PRIVATE LABEL PURCHASE AGREEMENT

This  Agreement  is entered  into  between  MINNESOTA  MINING AND  MANUFACTURING
COMPANY acting through its Packaging Systems Division (3M), having its principal
offices  at 3M Center,  St.  Paul,  Minnesota,  and AIR  PACKAGING  TECHNOLOGIES
INCORPORATED (APTI), a Delaware corporation, with its principal offices at 25620
Rye Canyon Road, Valencia California 91355-1164.

1.       Purpose

     APTI manufactures and sells inflatable  packaging  products and has entered
into a Private Label Purchase  Agreement with Minnesota Mining and Manufacturing
Company on behalf of the Stationery Products Division regarding the sale of some
of these  products,  granting 3M the  worldwide  exclusive  right for the retail
market, the exclusive right for Japan for all markets and a non-exclusive  right
for  all  other  markets  throughout  the  world  effective  September  1,  2000
(hereafter  "SPD  Agreement").  The SPD Agreement  will remain in full force and
effect  unless  expressly  modified  herein.  3M  is  interested  in  purchasing
additional products from APTI on a private label basis for resale throughout the
world and to  obtain  exclusive  rights  for these  additional  products  in the
industrial  protective packaging market under the terms and conditions set forth
in this Agreement.  APTI is willing to sell the desired products to 3M under the
terms and conditions set forth in this Agreement.

2.       Products To Be Sold: Restrictions: New Products

     2.1 APTI  agrees to sell to 3M and 3M  agrees to buy from APTI the  private
label inflatable  packaging products which are described in the attached Exhibit
A ("STANDARD  PRODUCTS") and custom designed  products  specified by the parties
following the procedure  outlined in Exhibit B and to be deemed added to Exhibit
A once specified ("CUSTOM PRODUCTS")(together "PRODUCTS"). Specifications of the
STANDARD  PRODUCTS  will be agreed to between the parties and  delivered to APTI
prior to the  commencement  of this  Agreement.  APTI must not  change  PRODUCTS
without  the prior  written  consent of 3M. If APTI  wishes to change a PRODUCT,
then APTI  will  provide  3M with a  written  request  to  change  the  PRODUCT,
including a  description  of the  proposed  change and whether or not the change
would affect the price or performance  of the PRODUCT.  3M agrees to inform APTI
concerning  whether or not 3M is willing to consent to the change  within ninety
(90) days after receipt of the request.

     2.2 a.  Starting  on May 1, 2001,  APTI  grants 3M,  its  subsidiaries  and
affiliates  the exclusive  right  throughout  the world to  distribute,  sell or
otherwise  dispose  of all  PRODUCTS  in the market  for  industrial  protective
packaging,   as  defined  herein   (hereinafter   "EXCLUSIVE  MARKET")  and  the
non-exclusive  right to  distribute,  sell or otherwise  dispose of all PRODUCTS
throughout the world in all other markets.  For the purposes of this  Agreement,
the market of industrial  protective  packaging is defined as direct or indirect
sales to small businesses,  industrial  customers,  and logistics  companies for
packaging applications,  the predominant purpose of which is to protect products
and/or product components  against damage during storage or transportation  from
the  manufacturer  throughout  the  logistics  and  distribution  channel to the
ultimate destination of the product or product component.


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     b.  Notwithstanding  the  foregoing,  APTI shall be entitled to continue to
sell  to any  existing  customer  and  to  any  customer  whom  it was  actively
soliciting  independently  of 3M as of the date on which 3M's  exclusive  rights
hereunder commenced until the earlier of (i) the date on which 3M's purchases in
any given 12 months period have reached two (2) million dollar worth of PRODUCTS
sold  under  this  Agreement  from APTI or (ii) 3M has  maintained  two years of
exclusivity  and the parties have agreed on the business plan for the third year
as outlined in Section 2.3 b.

     c. APTI agrees that APTI will not knowingly and intentionally sell PRODUCTS
to any  third  party for  resale  into in the  EXCLUSIVE  MARKET as long as 3M's
exclusive rights exist. If APTI  subsequently  learns that a customer is selling
PRODUCTS  into the  EXCLUSIVE  MARKET,  then APTI  agrees to  immediately  cease
selling PRODUCTS to the customer.

