Promissory Note dated December 14, 2017

EXHIBIT 10.4

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

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 One Million Four Hundred Ninety-Eight Thousand Eight Hundred Twenty-Two and 01/100 Dollars ($1,498,822.01) (the “Loan”) comprised of (a) One Million Ninety-Nine Thousand Ninety and 76/100 Dollars ($1,099,090.76) on which interest shall be paid at a rate of 6% per annum, and (b) Three Hundred Ninety-Nine Thousand Seven Hundred Thirty-One and 25/100 Dollars ($399,731.25) of existing accrued interest on which no interest shall be paid, all 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 December 31, 2023.

"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.

“Subordination Agreement” means that certain Subordination Agreement entered into as of December 14, 2017, among Maker, Noteholder and PNC Bank, National Association, as Agent for certain lenders.

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. Subject to the Subordination Agreement, 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 Payment Dates. In accordance with Section 2.1, all interest accruing hereunder shall be payable monthly, subject only to restrictions on payment under the Subordination Agreement.

  3.2       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.

  3.3       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 principal portion of this Note 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 3:00 PM Central Time 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       Business Day. 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 Illinois.

  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 PNC Bank, which consent has been given subject to the Subordination Agreement, 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 any monthly installment of interest accruing hereunder unless such payment would violate the terms of the Subordination Agreement.

  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.  The following shall be considered acts of 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       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 ten (10) 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 his option, but subject to the Subordination Agreement 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.

8.     Miscellaneous.

8.1       Notices.  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.

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       Successors and Assigns. Subject to the terms of the Subordination Agreement, 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.

8.8       Waiver of Notice. The Maker hereby waives presentment, 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.

8.9       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.

IN WITNESS WHEREOF, the Maker has executed this Note as of December 14, 2017.