EXHIBIT 10.16
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Agreement is made as of July 1, 1997 among CTI Industries
Corporation, a Delaware corporation (the "Borrower"), and First American Bank,
an Illinois banking corporation (the "Bank"), and Stephen M. Merrick, John H.
Schwan, and Howard W.
Schwan (the "Guarantors").
Whereas, the Borrower and the Bank are parties to a Loan and
Security Agreement dated as of August 22, 1996, as it has been amended from time
to time (the "Loan Agreement"), and the Borrower is the maker of the Revolving
Note dated August 22, 1996 payable to the order of the Bank in the original
principal amount of $3,000,000.00 (the "Revolving Note"), and the Borrower is
the maker of the First Term Note dated August 22, 1996 payable to the order of
the Bank in the original principal amount of $1,100,000.00 (the "First Term
Note"), and the Borrower is the maker of the Second Term Note dated August 22,
1996 payable to the order of the Bank in the original principal amount of
$2,200,000.00 (the "Second Term Note") each delivered by the Borrower to the
Bank; and
Whereas, the obligations of the Borrower are secured by, among
other things: a security interest in all of Borrower's assets; a first mortgage
made by American National Bank and Trust Company of Chicago, not personally, but
solely as Trustee under Trust Agreement dated September 19, 1984 and known as
Trust No. 61978 (the "Trust") to secure the obligations of the Borrower under
the Loan Agreement and the Second Term Note; and a Collateral Assignment of
Beneficial Interest in the Trust (the "ABI")and
Whereas, the Guarantors have guaranteed the obligations of the
Borrower to the Bank pursuant to a Guaranty dated August 22, 1996 (hereinafter
referred to as the "Guaranty"); and
Whereas, on November 21, 1996 the Borrower and the Bank
executed a First Amendment to Loan and Security Agreement whereby the Bank
temporarily increased the rate of the advance limit on eligible inventory; and
Whereas, on March 21, 1997 the Borrower and the Bank executed
a Second Amendment to Loan and Security Agreement whereby the Bank temporarily
increased the rate of the advance limit on eligible inventory; and
Whereas, the Borrower and the Bank desire to enter into this
Agreement in order to extend additional indebtedness to the Borrower in the form
of a third and fourth term loans, extend the maturity of the Revolving Note, and
otherwise confirm the obligations of the Borrower under the Loan Agreement, the
Note (as hereinafter defined), the Guaranty, the Mortgage, the ABI, and all
other documents and instruments at any time evidencing, creating, or securing
the obligations of the Borrower to the Bank (collectively, the "Loan
Documents").
Now, therefore, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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1. Defined Terms. Capitalized words used in this Agreement as
defined terms are used herein with the same meanings as in the Loan Agreement,
unless otherwise defined herein.
2. Amendment to Loan Agreement. Section 1.1 of the Loan
Agreement shall be amended and restated and, as amended in its entirety, reads
as follows:
1.1 Loan Amount. Subject to and upon the terms and conditions
set forth in this Agreement, the Bank agrees to lend to the Borrower,
from time to time, such sums as may be requested by the Borrower and
which the Bank in its discretion agrees to lend from time to time, the
total of which shall not exceed, in the aggregate, $6,553,513.67,
subject to the further limits hereinafter set forth (the "Loan")
pursuant to the First Term Loan, the Second Term Loan, the Third Term
Loan, the Fourth Term Loan and the Revolving Loan hereinafter provided.
3. Amendment to Loan Agreement. The first paragraph in Section
1.1.3 of the Loan Agreement shall be amended and restated in its entirety and,
as amended, reads as follows:
1.1.3 Revolving Loan. The Bank agrees to lend to the Borrower,
subject to and upon the terms and conditions set forth herein, at any
time or from time to time on or after the date hereof and on or before
July 1, 1998, such amounts (each such loan and all such loans,
collectively, as the context requires being herein referred to as the
"Revolving Loan") as may be requested by the Borrower and which the
Bank in its discretion agrees to lend from time to time, subject to the
limitations hereinafter set forth. Within the limits and subject to and
upon the terms and conditions herein set forth, amounts under the
Revolving Loan may be borrowed and repaid and reborrowed from time to
time. Except as otherwise permitted by the Bank, the aggregate unpaid
principal amount of the Revolving Loan outstanding at any time shall
not exceed the lesser of Three Million and No/100 Dollars
($3,000,000.00) or the Advance Limit (as hereinafter defined). The
Revolving Loan shall be evidenced by and be repayable with interest in
accordance with the terms of this Agreement and a promissory note
payable to the order of the Bank in the original principal amount of
$3,000,000.00 which shall be dated on or before the initial
disbursement of the Revolving Loan and shall be duly executed and
delivered by the Borrower (the "Revolving Note"). For purposes of this
Agreement, the Advance Limit shall be equal to the sum of: (i) 80% of
the Eligible Accounts (as defined in the Loan Agreement) or
$3,000,000.00, whichever is less; and (ii) 25% of Eligible Inventory
(as defined in the Loan Agreement) or $1,000,000.00, whichever is less,
except for the period from June 19, 1997 through October 17, 1997 when
the advance on Eligible Inventory shall be increased to 35% or
$1,300,000.00, whichever is less.