     2.3 a. 3M will not be  required  to  purchase  any  specified  quantity  of
PRODUCTS from APTI during the Agreement term.

     b. On or  before  March  31st of 2001  and  March  31st of each  subsequent
calendar  year during the  Agreement  term,  3M will present to APTI a marketing
plan,  which  explains  the  actions  3M will  take to  market  PRODUCTS  in the
EXCLUSIVE MARKET. APTI will review the plan, taking into account,  among others,
the  previous  year's  sales and  notify 3M in writing  within  two weeks  after
receiving  3M's plan that APTI  accepts  the plan as written  or APTI  wishes to
discuss  the  plan.  If APTI  notifies  3M that a plan is  accepted,  then  3M's
exclusivity  with respect to the EXCLUSIVE  MARKET will continue during the next
12 months period starting on May 1st of each  subsequent  calendar year. If APTI
notifies  3M that APTI wishes to discuss a plan,  then the parties  will meet to
discuss the plan.  If the  parties  are not able to agree upon a marketing  plan
that is acceptable to APTI, then 3M's exclusive  right for the EXCLUSIVE  MARKET
will convert to a nonexclusive  right  effective as of the date APTI notifies 3M
in  writing  that the  parties  were  unable  to  agree  upon a  marketing  plan
acceptable  to APTI  such  notice  not to be  sent  earlier  than 30 days  after
discussions about the marketing plan have started.  APTI agrees that it will not
unreasonably  withhold  its  acceptance  of a 3M  marketing  plan.  If 3M  loses
exclusivity for the EXCLUSIVE MARKET during the Agreement term, then 3M will not
be obligated to share a marketing plan the following March 31st.

     2.4 a. APTI  agrees to offer 3M the right to  purchase  all new  inflatable
packaging products which APTI develops or obtains the right to sell from a third
party. If 3M notifies APTI that 3M wishes to add a new product to the Agreement,
then the parties will execute an amendment  adding the new product to Exhibit A.
The initial price of the new product will not exceed APTI's  manufacturing  cost
times 1.5.  The  initial  price  will be firm until the end of the twelve  month
period  during  which the new  product  is added to the  Agreement.  After  this
initial  period,  the price will be subject to change as provided in Section 3.2
b.

     b. If 3M  declines  to  purchase  a new  product  offered  by APTI and APTI
subsequently  decides to offer the new  product at a price  lower than the price
offered  to 3M,  then  APTI  agrees  to give 3M the  opportunity  to buy the new
product at the reduced price before offering the lower price to any third party.


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3.       Product Prices: Payment Terms: Price Protection

     3.1 a. APTI agrees to initially sell STANDARD  PRODUCTS to 3M at the prices
listed in the Price  Schedule  attached  as  Exhibit A.  Prices for each  CUSTOM
PRODUCT will be determined and documented according to the procedure outlined in
Exhibit B. The prices are F.O.B. APTI's Valencia,  California facility delivered
to a carrier specified by 3M.

     b. APTI and 3M will meet to agree upon the  prices  which will apply to all
other  products which APTI makes and which 3M wishes to buy after this Agreement
has been  executed.  Once 3M and APTI  agree  upon the  price  for a  particular
product,  the product will be added to Exhibit A in the  appropriate  section by
both parties initialing an updated version of Exhibit A.

     3.2 a. APTI agrees that the prices  listed in Exhibit A are firm during the
first twelve months of the Agreement  term.  Prices for CUSTOM  PRODUCTS will be
held firm for a period of 12 months  starting from the date when they were added
to Exhibit A.

     b. At the  beginning of each new twelve  months period during the Agreement
term the  parties  will meet to review the  pricing.  No  overhead or labor cost
increases  will be passed on to 3M.  APTI will  offset  any such cost  increases
through continuous  improvements within APTI's operations.  If the prices of the
raw materials used to manufacture  each PRODUCT and the packaging  supplies used
to package the PRODUCT have  increased or decreased  during the previous  twelve
months of the Agreement  term by an amount equal to at least 3% of the total raw
material and packaging  supplies  costs related to a PRODUCT,  then the price of
the  affected  PRODUCT  will be  increased or decreased at the end of the twelve
month  period by the  amount of the raw  material  and  packaging  supply  price
increase or decrease  applicable to the PRODUCT effective as of the first day of
the new twelve month period. The adjusted prices will be firm for the new twelve
month period.

     c. The amount of the raw material and  packaging  supply price  increase or
decrease  applicable  to each PRODUCT will be calculated by taking the prices of
each raw  material  and  packaging  supply paid by APTI on the first day of each
month during the  preceding  twelve  months (or the amount paid in the last bill
prior to the first day of the month) and  calculating  an  average  price.  This
average  price  will be  compared  to the  price of the each  raw  material  and
packaging  supply that APTI paid during the first month of the  previous  twelve
months period. A weighted average  calculation will be made to determine whether
or not APTI's total cost or raw materials  and packaging  supplies for a PRODUCT
has  increased  or  decreased by an amount equal to at least 3% of the total raw
material and packaging supplies costs related to a PRODUCT.

