Exhibit
10.5

     

    Pledge
Agreement

     

    This Pledge Agreement (this “Agreement”) is dated as of
April 29, 2010, between CTI
Industries Corporation, an Illinois corporation (the “Pledgor”), and Harris
N.A., a national banking association (the “Secured Party”), in
connection with the Credit Agreement described below.

     

    Preliminary
Statement

    


    A.           The
Pledgor has requested that the Secured Party from time to time extend credit or
otherwise make financial accommodations available to or for the account of the
Pledgor, including, without limitation, pursuant to the terms of that certain
Credit Agreement dated as of April 29, 2010, between the Pledgor and the Secured
Party, as the same may from time to time be amended, modified or restated (the
“Credit Agreement”;
capitalized terms used herein and not otherwise defined shall have the meanings
given such terms in the Credit Agreement).

    B.           As
a condition to extending credit or otherwise making financial accommodations
available to or for the account of the Pledgor, the Secured Party requires,
among other things, that the Pledgor pledge and assign to the Secured Party and
grant to the Secured Party a security interest in all of the Pledged Collateral
(as defined below), whether now owned or hereafter acquired, to secure prompt
payment and full performance of the Secured Obligations (as defined
below).

    Now,
Therefore, in consideration of the benefits accruing to the Pledgor, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

    SECTION
1.       DEFINITIONS

     

    As used
herein, the following terms have the meanings set forth below:

     

    Pledged
Collateral:  collectively, (a) those certain shares of capital
stock or other equity interests owned beneficially and, if applicable, of record
by the Pledgor listed on Schedule I attached hereto and made a part hereof
(provided that the Pledged Collateral shall not include more than 65% of any
voting capital stock or other voting equity interests of foreign issuers owned
beneficially and, if applicable, of record by the Pledgor), and all cash,
dividends, other securities, instruments, rights, and other property at any time
and from time to time received or receivable in respect thereof or in exchange
for all or any part thereof, including without limitation, dividends,
distributions, warrants, profits, rights to subscribe, rights to return of its
contribution, conversion rights, liquidating dividends, and other rights
(subject to Section 6.1 below); (b) all other property hereafter delivered to
the Secured Party (or any agent or bailee holding on behalf of the Secured
Party) by the Pledgor in substitution for or in addition to any of the
foregoing, and all certificates and instruments representing or evidencing such
other property and all cash, dividends, other securities, instruments, rights,
and other property at any time and from time to time received or receivable in
respect thereof or in exchange for all or any part thereof, including without
limitation, dividends, distributions, warrants, profits, rights to subscribe,
conversion rights, liquidating dividends, and other rights; and (c) all proceeds
of all of the foregoing.

     

    Secured Obligations:
(a) any and all indebtedness, obligations and liabilities of whatsoever
kind and nature of the Pledgor to the Secured Party (whether arising before or
after the filing of a petition in bankruptcy), whether direct or indirect,
absolute or contingent, due or to become due, and whether now existing or
hereafter arising and howsoever held, evidenced or acquired, and whether
several, joint or joint and several; and (b) any and all expenses and
charges, legal or otherwise, suffered or incurred by the Secured Party in
collecting or enforcing any of such indebtedness, obligations or liabilities or
in realizing on or protecting or preserving any security therefor, including,
without limitation, the lien and security interest granted hereby.

     

    
      
        
        

      

      
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    SECTION
2.          PLEDGED
COLLATERAL

     

    2.1.           Pledge of
Collateral.  The Pledgor
hereby pledges and assigns to the Secured Party and grants to the Secured Party
a security interest in all of the Pledged Collateral, whether now owned or
hereafter acquired, to secure prompt payment and full performance of the Secured
Obligations.

