective Date in an aggregate principal amount not to exceed $370,000 as of the Amendment No. 9 Effective Date, as reduced by permitted payments or permitted deemed payments thereon, and provided that (A) the maturity date for the 2016 CTI–Merrick Debt shall be not earlier than the date that is six months after the latest of the Equipment Loan Final Maturity Date, the Mortgage Loan Final Maturity Date, and the Revolving Credit Termination Date, (B) the 2016 CTI–Merrick Debt shall be unsecured, (C) the 2016 CTI–Merrick Debt shall be Subordinated Debt, and (D) the first $900,000 of Receivables from the 2016 Walmart Promotional Program paid to the Borrower shall, subject to Section 8.21 , be used by the Borrower to make one or more prepayments or deemed prepayments of all of the outstanding principal amount of the 2016 CTI–Merrick Debt and the 2016 CTI–Schwan Debt;

(j)          the 2016 CTI–Schwan Debt existing on the Amendment No. 9 Effective Date in an aggregate principal amount not to exceed $530,000 as of the Amendment No. 9 Effective Date, as reduced by permitted payments or permitted deemed payments thereon, and provided that (A) the maturity date for the 2016 CTI–Schwan Debt shall be not earlier than the date that is six months after the latest of the Equipment Loan Final Maturity Date, the Mortgage Loan Final Maturity Date, and the Revolving Credit Termination Date, (B) the 2016 CTI–Schwan Debt shall be unsecured, (C) the 2016 CTI–Schwan Debt shall be Subordinated Debt, and (D) the first $900,000 of Receivables from the 2016 Walmart Promotional Program paid to the Borrower shall, subject to Section 8.21w , be used by the Borrower to make one or more prepayments or deemed prepayments of all of the outstanding principal amount of the 2016 CTI–Merrick Debt and the 2016 CTI–Schwan Debt; and”

(g)          Clause (b) of Section 8.21 of the Credit Agreement is hereby amended to read in its entirety as follows:

“(b) make any voluntary prepayment of Subordinated Debt or effect any voluntary redemption thereof, other than voluntary prepayments (or deemed voluntary prepayments) of the 2016 CTI–Merrick Debt and the 2016 CTI–Schwan Debt that are not prohibited under the terms of any instrument or agreement subordinating the same to the Obligations, or”

3.             Reaffirmation of Subsidiary Guaranty . The Subsidiary Guarantor hereby expressly does each of the following:

4.             Representations and Warranties . To induce the Bank to enter into this agreement, the Borrower hereby represents to the Bank as follows:

5.             Conditions . The effectiveness of this agreement is subject to satisfaction of the following conditions:

6.             General . (a) This agreement and the rights and duties of the parties hereto are governed by, and are to be construed in accordance with, the internal laws of State of Illinois without regard to principles of conflicts of laws. Wherever possible each provision of the Credit Agreement and this agreement is to be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Credit Agreement and this agreement is prohibited by or invalid under any such law, that provision will be deemed ineffective to the extent of that prohibition or invalidity, without invalidating the remainder of that provision or the remaining provisions of the Credit Agreement and this agreement.

(b)          This agreement is a Loan Document.

(c)          This agreement binds each party and their respective successors and assigns, and this agreement inures to the benefit of each party and the successors and assigns of the Bank.

(d)          Except as specifically modified or amended by the terms of this agreement, the terms and provisions of the Credit Agreement, the Subsidiary Guaranty, and the other Loan Documents are incorporated by reference herein and in all respects continue in full force and effect. The Borrower, by execution of this agreement, hereby reaffirms, assumes, and binds itself to all of the obligations, duties, rights, covenants, terms, and conditions contained in the Credit Agreement and the other Loan Documents to which it is a party.

(e)          Each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” or words of like import, and each reference to the Credit Agreement in any and all instruments or documents delivered in connection therewith, are deemed to refer to the Credit Agreement, as amended by this agreement.

(f)          The Borrower shall pay all costs and expenses in connection with the preparation of this agreement and other related loan documents, including, without limitation, reasonable attorneys’ fees and time charges of attorneys who are employees of the Bank or any affiliate or parent of the Bank. The Borrower shall pay any and all stamp and other taxes, UCC search fees, filing fees, and other costs and expenses in connection with the execution and delivery of this agreement and the other instruments and documents to be delivered hereunder, and agrees to save the Bank harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses.