     3.3 If APTI sells a PRODUCT at a lower price to any third party,  then APTI
agrees to promptly reduce 3M's price and allow 3M to continue paying the reduced
price as long as APTI is selling  the  PRODUCT at the  reduced  price to a third
party. Exhibit A will be amended to reflect to the reduced price.

     3.4  Payment  terms are 2% 10 days net 45 days from the date 3M  receives a
copy of the bill of lading and a complete and correct invoice for  international
shipments  and 2% 10 days net 40 days  from the date 3M  receives  a copy of the
bill of lading and a complete  and  correct  invoice for US  shipments.  If 3M's
purchase order or purchase order release contains invoicing  instructions,  then
APTI agrees to comply with those  instructions.  Payment of any invoice will not
constitute  acceptance of the applicable  PRODUCTS.  Invoices will be subject to
adjustment  for errors,  shortages,  defects in goods or  services,  a PRODUCT's
non-compliance  with  specifications,  or  other  failure  of APTI  to meet  its
requirements under this Agreement.

4.       Forecasts: Orders: Shipment: Packaging

     4.1 3M will order PRODUCTS  either by a) issuing a specific  purchase order
listing an order  quantity or b) by issuing a blanket  purchase  order listing a
forecasted  quantity which 3M estimates is the maximum quantity 3M will purchase
for each PRODUCT and then order  PRODUCTS using  purchase  order  releases.  All
blanket purchase orders are for planning  purposes only and are not a commitment
to purchase the estimated  quantities of PRODUCTS listed in the blanket purchase
order.  If any purchase order or blanket  purchase order issued pursuant to this
Agreement contains any specific provision inconsistent with this Agreement, then
this Agreement will govern and the inconsistent  provision of the purchase order
will be applicable only so far as it is not inconsistent with this Agreement.

     4.2 During the term of this Agreement, APTI will accept all purchase orders
and all  purchase  order  releases  for  STANDARD  PRODUCTS  tendered by 3M that
conform  to the terms of the  Agreement  and to  respond  to all  custom  design
applications as outlined in Exhibit B.

     4.3 3M will provide APTI monthly  with a six month  rolling  forecast.  The
quantities  listed  for the  first  month  of each  forecast  are  firm  and the
quantities  listed for the last five  months are a  nonbinding  estimate  unless
expressly agreed upon otherwise between the parties.

     4.4 The  quantities of STANDARD  PRODUCTS  ordered in a purchase order or a
purchase  order  release  which are  consistent  with 3M's forecast will be made
available by APTI for pickup by 3M's carrier  within 10 days after  receipt of a
purchase order or purchase order release.  If 3M orders more than the forecasted
quantity,  then APTI  agrees to make a good faith  effort to deliver  the excess
quantities  within 30 days  after  receipt of the  purchase  order or a purchase
order release. APTI will inform 3M when the ordered quantity is ready for pickup
by 3M's  designated  carrier.  If the purchase  order or purchase  order release
contains  shipping or  identification  instructions,  then APTI agrees to comply
with such instructions.

     4.5 APTI agrees to keep in stock at all times a quantity  of each  STANDARD
PRODUCT  equal to 50% of the current  monthly  forecast and any  quantities  the
parties might agree upon for individual CUSTOM PRODUCTS.


     4.6 All orders will be sent to the following address:

                  Air Packaging Technologies Incorporated
                  25620 Rye Canyon Road
                  Valencia, California 91355-1164
                  Attention: Sales Service Manager Fax No (661) 294-0947

     4.7 APTI shall bulk package  PRODUCTS,  at APTI's sole cost, in conformance
with the  Packaging  Specifications  agreed  to by the  parties.  The  packaging
keyline art will be supplied by 3M.

     4.8 3M has the option of converting ordering to Electronic Data Interchange
(EDI) and converting  payment to Electronic  Funds Transfer (EFT)  technology at
any time during the Agreement  term on sixty (60) days prior  written  notice to
APTI. If 3M exercises  this option,  then APTI agrees to provide,  at no cost to
3M, the necessary  electronic data interface to allow for the  implementation of
such technology.

     4.9 THE PARTIES AGREE THAT TIME AND THE RATE OF DELIVERY ARE OF THE ESSENCE
FOR ALL PURCHASE  ORDERS AND  PURCHASE  ORDER  RELEASES  PLACED BY 3M UNDER THIS
AGREEMENT

5.       Warranty and Limitation of Remedies

     5.1 APTI warrants each PRODUCT will be merchantable and will conform to the
agreed upon product and packaging  specifications  for a period of one year from
the  date the  PRODUCT  is  purchased  by a user.  Acceptance  of  delivery  and
inspection  of any  PRODUCTS by 3M will not waive any  warranties  made by APTI.
APTI  understands  that 3M has relied upon all of these  warranties  in entering
into this Agreement.

