LICENSE AGREEMENT
 
THIS AGREEMENT ("Agreement") is entered into this ___ day of April, 2006, by and
between CTI Industries Corporation ("CTI"), a corporation organized and existing
under laws of the State of Illinois, and Rapak, LLC ("Rapak"), an Illinois
limited liability company.
 
RECITALS
 
WHEREAS, CTI is the owner of record of U.S. Patent No. 6,984,278 issued January
10, 2006, entitled "Method for Texturing a Film", and corresponding foreign
patent applications (hereinafter referred to collectively as the "Patent"), and
technical information relating thereto;
 
WHEREAS, Rapak wishes to acquire the right to make, have made, use, sell and
offer to sell the invention disclosed in the Patent, and technical information
relating thereto, in the field of pouches or bags with fitments;
 
WHEREAS, the parties have entered into a certain Supply Agreement dated December
20, 2002 ("2002 Supply Agreement"), pursuant to which CTI supplies certain film
products to Rapak.
 
NOW THEREFORE, in consideration of the mutual covenants set forth herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
 
I.  Definitions
 
As used herein, the following terms shall have the meanings set forth below:
 
1.1  "Affiliates" shall mean all entities controlled by, controlling or under
common control with the identified entity, that is, CTI or Rapak.
 
1.2  "Patent" shall mean and include U.S. Patent No. 6,984,278 issued January
10, 2006 and any other patents that may issue from any continuation,
continuation-in-part, divisional, reexamination or reissue application of, or
relating to, U.S. Patent No. 6,984,278, and any improvements thereon.
 
1.3 "Film" shall mean the embossed film described in the Patent.
 
1.4 "Products" shall mean pouches or bags with fitments for the packaging of
various liquid products, including bag-in-box products, incorporating the Film
and made by any method claimed in the Patent.
 
1.5 "Field Of Use" shall mean the manufacture, use and sale of pouches or bags
with fitments, such pouches or bags used for packaging various liquid products,
including bag-in-box products.
 
1.6 "Rapak" shall mean Rapak LLC, its successors in interest, its parent
corporations and its Affiliates.
 
 
 

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II.  Grant Of License
 
2.1  CTI grants to Rapak a worldwide, royalty-free license to make, have made,
use, sell, offer for sale and otherwise dispose of Products utilizing Film
supplied to Rapak by (i) CTI, (ii) any person or entity that produces Film under
license from CTI or (iii) any third party that Rapak has identified as an
alternate source of Film in accordance with Section 2.4 of the 2002 Supply
Agreement, including Amcor and Alcan or (iv) any other third party that Rapak
identifies in accordance with Section 2.4 of the 2002 Supply Agreement and that
CTI consents to, with the understanding that such consent by CTI shall not be
unreasonably withheld.
 
2.2  The license granted to Rapak herein is irrevocable and shall extend through
the last expiration date of the Patent. Subject to the provisions of Article IV
hereof and to the retained right of CTI to produce Film, the license shall be
exclusive to Rapak in the Field Of Use through and until October 31, 2008 and
for any additional extensions of the 2002 Supply Agreement. Commencing on either
November 1, 2008 or on the last date on which any extension of the 2002 Supply
Agreement expires, whichever date is later in time, the license granted by CTI
to Rapak will become non-exclusive. Throughout the term of the non-exclusive
license, Rapak shall have the right to sublicense others to make Film for Rapak
in its Field Of Use.
 
III.  Amendments To The 2002 Supply Agreement
 
In consideration for the license rights granted above, Rapak agrees to certain
amendments, prospectively, to the terms and conditions of the 2002 Supply
Agreement. The following amendments are hereby made to the 2002 Supply Agreement
and shall be effective as between the parties from and after the date hereof:
 
3.1  The parties agree that Section 2.1 of the 2002 Supply Agreement is amended
to provide for Rapak to commit to purchase from CTI not less than 65% of Rapak's
production requirements for Film for the remainder of the current renewal term
and additional renewal terms of the 2002 Supply Agreement to October 31, 2008.
Rapak's obligation to buy not less than 65% of its Film requirements will be
determined on a calendar quarterly basis. The 2002 Supply Agreement shall be
renewed for the period from November 1, 2006 to October 31, 2008. From and after
November 1, 2008, for so long as the 2002 Supply Agreement shall continue in
effect, Rapak shall purchase from CTI, subject to the provisions of Section 3.3
hereof, 65% of its requirements for Film, determined on a calendar quarterly
basis.
 