(g)          The Borrower hereby waives and releases any and all current existing claims, counterclaims, defenses, or set-offs of every kind and nature which it has or might have against the Bank arising out of, pursuant to, or pertaining in any way to the Credit Agreement, any and all documents and instruments in connection with or relating to the foregoing, or this agreement. The Borrower hereby further covenants and agrees not to sue the Bank or assert any claims, defenses, demands, actions, or liabilities against the Bank arising out of, pursuant to, or pertaining in any way to the Credit Agreement, any and all documents and instruments in connection with or relating to the foregoing, or this agreement.

(h)          The parties may sign this agreement in several counterparts, each of which will be deemed an original but all of which together will constitute one instrument. Receipt of an executed signature page to this agreement by facsimile or other electronic transmission will constitute effective delivery of that executed signature page. Electronic records of executed Loan Documents (including this agreement) maintained by the Bank will be deemed to be originals.

[ Signature pages follow ]

The parties are signing this Amendment No. 9 to Credit Agreement as of the date stated in the introductory clause.

Signature page to Amendment No. 9 to Credit Agreement

EXHIBIT 10.4

Amendment No. 4
to NOTE AND WARRANT PURCHASE Agreement

This Amendment No. 4 to Note and Warrant Purchase Agreement is dated as of October 12, 2016, but effective as of September 30, 2016, and is between CTI Industries Corporation , an Illinois corporation (the “ Company ”); CTI Supply, Inc. , an Illinois corporation f/k/a CTI Helium, Inc., and a Wholly-Owned Subsidiary of the Company, in its capacity as a guarantor (the “ Subsidiary Guarantor ”); and BMO PRIVATE EQUITY (U.S.), INC., a Delaware corporation (the “ Purchaser ”).

The Company and the Purchaser entered into a Note and Warrant Purchase Agreement dated as of July 17, 2012 (as amended, restated, supplemented or otherwise modified prior to the effective date hereof, the “ Purchase Agreement ”), under which, among other things, the Company sold to the Purchaser and the Purchaser purchased from the Company a note in the aggregate principal amount of $5,000,000.

In connection with the Purchase Agreement, the Subsidiary Guarantor entered into a Guaranty dated as of July 17, 2012 (the “ Subsidiary Guaranty ”), under which, among other things, the Subsidiary Guarantor guarantees the prompt and complete payment and performance of the Obligations.

The parties now desire to amend the Purchase Agreement in certain respects.

The parties therefore agree as follows:

1.           Definitions . Defined terms used but not defined in this agreement are as defined in the Purchase Agreement.

2.           Amendments to Purchase Agreement . (a) The definition of “CTI Helium” in section 5.1 of the Purchase Agreement is hereby amended to read in its entirety as follows:

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

(b)          The definition of “Fixed Charges” in section 5.1 of the Purchase Agreement is hereby amended to read in its entirety as follows:

“             “Fixed Charges” means, with reference to any period, the sum of (a) the aggregate amount of payments made or required to be made by the Company and its Subsidiaries, on a consolidated basis, during such period in respect of principal on all Indebtedness for Borrowed Money (whether at maturity, as a result of mandatory sinking fund redemption, scheduled payments or otherwise) other than (i) Revolving Loans (as defined in the Senior Credit Agreement), (ii) Intercompany Debt, and (iii) in the case of Subordinated Debt, principal reductions caused by the exercise of warrants by the holders of such debt and principal reductions made prior to the date of this Agreement, plus (b) total cash interest expense (including interest on Subordinated Debt but excluding interest on Intercompany Debt) for such period.”

(c)          The definition of “Total Funded Debt” in section 5.1 of the Purchase Agreement is hereby amended to read in its entirety as follows:

“             “Total Funded Debt” means, at any time the same is to be determined, the aggregate of all Indebtedness for Borrowed Money of the Company and its Subsidiaries, on a consolidated basis, at such time, plus all Indebtedness for Borrowed Money of any other person or entity which is directly or indirectly guaranteed by the Company or any of its Subsidiaries or which the Company or any of its Subsidiaries has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which the Company or any of its Subsidiaries has otherwise assured a creditor against loss. For purposes of this Agreement, “Total Funded Debt” includes the 2016 CTI–Merrick Debt and the 2016 CTI–Schwan Debt, but “Total Funded Debt” does not include any Excluded Flexo VIE Debt or the Subordinated Debt owing to John H. Schwan and Stephen M. Merrick described in Section 8.7(f) .”