     5.2 As the sole remedy to 3M for breach of the foregoing  warranties,  APTI
agrees to replace,  without charge to 3M or its customer,  any PRODUCT proved to
be defective within the warranty period or to refund 3M's purchase price at 3M's
option.

     5.3 APTI will have the right to evaluate and confirm all alleged defects in
the specified  PRODUCT.  3M shall return allegedly  defective PRODUCT to APTI at
the  address  listed on page 1 at APTI'S  cost for  evaluation  by APTI,  unless
instructed  otherwise  by APTI.  APTI  shall  promptly  evaluate  the  allegedly
defective  PRODUCT  submitted  by 3M  and  communicate  the  results  of  APTI's
evaluation to 3M within fourteen (14) days after receipt.

6.       Trademarks

     6.1 PRODUCTS  packaging will bear such trademarks of 3M as 3M shall direct.
APTI's use of 3M's  trademarks  will be limited  to use in  connection  with the
PRODUCTS sold to 3M pursuant to this Agreement, subject to 3M's prior review and
approval.

     6.2 APTI acknowledges that the "3M" corporate symbol trademark and other 3M
trademarks which may be used on PRODUCTS packaging,  and the goodwill associated
therewith,  are valid throughout the world and are the exclusive  property of 3M
and the use of those trademarks on PRODUCTS packaging,  and the goodwill created
inures  to the  benefit  of 3M.  APTI  will not  claim  any  rights  in the "3M"
corporate  symbol  trademark or the type style, or the other 3M trademarks which
3M may use on PRODUCTS  packaging,  or put in issue either the validity of those
trademarks or the ownership by 3M of those trademarks.

     6.3 Upon cancellation or termination of this Agreement,  APTI shall not use
the  "3M"  corporate  symbol  trademark,  or the  type  style,  or the  other 3M
trademarks  which 3M may use on  PRODUCTS  packaging  or any  other  confusingly
similar marks.

7.       Terms: Termination

     7.1 The term of this  Agreement  will  commence as of its execution by both
parties and continue  until 3M  terminates  the Agreement by giving APTI written
notice at least 90 days before the desired termination date.

     7.2  Notwithstanding   the  foregoing  language,   this  Agreement  may  be
terminated on proper  written  notice by either of the parties in the event of a
material  breach by the other  party of its  obligations  under this  Agreement.
Either of the parties  intending to terminate the  Agreement  under this Section
shall give written  notice of its  intention to do so to the other party stating
its rationale and giving a detailed  description of the cause.  The party giving
notice shall grant the other party a reasonable  period of time (but in no event
more than  thirty  (30)  days) to remedy the cause for  termination.  During the
grace  period,  the parties shall make a good faith effort to assist one another
in the remedying of any problems  surrounding  this Agreement.  If the cause for
termination is remedied within the grace period, then this Agreement will remain
in full force and effect.

     7.3  Termination of this Agreement will not terminate any  obligations  set
forth in this Agreement which are incurred prior to such termination.

8.       Confidential Information

     8.1 APTI  acknowledges  that  during the  Agreement  term APTI may  receive
confidential  information  related to the subject  matter of this Agreement from
3M, including, but not limited to, product specifications,  customer information
and sales  information.  Except as required by law,  APTI agrees that during the
term of this  Agreement and for three (3) years after the term of this Agreement
APTI shall keep secret all such 3M  confidential  information and shall use such
care  as  APTI  uses  in  maintaining  the  confidentiality  of its  own  secret
information,  but not less than a reasonable degree of care. APTI shall use such
3M  confidential  information  only to the  extent,  for the  purpose and in the
course of performing APTI's  obligations  under this Agreement.  Notwithstanding
the  foregoing,  APTI may disclose the fact that 3M is  purchasing  PRODUCT from
APTI,  the fact that 3M has entered into a purchase  Agreement  with APTI, and a
summary of the major terms of the Agreement to APTI's

<PAGE>


bank  and  investors;  furthermore,  APTI may  disclose  to  third  parties  the
existence and scope of this Agreement  after having  received 3M's prior written
consent which will not be unreasonably withheld.

     8.2 The  obligations of  confidentiality  will not apply to the extent that
any such information:

     a.   Is known to APTI  prior to receipt of the same from 3M as shown by its
          written records; or

     b.   Is  disclosed  in  published   form  now  or  in  the  future  in  any
          publication, or

     c.   Is or becomes  available to APTI from any other source  without breach
          of Agreement or violation of law; or

     d.   Is  independently  developed  by  APTI  as  evidenced  by its  written
          records; or

     e.   Is released in writing from the obligation of confidentiality by 3M.