4. Amendment to Loan Agreement. Section 1 of the Loan
Agreement shall be amended and restated in its entirety to add
the following sub-sections:
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1.1.4 Third Term Loan. The Bank agrees to lend to the
Borrower, subject to and upon the terms and conditions herein set
forth, the sum of Two Hundred Seventy Five Thousand and No/100 Dollars
($275,000.00) (herein referred to as the "Third Term Loan"). The Third
Term Loan shall be evidenced by and be repayable with interest in
accordance with the terms of this Agreement and a promissory note
payable to the order of the Bank in the original principal amount of
$275,000.00, which shall be dated on or before the initial disbursement
of the Third Term Loan and shall be duly executed and delivered by the
Borrower (the "Third Term Note").
1.1.5 Fourth Term Loan. The Bank agrees to lend to the
Borrower, subject to and upon the terms and conditions herein set
forth, the sum of Two Hundred Thousand and No/100 Dollars
($200,000.00)(herein referred to as the "Fourth Term Loan"). The Fourth
Term Loan shall be evidenced by and be repayable with interest in
accordance with the terms of this Agreement and a promissory note
payable to the order of the Bank in the original principal amount of
$200,000.00, which shall be dated on or before the initial disbursement
of the Fourth Term Loan and shall be duly executed and delivered by the
Borrower (the "Fourth Term Note").
5. Amendment to Loan Agreement. Section 1.2 of the Loan
Agreement shall be amended and restated in its entirety to add the following
sub-sections:
2.1.4 Third Term Loan Disbursements. The Third Term Loan shall
be disbursed, as the Borrower shall direct, upon the satisfaction of
the conditions set forth in Sections 2 and 3 of the Loan Agreement.
2.1.5 Fourth Term Loan Disbursements. The Fourth Term Loan
shall be disbursed, as the Borrower shall direct, upon the satisfaction
of the conditions set forth in Sections 2 and 3 of the Loan Agreement.
6. Amendment to Loan Agreement. Section 1.3 of the Loan
Agreement shall be amended and restated in its entirety to add the following
sub-sections:
1.3.4 Third Term Loan Interest and Penalties The Third Term
Loan shall bear interest on its principal amount outstanding from time
to time at a rate per annum equal to one percent (1%) per annum over
the Bank's Prime Rate, which shall be adjusted daily when and as the
Bank's Prime Rate changes. Upon and after the occurrence of an Event of
Default, the Third Term Loan shall bear interest on its principal
amount outstanding from time to time at a rate per annum (the "Third
Term Loan Default Rate") equal to four percent (4%) per annum over the
Bank's Prime Rate, which shall be adjusted daily when and as the Bank's
Prime Rate changes. Interest accruing prior to maturity of the Third
Term Loan (whether by lapse of time, acceleration, or other wise) shall
be due and payable on the first day of each calendar month, commencing
with the month following the date on which the first disbursement of
the Third Term Loan is made. After maturity of the Third Term Loan
(whether by lapse of time, acceleration, or otherwise) accrued interest
shall be due and payable upon demand. The Borrower shall pay a late
charge of five percent (5%) of the amount of any sum payable to the
Bank under this Agreement or any of the Notes that is received by the
Bank more than 10 days after the date on which it is due. Such late
charges shall be due and payable on the due date of the next
installment of principal or interest, together with the regular
installment then due.
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1.3.5 Fourth Term Loan Interest and Penalties The Fourth Term
Loan shall bear interest on its principal amount outstanding from time
to time at a rate per annum equal to one percent (1%) per annum over
the Bank's Prime Rate, which shall be adjusted daily when and as the
Bank's Prime Rate changes. Upon and after the occurrence of an Event of
Default, the Fourth Term Loan shall bear interest on its principal
amount outstanding from time to time at a rate per annum (the "Fourth
Term Loan Default Rate") equal to four percent (4%) per annum over the
Bank's Prime Rate, which shall be adjusted daily when and as the Bank's
Prime Rate changes. Interest accruing prior to maturity of the Fourth
Term Loan (whether by lapse of time, acceleration, or other wise) shall
be due and payable on the first day of each calendar month, commencing
with the month following the date on which the first disbursement of
the Fourth Term Loan is made. After maturity of the Fourth Term Loan
(whether by lapse of time, acceleration, or otherwise) accrued interest
shall be due and payable upon demand. The Borrower shall pay a late
charge of five percent (5%) of the amount of any sum payable to the
Bank under this Agreement or any of the Notes that is received by the
Bank more than 10 days after the date on which it is due. Such late
charges shall be due and payable on the due date of the next
installment of principal or interest, together with the regular
installment then due.