(d)          Section 5.1 of the Purchase Agreement is hereby further amended by inserting each of the following new definitions in the appropriate alphabetical order:

“            “2016 CTI-Merrick Debt ” means the Indebtedness for Borrowed Money of the Company owing to Stephen M. Merrick evidenced by a Promissory Note dated September 30, 2016, in the original principal amount of $370,000 made by the Company and payable to Stephen M. Merrick.

“2016 CTI-Schwan Debt ” means the Indebtedness for Borrowed Money of the Company owing to John H. Schwan evidenced by a Promissory Note dated September 30, 2016, in the original principal amount of $530,000 made by the Company and payable to John H. Schwan.

“ 2016 Walmart Promotional Program ” means a program and arrangement pursuant to which the Company will provide and sell to Walmart in November 2016 approximately 4,000 half-pallets of vacuum-sealing machines and rolls of film for sale at Walmart stores.

“Amendment No. 4 Effective Date” means September 30, 2016, which is the effective date of an Amendment No. 4 to Note and Warrant Purchase Agreement dated as of October 12, 2016, but effective as of September 30, 2016, between the Company, CTI Helium, and the Purchaser.”

(e)            Section 8.5(a) of the Purchase Agreement is hereby amended to read in its entirety as follows:

“(a)          (i) from and after the Amendment No. 4 Effective Date and through and including the earlier of (A) the date as of which all Receivables (as such term is defined in the Senior Credit Agreement) from the 2016 Walmart Promotional Program have been paid to the Company (as determined by Purchaser in its sole and absolute discretion based, in part, on delivery to the Purchaser of invoice documentation and proof of payment remittance from Walmart) and (B) February 28, 2017, concurrently with delivery to the Senior Lender, and in any event by the first Business Day of each week, a copy of the Borrowing Base certificate in the form attached as Exhibit F to the Senior Credit Agreement showing the computation of the Borrowing Base in reasonable detail as of the close of business on the last day of the immediately preceding week, together with an accounts receivable and accounts payable aging and an inventory report supporting the computation of the Borrowing Base, prepared by the Company and certified to by its chief financial officer or such other officer acceptable to the Purchaser; and (ii) thereafter, concurrently with delivery to the Senior Lender, and in any event within fifteen (15) days after the last day of each calendar month, a copy of the Borrowing Base certificate in the form attached as Exhibit F to the Senior Credit Agreement showing the computation of the Borrowing Base in reasonable detail as of the close of business on the last day of such month, together with an accounts receivable and accounts payable aging and an inventory report supporting the computation of the Borrowing Base, prepared by the Company and certified to by its chief financial officer or such other officer acceptable to the Purchaser;”

(f)            Section 8.7 of the Purchase Agreement is hereby amended as follows: (1) by deleting “and” from the end of section 8.7(h); (2) by renumbering existing section 8.7(i) as a new section 8.7(k); and (3) by inserting the following as new sections 8.7(i) and 8.7(j):

“(i)          the 2016 CTI-Merrick Debt existing on the Amendment No. 4 Effective Date in an aggregate principal amount not to exceed $370,000 as of the Amendment No. 4 Effective Date, as reduced by permitted payments or permitted deemed payments thereon, and provided that (A) the maturity date for the 2016 CTI-Merrick Debt shall be not earlier than the date that is six months after the Maturity Date, (B) the 2016 CTI-Merrick Debt shall be unsecured, (C) the 2016 CTI-Merrick Debt shall be Subordinated Debt and (D) the first $900,000 of Receivables (as such term is defined in the Senior Credit Agreement) from the 2016 Walmart Promotional Program paid to the Company shall, subject to Section 8.21, be used by the Company to make one or more prepayments or deemed prepayments of all of the outstanding principal amount of the 2016 CTI-Merrick Debt and the 2016 CTI-Schwan Debt;