     

    2.2.           Delivery
of Certificates.
All certificates or instruments representing or evidencing the Pledged
Collateral must be delivered to and held by or on behalf of the Secured Party
pursuant to this Agreement and must be in suitable form for transfer by
delivery, or accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance satisfactory to the Secured
Party.  The Secured Party has the right, at any time after an Event of
Default (as defined herein) has occurred and is continuing, in its reasonable
discretion and without notice to the Pledgor, to transfer to or to register any
or all of the Pledged Collateral in the name of the Secured Party or any of its
nominees.  In addition, the Secured Party has the right at any time to
exchange certificates or instruments representing or evidencing any or all of
the Pledged Collateral for certificates or instruments of smaller or larger
denominations.

     

    2.3.           Dividends
and Replacement Stock.  Except as
provided in Section 6.1 below, in the event that the Pledgor receives any cash,
dividends, other securities, instruments, rights, or other property at any time
and from time to time received or receivable in respect of any of the Pledged
Collateral, or in exchange for all or any part thereof, including without
limitation, dividends, distributions, warrants, profits, rights to subscribe,
conversion rights, liquidating dividends, and other rights, the Pledgor
acknowledge that the same will be received IN TRUST for the Secured Party and
will immediately deliver the same to the Secured Party in original form of
receipt, together with any stock or bond powers, assignments, endorsements, or
other documents or instruments as the Secured Party may request to establish,
protect, or perfect the Secured Party’s interest in respect of such Pledged
Collateral.

     

    SECTION
3.          REPRESENTATIONS
AND WARRANTIES

     

    3.1.           General
Representations and Warranties.  To induce the
Secured Party to enter into the Credit Agreement and the other Loan Documents,
the Pledgor represents and warrants that:

     

    3.1.1.      Ownership of Pledged
Collateral.  The Pledgor is the sole legal, beneficial, and, if
applicable, record owner of the Pledged Collateral (or, in the case of
after-acquired Pledged Collateral, will be the sole such owner thereof), having
good and marketable title thereto, free of all liens, security interests,
encumbrances, or claims of any kind other than those in favor of the Secured
Party under this Agreement.

     

    3.1.2.      Securities
Act.  All capital stock or other equity interests constituting
Pledged Collateral: (a) have been duly and validly issued in compliance
with (or pursuant to a valid exception from) all applicable laws (including
without limitation, if applicable, the Securities Act of 1933, as amended (the
“Securities Act”));
(b) if applicable, are fully paid, non-assessable, and free of preemptive
rights; (c) are not subject to any restrictions upon the voting rights or
upon the transfer thereof other than the Securities Act, any applicable “blue
sky” laws or other similar foreign laws (if applicable); (d) constitute (i) all
capital stock or other equity interests of the domestic issuers, if any, of the
Pledged Collateral owned beneficially and of record by the Pledgor and (ii) no
more than 65% of the voting capital stock or other voting equity interests of
the foreign issuers of the Pledged Collateral; and (e) include the
percentages of the issued and outstanding capital stock or other equity
interests as set forth on Schedule I attached
hereto.

     

    
      
        
        

      

      
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    3.1.3.      Representations and
Warranties in Credit Agreement and Security Agreement Incorporated.
Without limiting any of the foregoing representations and warranties, the
Pledgor represents and warrants that each of the representations and warranties
set forth in the Credit Agreement and in the Security Agreement are true,
correct, and complete as written.

     

    3.2.           Complete
Disclosure.  No Loan Document
contains any untrue statement of a material fact regarding the Pledgor or its
properties, nor fails to disclose any material fact regarding the Pledgor or its
properties necessary to make the statements contained therein not materially
misleading.  There is no fact or circumstance that the Pledgor has
failed to disclose to the Secured Party in writing that could reasonably be
expected to have a Material Adverse Effect.

     

    SECTION
4.         COVENANTS

     

    4.1.           Covenants
of Pledgor.  Until all of the
Secured Obligations, both for principal and interest, have been fully paid and
satisfied and all agreements of the Secured Party to extend credit to or for the
account of the Pledgor have expired or otherwise have been terminated, the
Pledgor shall:

     

    4.1.1.      Protect Pledged
Collateral.  Preserve and protect the Pledged
Collateral.

     

    4.1.2.      No
Liens.  Not create, incur, assume, or permit to exist any
liens, encumbrances, security interests, levies, assessments, or charges on or
in any of the Pledged Collateral, except liens permitted by the Loan
Documents.