3.2  The parties agree that Section 2.3 of the 2002 Supply Agreement is amended
to reduce the inventory of Film that CTI must maintain from six (6) weeks
consumption of Film by Rapak to three (3) weeks consumption of Film by Rapak.
 
3.3  The parties agree that the portion of Section 4.2 of the 2002 Supply
Agreement commencing with the fifth sentence thereof is amended as follows:
 
3.3.1  If, at any time during any renewal term of the 2002 Supply Agreement and
after October 31, 2008, Rapak receives an offer from a third party supplier to
purchase Film of like grade or quality in the same country at a lower price or
on more favorable terms and conditions than provided for by the 2002 Supply
Agreement, including any rebates, bonuses, discounts, free goods or other
allowances, Rapak will provide CTI with written notice of such superior offer.
Any offer for the sale of Film from a third party to Rapak must be in writing
and conform to the Specification. Rapak agrees to provide either a copy of the
offer to CTI or a complete identification of the terms and conditions of that
offer if, for some reason, confidentiality restrictions are imposed by the third
party.
 
 
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3.3.2  All terms of the offer for sale, other than price, such as payment terms,
delivery schedules, volumes, quality, services and grade, shall be substantially
equal to the terms provided herein. The price for Film in the offer shall be
less than the then current price for Film being sold hereunder to Rapak by CTI
by an amount greater than Two Percent (2%).
 
3.3.3  CTI shall have ten (10) days after receipt of notice to match such lower
price and/or more favorable terms and conditions presented in such superior
offer. In the event that CTI fails to match the terms of such superior offer,
Rapak may purchase Film from such third party suppliers and the quantity of Film
required to be purchased by Rapak as set out in Section 2.1 of the 2002 Supply
Agreement, and Section 3.1 above, shall be reduced.
 
3.3.4  Upon Rapak's first purchase from a third party supplier under Section
3.3.3, Rapak agrees that it will, on a one time only basis, purchase up to three
(3) weeks of finished goods stock that CTI has at that point in time and up to
an additional three (3) weeks of materials that CTI has commitments at that
point in time to purchase from raw materials suppliers.
 
3.4 At or prior to the date hereof, the parties shall have prepared and mutually
accepted amended Schedule 1.6 and Schedule 4.1 to the 2002 Supply Agreement
which amended Schedules shall be attached to this Agreement and shall be and
become the applicable Schedules for the 2002 Supply Agreement.
 
3.5 CTI’s obligations under Section 2.6 of the 2002 Supply Agreement shall cease
and terminate as of the date on which the license granted herein to Rapak
becomes non-exclusive.
 
3.6 Except as and only to the extent amended herein, the 2002 Supply Agreement
shall remain in full force and effect as written.
 
IV.  Term and Termination
 
The term of this Agreement shall be for the full term of the Patent. CTI shall
be entitled to convert the exclusive license provided herein to a non-exclusive
license, sixty (60) days prior written notice to Rapak in the event that (i)
Rapak shall violate or fail to perform any provision of this Agreement or the
2002 Supply Agreement and shall fail to cure such violation or non-performance
within sixty (60) days after CTI shall give written notice of such violation or
failure to perform to Rapak specifying the violation or failure to perform, (ii)
Rapak shall utilize barrier film (other than the Film specified in this
Agreement) in more than 20% of the beverage syrup bags it produces within a
given calendar quarter.
 
 
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V.  Improvements
 
With respect to any and all improvements to the subject matter of the Patent
which may be developed by or for CTI as to which a patent shall issue, CTI shall
grant to Rapak a license with respect thereto on the same terms as set forth
herein.
 
VI.  Acknowledgments
 
Each of the parties acknowledges to the other, and agrees, and nothing herein
shall be construed to provide otherwise, that:
 
6.1  CTI makes no representation or warranty, express or implied, to Rapak (i)
as to the validity or scope of the Patent or that (ii) anything made, used or
sold, or otherwise disposed of under this License Agreement is or will be free
from infringement of patents of third persons.
 
6.2  CTI undertakes no obligation, commitment or requirement (i) to file any
patent application, secure any patent or maintain any patent in force, (ii) to
bring or prosecute actions or suits against third parties for infringement of
any patent or (iii) to furnish any manufacturing or technical information to
Rapak.
 