(j)          the 2016 CTI-Schwan Debt existing on the Amendment No. 4 Effective Date in an aggregate principal amount not to exceed $530,000 as of the Amendment No. 4 Effective Date, as reduced by permitted payments or permitted deemed payments thereon, and provided that (A) the maturity date for the 2016 CTI-Schwan Debt shall be not earlier than the date that is six months after the Maturity Date, (B) the 2016 CTI-Schwan Debt shall be unsecured, (C) the 2016 CTI-Schwan Debt shall be Subordinated Debt and (D) the first $900,000 of Receivables (as such term is defined in the Senior Credit Agreement) from the 2016 Walmart Promotional Program paid to the Company shall, subject to Section 8.21, be used by the Company to make one or more prepayments or deemed prepayments of all of the outstanding principal amount of the 2016 CTI-Merrick Debt and the 2016 CTI-Schwan Debt; and”

(g)          Clause (b) of Section 8.21 of the Purchase Agreement is hereby amended and restated in its entirety to read as follows:

“(b) make any voluntary prepayment of Subordinated Debt or effect any voluntary redemption thereof other than voluntary prepayments (or deemed voluntary prepayments) of the 2016 CTI-Merrick Debt and the 2016 CTI-Schwan Debt that are not prohibited under the terms of any instrument or agreement subordinating the same to the Obligations, or”

3.             Reaffirmation of Subsidiary Guaranty . The Subsidiary Guarantor hereby expressly does each of the following:

4.             Representations and Warranties . To induce the Purchaser to enter into this agreement, the Company hereby represents to the Purchaser as follows:

5.             Conditions . The effectiveness of this agreement is subject to satisfaction of the following conditions:

6.             General . (a) This agreement and the rights and duties of the parties hereto are governed by, and are to be construed in accordance with, the internal laws of State of Illinois without regard to principles of conflicts of laws. Wherever possible each provision of the Purchase Agreement and this agreement is to be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Purchase Agreement and this agreement is prohibited by or invalid under any such law, that provision will be deemed ineffective to the extent of that prohibition or invalidity, without invalidating the remainder of that provision or the remaining provisions of the Purchase Agreement and this agreement.

(b)          This agreement is an Operative Document.

(c)          This agreement binds each party and their respective successors and assigns, and this agreement inures to the benefit of each party and the successors and assigns of the Purchaser.

(d)          Except as specifically modified or amended by the terms of this agreement, the terms and provisions of the Purchase Agreement, the Subsidiary Guaranty, and the other Operative Documents are incorporated by reference herein and in all respects continue in full force and effect. The Company, by execution of this agreement, hereby reaffirms, assumes, and binds itself to all of the obligations, duties, rights, covenants, terms, and conditions contained in the Purchase Agreement and the other Operative Documents to which it is a party.

(e)          Each reference in the Purchase Agreement to “this Agreement,” “hereunder,” “hereof,” or words of like import, and each reference to the Purchase Agreement in any and all instruments or documents delivered in connection therewith, are deemed to refer to the Purchase Agreement, as amended by this agreement.

(f)          The Company shall pay all costs and expenses in connection with the preparation of this agreement and other related loan documents, including, without limitation, reasonable attorneys’ fees and time charges of attorneys who are employees of the Purchaser or any affiliate or parent of the Purchaser. The Company shall pay any and all stamp and other taxes, UCC search fees, filing fees, and other costs and expenses in connection with the execution and delivery of this agreement and the other instruments and documents to be delivered hereunder, and agrees to save the Purchaser harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses.

(g)          The Company hereby waives and releases any and all current existing claims, counterclaims, defenses, or set-offs of every kind and nature which it has or might have against the Purchaser arising out of, pursuant to, or pertaining in any way to the Purchase Agreement, any and all documents and instruments in connection with or relating to the foregoing, or this agreement. The Company hereby further covenants and agrees not to sue the Purchaser or assert any claims, defenses, demands, actions, or liabilities against the Purchaser arising out of, pursuant to, or pertaining in any way to the Purchase Agreement, any and all documents and instruments in connection with or relating to the foregoing, or this agreement.

(h)          The parties may sign this agreement in several counterparts, each of which will be deemed an original but all of which together will constitute one instrument. Receipt of an executed signature page to this agreement by facsimile or other electronic transmission will constitute effective delivery of that executed signature page. Electronic records of executed Operative Documents (including this agreement) maintained by the Purchaser will be deemed to be originals.