9.       Regulatory Compliance

APTI represents that PRODUCTS have been manufactured and sold in compliance with
all  applicable  federal,  state,  and municipal  laws,  rules and  regulations,
including but not limited to those related to  environmental  concerns and waste
disposal.

10.      Inspection

     10.1 APTI shall execute at its factory a quality control inspection program
to ensure each lot of PRODUCTS  meets the agreed  upon  product  specifications.
APTI shall send 3M a copy of the inspection  results and retain samples whenever
requested  by 3M. 3M agrees it will not request  such  results and samples  more
than once a month.

     10.2 APTI agrees to allow 3M to enter APTI's  premises  and inspect  APTI's
manufacturing  operation  at any time to allow 3M to confirm that APTI is making
high  quality   PRODUCTS  in  compliance   with  all   applicable   governmental
regulations.

11.      Notice

Any notice, report or communication required or permitted to be given under this
Agreement  will be in writing.  Notices  given will be sent by  facsimile or Air
Mail, postage prepaid,  addressed as follows unless otherwise  specified in this
Agreement:

To 3M:            Packaging Systems Division
                  Minnesota Mining and Manufacturing Company
                  3M Center, Bldg. 220-8W-01
                  St. Paul, Minnesota 55144
                  Attn:  Division Vice President


<PAGE>



To APTI: Air Packaging Technologies Incorporated
                  25620 Rye Canyon Road
                  Valencia, California 91355-1164
                  Attention:  President

If either  party wishes to change the address  where  notice is to be sent,  the
party shall  promptly  communicate  the  desired  change in writing to the other
party.

12.      Right of First Refusal

     12.1 If APTI wishes to sell the assets of the business or the capital stock
of the  company,  then APTI agrees to give 3M written  notice of this desire and
the price at which APTI wishes to sell. 3M must give APTI written  notice within
15 days from receipt of APTI's notice indicating whether or not 3M is interested
in purchasing the assets or stock.  If 3M indicates it is  interested,  then the
parties will engage in good faith  negotiation to determine  whether or not they
can agree upon a purchase price and the  conditions of purchase.  If the parties
can't agree within 30 days from the date APTI  receives  3M's notice,  then APTI
may offer the assets or stock to other parties subject to the limitations listed
below:

     12.2 If APTI  receives  a bone fide offer to sell or  otherwise  dispose of
substantially  all of the assets of the  business  or the  capital  stock of the
company  and APTI  decides it is willing to  consider  such an offer,  then APTI
agrees to give 3M written  notice that APTI has received an offer and is willing
to  consider  an offer.  3M must give APTI  written  notice  within 15 days from
receipt  of  APTI's  notice  indicating  whether  or  not  3M is  interested  in
purchasing  the assets or stock.  If 3M  indicates  it is  interested,  then the
parties will engage in good faith  negotiation to determine  whether or not they
can agree upon a purchase price and the  conditions of purchase.  If the parties
can't agree within 30 days from the date APTI  receives  3M's notice,  then APTI
may offer the asset or stock to the other party who submitted the offer to APTI.

     12.3 The rights granted to 3M in this Section 12 are identical with and are
not in addition to the ones granted to 3M under the SPD Agreement.

13.      Stock Warrants

APTI  agrees  that the  definition  of PRODUCTS as used in Section 13 of the SPD
Agreement and the warrants attached as Exhibits E, F and G will not only include
PRODUCTS  covered  by the  SPD  Agreement  but  also  PRODUCTS  covered  by this
Agreement.  This Section 13 and Section 13 of the SPD  Agreement  shall  survive
termination  of either  Agreement as long as at least one  Agreement is still in
force.


<PAGE>


14.      Force Majeure

If either  party is unable to  perform  its  obligations,  either in whole or in
part,  under this  Agreement  as a result of civil or military  authority,  war,
flood,  fire,  epidemic,  or other Act of God, or any other  condition  or cause
beyond  its  reasonable  control  not due to its fault or  negligence  (a "Force
Majeure"),  the affected party will be excused from such performance  during the
continuance  of any such  event to the  extent  that the party is  prevented  or
delayed  thereby.  If any APTI  delay is  caused  by  non-performance  of APTI's
subcontractor  or  supplier,  this will be a Force  Majeure only if the goods or
services  to be  furnished  by  such  entity  were  not  obtainable  from  other
source(s).  During any Force  Majeure  period,  APTI will allocate any available
goods for delivery in any manner that is fair and reasonable consistent with the
provisions of Section 2-615 of the Uniform Commercial Code.