6.3  CTI shall not be obligated hereunder to, (i) confer upon, or consent or
grant to, Rapak any right in, or to, the use of, any trademark, tradename,
character, logo, copyright, graphic design, product design (except where the
subject of a design patent or foreign equivalent right), trade secret or other
proprietary right of CTI or (ii) grant or give, whether by agreement,
implication, estoppel or otherwise, any license or other right with respect to
any patent rights of CTI, whether now owned or hereafter acquired, except as
expressly provided herein.
 
VII.  Notices
 
All notices, or other communications required or permitted to be given hereunder
shall be in writing and shall be delivered personally or mailed, certified mail,
return receipt requested, postage prepaid, to the parties, as follows:

 
If to CTI:
Mr. Howard W. Schwan
   
President
   
CTI Industries Corporation
   
22160 N. Pepper Road
   
Barrington, IL 60010
       
If to Rapak:
Mr. Stuart McPherson
   
Segment Director
   
DS Smith Plastics Limited
   
Brownsover Road
   
Rugby
   
Warwickshire CV21 1HL UK

 
 
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Copy to:
Jeremy Aron, Esq.
   
Head of Group Legal
   
DS Smith Plc
   
4-16 Artillery Row
   
London SW1P 1RZ UK

 
Any notice mailed in accordance with the terms hereof shall be deemed received
on the third day following the date of mailing. Either party may change the
address to which notices to such party may be given hereunder by serving a
proper notice of such change of address to the other party.
 
VIII.  Entire Agreement
 
This License Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
written or oral negotiations, representations, agreements, commitments,
contracts or agreements with respect to the subject matter hereof.
 
IX.  Assignment
 
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, personal representatives and
successors in interest. Neither party shall be entitled to assign any right or
obligation under this Agreement without the express written consent of the other
party, such consent not to be unreasonably withheld. Any attempted assignment of
any such right or obligation shall be void; provided that either party hereto
may assign all of its rights and obligations hereunder (a) to any person who
shall acquire substantially all of the business and assets, and shall assume
substantially all of the liabilities of, such party or (b) a corporation into
which or with which the party shall merger or consolidate, if in such
transaction the acquiring person or succeeding corporation shall expressly
assume all of the obligations of such party hereunder.
 
X.  Governing Law
 
This Agreement shall be governed by and shall be interpreted and enforced in
accordance with, the laws of the State of Illinois.
 
XI.  Relationship Of The Parties
 
This Agreement does not constitute either party hereto the agent of the other
party for any purpose whatsoever, nor does either party hereto have the right or
authority to assume, create or incur any liability or obligation of any kind,
express or implied, against or in the name of or on behalf of the other party.
 
 
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XII.  Severability
 
Whenever possible, each paragraph of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law. If any paragraph of
this Agreement shall be unenforceable or invalid under applicable law, such
paragraph shall be ineffective only to the extent and duration of such
unenforceability or invalidity and the remaining substance of such paragraph and
the remaining paragraphs of this Agreement shall in such event continue to be
binding and in full force and effect.
 
XIII.  Waiver
 
No failure by any party to exercise any of such party's rights hereunder or to
insist upon strict compliance with respect to any obligation hereunder, and no
custom or practice of the parties at variance with the terms hereof, shall
constitute a waiver by any party to demand exact compliance with the terms
hereof. Waiver by any party of any particular default by any other party shall
not affect or impair such party's rights in respect to any subsequent default of
the same or of a different nature, nor shall any delay or omission of any party
to exercise any right arising from any default by any other party affect or
impair such party's rights as to such default or any subsequent default.
 
XIV.  Arbitration
 
The parties shall endeavor to resolve any dispute arising out of or related to
this Agreement amicably. Failing an amicable resolution of any dispute relating
to a material breach of this agreement, such dispute shall be referred to
arbitration by a panel of three (3) arbitrators. If the parties are unable to
agree on the appointment, the arbitrators shall be appointed on application by
either party to the American Arbitration Association ("AAA"), who shall select
panel members with at least 15 years relevant patent experience. The seat of the
arbitration shall be Chicago and the Commercial Rules and Regulations of the AAA
shall be applied by the arbitrators. The arbitrators' ruling shall be final and
binding on the parties.
 
 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
 

        CTI INDUSTRIES CORPORATION  
   
   
    By:   /s/ Howard W. Schwan   

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Authorized Officer

        Attest:               /s/ Stephen M. Merrick       

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Secretary    

        RAPAK, LLC  
   
   
    By:   /s/ Mark A. Smith   

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Authorized Officer   Title 

        Attest:                      

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Secretary    

 
 
 
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