[Signature pages follow]

(Signature Page to Amendment No. 4 to Note and Warrant Purchase Agreement)

The parties are signing this Amendment No. 4 to Note and Warrant Purchase Agreement as of the date stated in the introductory clause.

EXHIBIT 10.5

SUBORDINATION AGREEMENT
(2016 CTI–Shareholder Debt)

This Subordination Agreement made and entered into as of October 12, 2016, but effective as of September 30, 2016 (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 ”), Stephen M. Merrick , an individual (“ Merrick ”), John H. Schwan , an individual (“ Schwan ” and, together with Merrick, each a “ Subordinated Creditor ”), and BMO  Harris Bank N.A. , a national banking association (the “ Bank ”).

RECITALS :

A.            Pursuant to that certain Credit Agreement dated as of April 29, 2010 (as amended, restated, supplemented, or otherwise modified from time to time, the “ Credit Agreement ”), 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.

B.            Pursuant to a Promissory Note dated September 30, 2016, in the original principal amount of $370,000 made by the Debtor and payable to Merrick (the “ 2016 CTI–Merrick Note ”), and a Promissory Note dated September 30, 2016, in the original principal amount of $530,000 made by the Debtor and payable to Schwan (the “ 2016 CTI–Schwan Note ” and, together with the 2016 CTI–Merrick Note, each a “ Subordinated Debt Instrument ”), the Debtor is or will be indebted in various amounts to the Subordinated Creditors.

C.            The Debtor’s incurring the Subordinated Debt requires the Bank’s consent, and it is a condition the Bank’s consent that the Debtor and the Subordinated Creditors deliver this Agreement.

D.            Therefore, the Debtor, the Subordinated Creditors, and the Bank now desire to enter into this Agreement.

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)          “ 2016 Merrick–BMO Debt ” means the indebtedness of Merrick owing to the Bank evidenced by, among other documents, the 2016 Merrick–BMO Line of Credit Agreement and a Promissory Note dated September 30, 2016, in the original principal amount of $1,152,000 made by Merrick and payable to the Bank.

(b)          “ 2016 Merrick–BMO Line of Credit Agreement ” means a Line of Credit Agreement entered into as of September 30, 2016, by and between Merrick and the Bank.

(c)          “ 2016 Schwan–BMO Debt ” means the indebtedness of Schwan, individually and as Trustee of the John H. Schwan Revocable Trust dated September 9, 1997, owing to the Bank evidenced by, among other documents, the 2016 Schwan–BMO Line of Credit Agreement and a Promissory Note dated September 30, 2016, in the original principal amount of $2,250,000 made by Schwan, individually and as Trustee of the John H. Schwan Revocable Trust dated September 9, 1997, and payable to the Bank.

(d)          “ 2016 Schwan–BMO Line of Credit Agreement ” means a Line of Credit Agreement entered into as of September 30, 2016, by and between Schwan, individually and as Trustee of the John H. Schwan Revocable Trust dated September 9, 1997, and the Bank.

(e)          “ 2016 Walmart Promotional Program ” means a program and arrangement pursuant to which the Debtor will provide and sell to Walmart in November 2016 approximately 4,000 half-pallets of vacuum-sealing machines and rolls of film for sale at Walmart stores.

(f)          “ Merrick Bridge Repayment ” means the “Bridge Repayment” under and as defined in the 2016 Merrick–BMO Line of Credit Agreement, as in effect on October 12, 2016.

(g)          “ Schwan Bridge Repayment ” means the “Bridge Repayment” under and as defined in the 2016 Schwan–BMO Line of Credit Agreement, as in effect on October 12, 2016.

(h)          “ Subordinated Debt ” means all of the indebtedness, obligations, and liabilities of the Debtor to the Subordinated Creditors evidenced by the Subordinated Debt Instruments.

(i)          “ Superior Debt ” means all liabilities, indebtedness and obligations of the Debtor to the Bank, 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, including, but not limited to, all indebtedness, obligations and liabilities of the Borrower to the Bank under the Credit Agreement, the Notes, or any other agreement, document, or instrument referred to in Section 3 of 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. 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 BMO Harris Bank N.A. to the extent provided in a Subordination Agreement dated as of September 30, 2016, from the payee to said lender.