     

    4.1.3.      No
Sales.  Not sell, encumber, or otherwise dispose of or transfer
any Pledged Collateral, or any right or interest therein and will: (a) cause the
issuer(s) of the Pledged Collateral not to issue any other voting stock in
addition to or in substitution for the Pledged Collateral, except to the
Pledgor, or in connection with outstanding stock options or with the prior
written consent of the Secured Party; and (b) pledge hereunder, immediately
upon the Pledgor’s acquisition (directly or indirectly) thereof, any and all
additional shares of stock or other securities of the issuers of the Pledged
Collateral.

     

    4.1.4.      Defend
Title.  Appear in and defend, at the Pledgor’s own expense, any
action or proceeding that may affect the Pledgor’s title to or the Secured
Party’s interest in the Pledged Collateral.

     

    4.1.5.      Taxes on Pledged
Collateral.  Promptly pay and discharge all taxes, assessments,
and governmental charges or levies imposed on the Pledgor or any of the Pledged
Collateral before the same become delinquent.

     

    4.1.6.      Further
Assurances.  Procure or execute and deliver, from time to time,
in form and substance satisfactory to the Secured Party, any stock powers, bond
powers, endorsements, assignments, financing statements, estoppel certificates,
or other writings deemed necessary or appropriate by the Secured Party to
perfect, maintain, or protect the Secured Party’s security interest in the
Pledged Collateral and the priority thereof, and take such other action and
deliver such other documents, instruments, and agreements pertaining to the
Pledged Collateral as the Secured Party may reasonably request to effectuate the
intent of this Agreement.

     

    4.1.7.      Advances.  If
the Secured Party gives value to enable the Pledgor to acquire rights in or use
of any Pledged Collateral, use such value only for such purpose.

     

    
      
        
        

      

      
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    4.1.8.      Records and Other
Information. Keep separate, accurate, and complete records of the Pledged
Collateral and provide the Secured Party with access thereto with the right to
make extracts therefrom and provide the Secured Party with such other
information pertaining to the Pledged Collateral as the Secured Party may
reasonably request from time to time.

     

    SECTION
5.          AUTHORIZED ACTION
BY THE SECURED PARTY

     

    5.1.           Attorney-in-Fact.  The Pledgor
hereby irrevocably appoints the Secured Party as its attorney-in-fact to do (but
the Secured Party shall not be obligated to and shall not incur any liability to
the Pledgor or any third party for failure to do) any act that the Pledgor is
obligated by this Agreement to do, and (subject to Section 6.1 below) to
exercise such rights and powers as the Pledgor might exercise with respect to
the Pledged Collateral, including without limitation, the right to:

     

    (a)  Collect
by legal proceedings or otherwise and endorse, receive, and receipt for all
payments, proceeds and other sums and property now or hereafter payable on or in
respect of proceeds, and other sums and property now or hereafter payable on or
in respect of the Pledged Collateral, including dividends, profits, and interest
payments;

     

    (b)  Enter
into any extension, reorganization, deposit, merger, or consolidation agreement
or other agreement pertaining to any of the Pledged Collateral, and in
connection therewith, to: (i) deposit or surrender control of the Pledged
Collateral thereunder; (ii) accept other property in exchange therefor; and
(iii) do and perform such acts and things as the Secured Party may deem proper;
and any money or property secured in exchange therefor will be applied to the
Secured Obligations or held by the Secured Party pursuant to the provisions of
this Agreement;

     

    (c)  Protect
and preserve the Pledged Collateral;

     

    (d)  Transfer
the Pledged Collateral to its own or its nominee’s name; and

     

    (e)  Make
any compromise, settlement, or adjustment, and take any action the Secured Party
deems advisable, with respect to the Pledged Collateral.