15.      Assignment

This  Agreement,  any  rights  or  benefits  or  duties  hereunder  will  not be
assignable by either party without the prior written consent of the other party.

16.      Relationship of Parties

3M and APTI do not in any way or for any  purpose  intend to become  partners in
the  conduct of a business or  otherwise,  or joint  venturers,  or members of a
joint  enterprise  under  this  Agreement.  The  relationship  will  be  one  of
manufacturer  and purchaser.  Neither party will have any authority to obligate,
or to otherwise act as representative  of, or agent for, the other party for any
purpose,  and neither party will make any  representations or hold itself out as
having such authority.

17.      Partial Invalidity

In case of partial invalidity of this Agreement,  the rest of the Agreement will
remain in effect and will be enforced.

18.      Dispute Resolution Procedures

     18.1 The parties agree to resolve any questions, claims or disputes arising
from or relating to this  Agreement or its  negotiation  or  termination  by the
following sequence of dispute resolution  methods.  Except as otherwise provided
in Section 18.1.d below, these methods are exclusive and will be fully exhausted
before the commencement of any litigation.

     a. Negotiation. The parties shall attempt in good faith to resolve any such
questions,  claims, or disputes promptly by negotiations  between executives who
have  authority  to settle  the  matter  within  fifteen  (15) days of a party's
written request for a meeting, which will include a detailed written explanation
of the question, claim, or dispute and a proposed resolution.  Such negotiations
will be held at a mutually acceptable time and location, and as often thereafter
as the parties deem reasonably  necessary to exchange information and to attempt
to resolve the matter.


<PAGE>


If the parties are not able to resolve the matter within forty-five (45) days of
the parties'  first meeting to attempt to resolve the matter,  then either party
will initiate mediation of the matter as provided in Section 18.1.b below. If an
executive  participating  in such  negotiations  intends to be accompanied by an
attorney,  then the other  executive(s) will be given at least three (3) working
days' notice of such intention and may also be  accompanied by an attorney.  All
negotiations  pursuant  to this  Section  18.1.a  are  confidential  and will be
treated as compromise  and settlement  negotiations  for purposes of the Federal
Rules of Evidence and state rules of evidence,  and each party will bear its own
costs incurred in connection with such negotiations.

     b. Mediation.  If the question,  claim, or dispute has not been resolved by
negotiation  pursuant to Section 18.1.a above,  then the parties will attempt to
resolve the matter by non-binding mediation. Such mediation will be conducted at
a mutually  acceptable  time in a mutually  accepted  location,  using a neutral
mediator having experience with the industry in accordance with the rules of The
Center  for Public  Resources.  Mediation  pursuant  to this  Section  18.1.b is
confidential and will be treated as compromise  negotiations for purposes of the
Federal Rules of Evidence and state rules of evidence,  and each party will bear
its own costs incurred in and share equally the costs of such mediation.

     c. Litigation. If the parties cannot resolve the question, claim or dispute
as provided above, then, as a last resort, either party may commence litigation;
provided,  however,  that any lawsuit filed by APTI against 3M must be commenced
in a  federal  or state  court  of  competent  jurisdiction  in  Ramsey  County,
Minnesota  and any  lawsuit  filed by 3M  against  APTI must be  commenced  in a
federal or state court of  competent  jurisdiction  in the county  where  APTI's
principal office is located.

     d.  Equitable  Relief.  Nothing in this Section 18.1 will  preclude  either
party from taking any action necessary to prevent immediate and irreparable harm
to it.

     18.2 THE PARTIES  FURTHER HEREBY  CONSENT TO WAIVER OF ANY  CONSTITUTIONAL,
STATUTORY OR COMMON LAW RIGHT OF TRIAL BY JURY.

19.      Choice of Forum

The  parties  agree  that  Minnesota  and  California  each  have a  substantial
relationship  to  this   transaction,   and  each  party  consents  to  personal
jurisdiction  in the courts  thereof,  consistent with Section 18. Any action or
suit  arising  from or  related  to this  Agreement  must only be brought by the
parties in any federal or state  court with  appropriate  jurisdiction  over the
subject matter established or sitting in the states of Minnesota or California.

20.      Nonwaiver, Modifications

     20.1  Failure  by  either  party  to  require  strict  performance  of this
Agreement shall not be a waiver of a party's right  subsequently to require such
strict performance.



<PAGE>


     20.2 No change or  modification  of this  Agreement  will bind the  parties
unless it is in writing signed by their respective authorized representatives.