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 Bank 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 Bank properly assigned or endorsed to the Bank. Nothing contained in this Agreement shall affect the validity of the Subordinated Debt.

(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 Bank’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 Bank 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 Bank 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. This subordination as to the Subordinated Creditor Collateral is intended to define the rights and duties of the Bank 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 Bank 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 in cash: (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 Bank’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 or the Credit 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 Bank 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 Bank. The Bank is irrevocably authorized (but not required), and each Subordinated Creditor does hereby irrevocably appoint the Bank, or any of its officers or employees on behalf of the Bank 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 Bank and shall not be commingled with other funds or property of the recipient.

(c)           Permitted Payments .

(i)          Subject to the other provisions of this Section 3(c), the Debtor shall be permitted to make, and the Subordinated Creditors shall be permitted to accept from the Debtor, one or more prepayments of principal of the Subordinated Debt, so long as (A) the Debtor has delivered to the Bank evidence satisfactory to the Bank, in its sole and absolute discretion, that that prepayment is being funded solely with amounts received in collection of accounts receivable from the 2016 Walmart Promotional Program (which evidence might include, but will not necessarily be limited to, invoice documentation and proof of payment remittance from Walmart), (B) that prepayment is funded solely with amounts received in collection of accounts receivable from the 2016 Walmart Promotional Program, and (C) that prepayment is made on or before February 28, 2017.

(ii)         Subject to the other provisions of this Section 3(c), the Debtor shall be permitted to make, and the Subordinated Creditors shall be permitted to accept from the Debtor, one or more prepayments of accrued interest on the Subordinated Debt, so long as (A) the Debtor has delivered to the Bank evidence satisfactory to the Bank, in its sole and absolute discretion, that that prepayment is being funded solely with amounts received in collection of accounts receivable from the 2016 Walmart Promotional Program (which evidence might include, but will not necessarily be limited to, invoice documentation and proof of payment remittance from Walmart), (B) that prepayment is funded solely with amounts received in collection of accounts receivable from the 2016 Walmart Promotional Program, (C) that prepayment is made on or before February 28, 2017, and (D) the outstanding principal balance of the Subordinated Debt has been paid in full in cash.

(iii)        The Debtor shall not be permitted to make, and the Subordinated Creditors shall not be permitted to accept from the Debtor, payments in cash of any accrued interest on the Subordinated Debt other than in accordance with Section 3(c)(ii), but interest may accrue and continue to accrue on the Subordinated Debt in accordance with the Subordinated Debt Instruments. No such accrued interest may be capitalized or otherwise added to the outstanding principal balance of the Subordinated Debt, and no such accrued interest may itself bear interest under the Subordinated Debt Instruments.

(iv)        Until the Merrick Bridge Repayment is paid in full in cash, the Debtor shall, in lieu of making any prepayment of the Subordinated Debt evidenced by the 2016 CTI–Merrick Note that is permitted to be made in accordance with Section 3(c)(i) or 3(c)(ii), pay to the Bank the amount of that permitted prepayment as a payment or prepayment of the Merrick Bridge Repayment, and any such payment or prepayment paid to the Bank will be deemed a prepayment, in like amount, of the Subordinated Debt evidenced by the 2016 CTI–Merrick Note.

(v)         Until the Schwan Bridge Repayment is paid in full in cash, the Debtor shall, in lieu of making any prepayment of the Subordinated Debt evidenced by the 2016 CTI–Schwan Note that is permitted to be made in accordance with Section 3(c)(i) or 3(c)(ii), pay to the Bank the amount of that permitted prepayment as a payment or prepayment of the Schwan Bridge Repayment, and any such payment or prepayment paid to the Bank will be deemed a prepayment, in like amount, of the Subordinated Debt evidenced by the 2016 CTI–Schwan Note.

(vi)        Unless otherwise agreed in writing by each Subordinated Creditor, the Debtor, and the Bank, all prepayments of the Subordinated Debt permitted to be made in accordance Section 3(c)(i) or 3(c)(ii) (and all payments or prepayments of the Merrick Bridge Repayment or the Schwan Bridge Repayment to be made in lieu of any such permitted prepayment in accordance with Section 3(c)(iv) or 3(c)(v), respectively) must be made ratably to the Subordinated Creditors (or to the Bank, as applicable) based on the outstanding principal balance of the Subordinated Debt owing from the Debtor to each Subordinated Creditor.