7. Amendment to Loan Agreement. Section 1.4 of the Loan
Agreement shall be amended and restated in its entirety to add the following
sub-sections:
1.4.4 Third Term Loan Maturity. The Third Term Loan shall be
due and payable in monthly installments of $7,738.89 of principal,
commencing on November 1, 1997, and a like sum on the first day of each
calendar month thereafter until the principal of and accrued and unpaid
interest on the Third Term Loan is paid in full, provided that the
outstanding principal of and accrued and unpaid interest on the Third
Term Loan, if not sooner paid in full, shall be due and payable in full
on October 1, 2000 (or earlier as provided in this Agreement or the
Third Term Note).
1.4.5 Fourth Term Loan Maturity. The Fourth Term Loan shall be
due and payable in monthly installments of $16,666.67 of principal,
commencing on August 1, 1997, and a like sum on the first day of each
calendar month thereafter until the principal of and accrued and unpaid
interest on the Fourth Term Loan is paid in full, provided that the out
standing principal of and accrued and unpaid interest on the Fourth
Term Loan, if not sooner paid in full, shall be due and payable in full
on July 1, 1998 (or earlier as provided in this Agreement or the Fourth
Term Note).
8. Amendment to Loan Agreement. Section 2.1(a) of the Loan
Agreement shall be amended and restated in its entirety and, as amended, reads
as follows:
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(a) the First Term Note, the Second Term Note, the Third Term
Note, the Fourth Term Note, and the Revolving Note (collectively, the
"Note");
9. Delivery of Loan Documents The Borrower shall execute and
deliver to the Bank:
(a) a First Amendment to Revolving Note in the form attached
as Appendix A hereto providing that the Revolving Note shall be due and
payable in full on July 1, 1998 (or earlier as provided in the First
Amendment to Revolving Note, or the Loan Agreement;
(b) a Third Term Note dated July 1, 1997 in the original
principal amount of $275,000.00;
(c) a Fourth Term Note dated July 1, 1997 in the original
principal amount of $200,000.00;
(d) a Guaranty dated July 1, 1997 executed by the Guarantors;
and
(e) an Officer's Certificate dated July 1, 1997.
10. Validity of Agreements. Except as specifically provided in
this Agreement, all of the terms, provisions, and covenants of the Borrower in
the Loan Agreement, the Note, and the other Loan Documents are now and shall
remain in full force and effect and have not been and shall not be modified in
any way and are hereby affirmed, confirmed, and ratified in all respects. The
Borrower and the Guarantors hereby acknowledge that they have no claims or
offsets against, or defenses or counterclaims to, the enforcement by the Bank of
the Loan Agreement, the Note and the Amendment, or any of the other Loan
Documents. After the date hereof, all references to "Agreement", "hereof",
"herein", or the like appearing in the Loan Agreement shall be deemed to be
references to the Loan Agreement as herein amended or modified; all references
to the "First Term Note," the "Second Term Note," the "Third Term Note," the
"Fourth Term Note," and the "Revolving Note" in the Loan Agreement, the Note, or
any other Loan Documents shall be deemed to refer to the Note as amended by the
Third Amendment to Loan and Security Agreement and any extension, renewal,
refinancing, modification, amendment, or restructuring thereof.
11. Miscellaneous Provisions.
a. This Agreement shall be governed by the internal laws of
the State of Illinois.
b. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which, when taken together, shall constitute one and the same
instrument.
c. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and
assigns.
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d. This Agreement represents the complete agreement of the
parties with respect to the subject matter hereof and supersedes all
prior negotiations and Agreements with respect to the subject matter
hereof.
In Witness hereof, the parties have executed this Agreement on
the date first written above.
BORROWER:
CTI Industries Corporation
Attest:
By:/s/Stephen M. Merrick,
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Stephen M. Merrick,
By:/s/Howard W. Schwan President
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Howard W. Schwan,
Secretary
BANK:
First American Bank
By:/s/ Martin J. Carmody
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Martin J. Carmody,
Executive Vice President
GUARANTORS:
/s/ Stephen M. Merrick
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Stephen M. Merrick,ndividually
/s/ John H. Schwan
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John H. Schwan, Individually
/s/ Howard W. Schwan
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Howard W. Schwan, Individually