     

    5.2.           Reimbursement. The Pledgor agrees to
reimburse the Secured Party upon demand for any costs and reasonable expenses,
including attorneys’ fees, that the Secured Party may incur while acting as the
Pledgor’s attorney-in-fact under this Agreement, all of which costs and expenses
are included in the Secured Obligations and are payable upon
demand.  It is further agreed and understood between the parties
hereto that such care as the Secured Party gives to the safekeeping of its own
property of like kind constitutes reasonable care of the Pledged Collateral when
in the Secured Party’s possession; provided, however, that the Secured
Party will not be required to make any presentment, demand, or protest, or give
any notice and need not take any action to preserve any rights against any prior
party or any other person in connection with the Secured Obligations or with
respect to the Pledged Collateral.

     

    5.3.           Irrevocable
Interests.  All the foregoing
powers authorized in this Section 5, being coupled with an interest, are
irrevocable so long as any of the Secured Obligations are
outstanding.

     

    
      
        
        

      

      
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    SECTION
6.        TRANSFER, VOTING, DIVIDENDS,
ETC.

     

    6.1.         Prior to
Event of Default.  Notwithstanding
any other provision of this Agreement, so long as no Event of Default (as
defined herein) has occurred and is continuing:

     

    (a)  The
Pledgor is entitled to exercise all voting powers pertaining to all shares of
stock and other securities constituting the Pledged Collateral for all purposes
not inconsistent with the terms of this Agreement;

     

    (b)  The
Pledgor is entitled to receive and retain all dividends (other than shares of
stock or liquidating dividends) and all interest payments payable in respect of
the Pledged Collateral; provided, that such dividends
or interest payments are permitted by the terms of the Credit Agreement and the
other Loan Documents; and provided, further, however, that all shares of
stock or property representing shares of stock or liquidating dividends or a
distribution or return of capital upon or in respect of the shares of stock
constituting the Pledged Collateral or resulting from a split-up, revision, or
reclassification of the Pledged Collateral or received in exchange therefor, as
a result of a merger, consolidation, or otherwise, must be paid or transferred
directly to the Secured Party immediately upon receipt thereof by the Pledgor
and be retained by the Secured Party as Pledged Collateral hereunder;
and

     

    (c)  In
order to permit the Pledgor to exercise such voting powers and to receive such
dividends, the Secured Party will, if necessary and upon the written request of
the Pledgor, from time to time, execute and deliver to the Pledgor appropriate
proxies.

     

    6.2.         During
Event of Default.  If any Event of
Default (as defined herein) has occurred and while the same is
continuing:

     

    (a)           The
Secured Party or its nominee or nominees may, if the Secured Party so elects by
written notice to the Pledgor, have the sole and exclusive right to exercise all
voting powers pertaining to the shares of stock constituting Pledged Collateral,
and may exercise such powers in such manner as the Secured Party may elect, and
the Pledgor hereby grants the Secured Party an irrevocable proxy, coupled with
an interest, to vote such shares of stock; provided, however, that such proxy will
terminate upon termination of the Secured Party’s security interest in the
Pledged Collateral; and

     

    (b)           All
dividends and other distributions and profits made upon or in respect of the
Pledged Collateral and all interest payments must be paid directly to and be
retained by the Secured Party as Pledged Collateral hereunder (or applied to the
Secured Obligations, consistent with the terms of the Credit Agreement and the
Security Agreement).

     

    
      
        
        

      

      
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    SECTION
7.        DEFAULT AND
REMEDIES

     

    7.1.         Events of
Default.  Any “Event of
Default” as defined in the Credit Agreement shall be an “Event of Default”
hereunder.