4.            Collection of the Subordinated Debt, Bankruptcy, Etc . Until all of the Superior Debt is paid in full in cash, no Subordinated Creditor shall, without the prior written consent of the Bank, accelerate the maturity of the Subordinated Debt, initiate or join with any other creditor of the Debtor in initiating any proceedings, voluntary or involuntary, for the collection of the Subordinated Debt or for the distribution, division or application of all or part of the assets of the Debtor or the proceeds thereof, whether such proceedings be for the liquidation, dissolution or winding up of the Debtor or the Debtor’s business, receivership, insolvency or bankruptcy proceedings, an assignment for the benefit of creditors or proceedings by or against the Debtor for relief under any bankruptcy, reorganization or insolvency law or any law relating to the relief of debtors, readjustment of indebtedness, reorganization, arrangement, composition, extension or otherwise. The Bank is irrevocably authorized (but not required), and each Subordinated Creditor does hereby irrevocably appoint the Bank, or any of its officers or employees on behalf of the Bank 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 Bank in its discretion elects to effect, to the Superior Debt until all of the Superior Debt has been paid in full in cash, 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.

5.            Warranties and Representations Concerning Subordinated Debt .

(a)          The Debtor and the Subordinated Creditors jointly and severally represent and warrant that (i) 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 Bank (if requested by the Bank), (ii) 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 Bank, and (iii) as of the date hereof, (A) the aggregate outstanding principal balance of Subordinated Debt owing from the Debtor to Schwan is $530,000 and (B) the aggregate outstanding principal balance of Subordinated Debt owing from the Debtor to Merrick is $370,000.

(b)          Until all of the Superior Debt has been paid in full in cash, (i) no Subordinated Creditor shall assign or subordinate any part of the Subordinated Debt except to or in favor of the Bank; and (ii) except as set forth in Section 8, 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 . The Subordinated Creditors jointly and severally waive (a) 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 Bank, (b) 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 Bank, 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 (c) all rights, if any, to require a marshaling of the Debtor’s assets by the Bank or to require that the Bank 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 Bank 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.

7.            Duration . This Agreement is a continuing agreement and the Bank may, without notice to the Subordinated Creditors, extend or continue credit and make other financial accommodations to or for the account of the Debtor in reliance upon this Agreement. This Agreement may be terminated by the Subordinated Creditors only if all of the Superior Debt is finally paid in full in cash.

8.            Amendment of Subordinated Debt . Each Subordinated Creditor shall not modify or amend any note, agreement, or instrument evidencing or securing the Subordinated Debt, including, without limitation, the Subordinated Debt Instruments, without the prior written consent of the Bank.

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 Bank 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 Bank 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 Bank’s Duties Limited . The rights granted to the Bank in this Agreement are solely for its protection and nothing herein contained imposes on the Bank 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 Bank’s possession. The Bank 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 Bank, the Debtor and each Subordinated Creditor.

13.          Additional Documentation . The Debtor and each Subordinated Creditor shall execute and deliver to the Bank such further instruments and shall take such further action as the Bank 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 Bank on demand all expenses of every kind, including actual attorney’s fees, which the Bank may incur in enforcing or protecting any of their rights under this Agreement.

15.          Persons Bound . This Agreement benefits the Bank and its successors and assigns, and binds the Debtor, each Subordinated Creditor and their respective successors and assigns.

16.          Defects Waived . This Agreement is effective notwithstanding any defect in the validity or enforceability of any instrument or document evidencing the Superior Debt.

17.          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:

18.          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. Receipt of an executed signature page to this Agreement by facsimile or other electronic transmission will constitute effective delivery of that executed signature page. Electronic records of executed Loan Documents (including with Agreement) maintained by the Bank will be deemed originals.

19.          Law Governing . The validity, construction and enforcement of this Agreement are governed by the internal laws of the State of Illinois.

[ Signature pages follow ]

The parties are signing this Subordination Agreement as of the date stated in the introductory clause.