21.      License to Manufacture and Sell

     21.1 If APTI is unable to meet its  delivery  obligations  for  PRODUCTS as
defined in Section 4.4 above during any three month period, APTI agrees to grant
and does hereby grant to 3M a license  under any  intellectual  property  rights
(including all patents, trade secrets, and know-how) owned or controlled by APTI
to the extent  necessary  for 3M to make,  have made,  sell,  offer to sell,  or
import  PRODUCTS.  The terms of such a license  will be agreed to by APTI and 3M
and will be commercially  reasonable within the industry,  but in no event shall
the royalty  rate exceed five  percent  (5%) of 3M's net sales price of PRODUCTS
sold in countries where such PRODUCTS are covered by a granted, enforceable, and
unexpired  patent that  describes  and claims  such  licensed  PRODUCTS.  If the
licensed  PRODUCTS  are covered only by trade  secrets and how-how,  the royalty
rate shall not  exceed  two  percent  (2%) of 3M's net sales  price of  licensed
PRODUCTS.  APTI  will  provide  technical  assistance  and  documentation  to 3M
(including  know-how) , as 3M may request,  so that 3M can make or have made the
PRODUCTS.

     21.2 If APTI  executes the license  because of the  occurrence of the event
described  in  Section  21.1,  and  subsequently  can  prove to 3M's  reasonable
satisfaction  that it has developed  the  capability  to  consistently  meet its
delivery  obligations,  then APTI may give 3M written notice that it is able and
willing to meet those delivery obligations.

After  receipt of such  written  notice  from APTI,  3M agrees to stop making or
having  made by a third party the  applicable  PRODUCT  within  three (3) months
after receipt of APTI's notice and the license will be revoked no later than the
end of the  three  month  period.  3M will  have  the  right to sell and use all
quantities of the PRODUCT made during the time period the license was in effect.
It is agreed that this Section  will not apply unless APTI  provides 3M with the
required  written  notice within twelve (12) months after the effective  date of
the license.

     21.3 If the license is  executed,  the license is  subsequently  revoked as
provided  in Section  21.2 above and then the  license  must be  executed  again
because one of the events  described in Section  21.1 occurs,  it is agreed that
Section 21.2 will not apply again.

22.      Bailment of Stock; Work-In Process; Finished Products

     22.1 a. While this Agreement is in effect,  3M may provide to APTI the film
(BAILMENT STOCK) needed to manufacture the PRODUCTS. If 3M notifies APTI that 3M
wishes to provide the BAILMENT  STOCK,  then APTI will be responsible for making
timely  release  requests to ensure APTI's  inventory of BAILMENT STOCK does not
fall below the level necessary to provide timely delivery of PRODUCTS to 3M.

     b. APTI will visually  inspect all BAILMENT  STOCK received from 3M or 3M's
vendors using visual standards supplied by 3M. All BAILMENT STOCK failing

<PAGE>


the inspection test will be held for pickup by 3M. 3M will arrange for pickup of
failed  BAILMENT STOCK within fourteen (14) days after receipt of written notice
from APTI.

     22.2 a. APTI will keep  BAILMENT  STOCK at its  manufacturing  facility  or
warehouse  and will not relocate any BAILMENT  STOCK  without 3M's prior written
approval.

     b. APTI will use the BAILMENT STOCK only to perform work for 3M.

     c. APTI will keep the BAILMENT STOCK  segregated from any inventory of APTI
through the use of special labeling.

     d. APTI will store the BAILMENT STOCK in a dry storage area which will have
a temperature  of 60(degree)f -  180(degree)f  and a relative  humidity of 30% -
90%.

     22.3 The BAILMENT STOCK,  work-in-process and finished PRODUCTS will remain
at all times 3M  property.  APTI will not pledge or mortgage any of the BAILMENT
STOCK,  work-in-process  or  finished  PRODUCTS.  APTI will not do or omit to do
anything which might  encumber or threaten to encumber 3M's ownership  rights in
the  BAILMENT  STOCK,  work-in-process  or  finished  PRODUCTS.  APTI  agrees to
execute,  upon request,  a UCC-1 Financing  Statement for filing by 3M to record
3M's ownership rights.

     22.4 a. If APTI's  waste of film during any month is higher than 10%,  then
APTI will  reimburse  3M for the excess waste at the excess waste charge of $.20
per square yard. The parties will review the waste percentage quarterly.

     b. Waste of BAILMENT  STOCK will be  calculated  by  subtracting  the total
square yards of finished  PRODUCTS produced during a month from the total square
yards of BAILMENT  STOCK used to produce  those  finished  PRODUCTS.  Production
quantities will be recorded by filling out the production  report provided by 3M
after each production run. APTI will also report monthly inventory  balances for
BAILMENT STOCK.  APTI will send the reports to 3M on the last day of each month.
APTI will also  submit a monthly  waste  report  using a  mutually  agreed  upon
format.

     c. Where  APTI can show that 1) waste is the direct  result of a failure of
BAILMENT  STOCK to meet 3M's  specifications  and 2) the  failure to comply with
3M's  specifications  is due to a defect  in the  BAILMENT  STOCK  which was not
discoverable by APTI through the use of reasonable  care, such waste will not be
counted when  calculating  APTI's actual waste  percentages  for the purposes of
this Section 22.4.

     d. At the end of each  month 3M will  calculate  the amount due to 3M under
Section  22.4.a above and send APTI a statement  showing the amount due. If APTI
owes 3M an amount,  then 3M will at its  option  either  deduct the amount  from
payments due to APTI or invoice APTI for the amount.  If 3M invoices APTI,  then
APTI  shall pay the  amount due within  thirty  (30) days  after  receiving  the
invoice.


<PAGE>


     22.5 When this Agreement expires or terminates  (regardless of cause), APTI
will  immediately make available to 3M all BAILMENT STOCK and any other property
belonging to 3M and stored at APTI's premises or under APTI's  control.  If APTI
does not  immediately  make that property  available to 3M, then 3M may take all
action  permitted  by law to  immediately  recover the property and APTI will on
demand  reimburse 3M for all actual and reasonable costs 3M incurs in recovering
the  property  (including  reasonable  attorney's  fees and  other  expenses  of
litigation).

     22.6 APTI will dispose of BAILMENT STOCK waste by incineration or by burial
in a covered  landfill site in compliance with all applicable  local,  state and
federal laws and regulations.

     22.7 APTI has full risk of loss as to any BAILMENT STOCK on APTI's premises
or under  APTI's  control.  The  total  value of the  BAILMENT  STOCK  may reach
$150,000.00  and APTI will  insure the  BAILMENT  STOCK up to that value for all
times during which that  property is within APTI's  possession  or control.  The
policy must name 3M as an additional  insured as 3M's  interest may appear.  The
insurance  must be primary for 3M regardless of any other  coverage which 3M may
have available.

23.      Infringement of Third Party Rights

     23.1 APTI shall  indemnify,  defend and hold 3M harmless from any liability
for any injury,  loss, damage, cost or expense (including  reasonable  attorneys
fees)  caused  by or  resulting  from any third  party  claim,  action,  suit or
proceeding involving PRODUCTS,  which claim, action, suit or proceeding is based
on actual or alleged  infringement,  wrongful  use or  misappropriation  of such
third party's patent, trademark, copyright or trade secret rights by PRODUCT. 3M
shall give APTI notice of any such claim,  action, suit or proceeding.  3M shall
have  the  option  to  join  such  claim,  action,  suit  or  proceeding  and be
represented by attorney(s) of its own choosing, at 3M's cost.

     23.2 APTI shall main in full force and  effect,  so long as this  Agreement
remains in effect and for three (3) years thereafter,  comprehensive general and
commercial liability insurance, including coverage for the liabilities expressed
in Section 23.1, waiving subrogation with combined single limits of no less than
four million dollars ($4,000,000).  Contemporaneously with the execution of this
Agreement, APTI shall deliver to 3M a certificate or certificates evidencing the
required  coverage  and  indicating  that  3M will  receive  written  notice  of
cancellation, non-renewal or of any material change in the coverage least thirty
days  prior to the  effective  date  thereof.  Insurance  shall be carried by an
insurer with a BEST rating of B+V or above.  Compliance  with Section 23.2 in no
way  limits  APTI's  indemnity  obligations,  except to the extent  that  APTI's
insurance company actually pays amounts which are owed.

24.      Entire Agreement

     This  Agreement  constitutes  the  entire  Agreement  between  the  parties
relating to the matters set forth  herein and  supersedes  all prior  Agreements
except  for  the  SPD  Agreement,   whether  written  or  oral,  and  all  other
communications  between  the  parties  relating  to the  subject  matter of this
Agreement.


<PAGE>


The parties  have  confirmed  this  Agreement  by having  their duly  authorized
representatives  execute both copies of this  Agreement  in the spaces  provided
below. For reference  purposes the date of this Agreement will be the date it is
executed by 3M.

MINNESOTA MINING AND                  AIR PACKAGING TECHNOLOGIES
MANUFACTURING COMPANY                 INCORPORATED


By: /s/  John F. Pohl              By: /s/    Donald Ochacher
  ----------------------------         -----------------------------
  John F. Pohl                         Print name:  Donald Ochacher
  Division Vice President              Title:   President
  Packaging Systems Division

Date:   2/26/01                    Date   2/26/2001
    ----------------------------         -----------------------------