     

    7.2.         Remedies
upon Default.  If an Event of
Default described in Section 9.1(j) of the Credit Agreement occurs with respect
to the Pledgor, then to the extent permitted by applicable law, all Secured
Obligations shall become automatically due and payable by the Pledgor, without
any action by the Secured Party or notice of any kind.  In addition,
or if any other Event of Default exists, the Secured Party may in its discretion
do any one or more of the following from time to time (upon such notice to the
Pledgor as may be required by applicable law after giving effect to the
agreements and waivers contained herein):

     

    (a)           declare
any Secured Obligations immediately due and payable, whereupon they shall be due
and payable without diligence, presentment, demand, protest, or notice of any
kind, including notice of intent to accelerate and notice of acceleration, all
of which are hereby waived by the Pledgor to the fullest extent permitted by
law;

     

    (b)           settle,
compromise, or release, on terms acceptable to the Secured Party, in whole or in
part, any amounts owing on the Pledged Collateral, and to extend the time of
payment, in the Secured Party’s name or in the name of the Pledgor, in respect
thereof;

     

    (c)           apply
to the payment of the Secured Obligations, or collect the Pledged Collateral,
notwithstanding any forfeiture of interest or loss of other rights of the
Pledgor against any obligor on the Pledged Collateral resulting from such
action;

     

    (d)           sell
or otherwise dispose of all or any part of the Pledged Collateral in accordance
with applicable law, either at public or private sale, on any broker’s board or
securities exchange, in lots or in bulk, for cash, on credit, or otherwise, with
or without representations or warranties, and upon such terms as are acceptable
to the Secured Party; and

     

    (e)           exercise
any other default rights or remedies afforded under the Credit Agreement, any
other Loan Document, or any other agreement, by law, at equity or otherwise,
including the rights and remedies of a secured party under the Uniform
Commercial Code of the State of Illinois as in effect from time to
time.

     

    7.3.        Application
of Proceeds.  The net cash
proceeds resulting from the collection, liquidation, sale, or other disposition
of the Pledged Collateral will be applied first to the expenses (including all
attorneys’ fees) of holding, storing, preparing for sale, selling, collecting,
liquidating, and the like, including any brokerage commissions and stamp or
transfer taxes, and then to the satisfaction of all Secured Obligations,
application as to any particular obligation or indebtedness or against principal
or interest to be in the Secured Party’s absolute discretion.

     

    
      
        
        

      

      
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    7.4.        Securities
Act.  If by reason of
any prohibition contained in the Securities Act, as now or hereafter in effect,
or in applicable Illinois or other state securities laws, as now or hereafter in
effect, or in any rules or regulations pertaining to any of the foregoing laws,
the Secured Party believes in its sole judgment that it is compelled to resort
to one or more private sales of shares of stock constituting Pledged Collateral
to a single purchaser or a restricted group of purchasers who will be obliged to
agree, among other things, to acquire such securities for their own account, for
investment and not with a view to the distribution or resale thereof, the
Pledgor acknowledges and agrees that private sales of such Pledged Collateral
may be held notwithstanding that such sales may be at prices and on other terms
less favorable to the Pledgor than if such Pledged Collateral were sold at
public sale.  The Pledgor further agrees that the Secured Party has no
obligation to delay the sale of any such Pledged Collateral for the period of
time necessary to permit registration of the Pledged Collateral, even if the
issuer thereof would, or should, agree to register such Pledged Collateral for
public sale under applicable securities laws.  The Pledgor
specifically agrees that private sales made under the foregoing circumstances
shall be deemed to have been made in a “commercially reasonable”
manner.

     

    7.5.        Duty of
Secured Party.  The Secured Party
is not under any duty or obligation whatsoever to collect any dividends,
interest, profits, or other payments due or accruing in respect of the Pledged
Collateral or to take any action to preserve rights in connection with any
Pledged Collateral, including without limitation, making or giving any
presentment, demands for performance, notices of non-performance, protests,
notices of protest, or notices of dishonor in connection with any Pledged
Collateral.

     

    7.6.        Return;
Acquittance.  The Secured Party
may deliver any Pledged Collateral to the Pledgor at any time and the receipt
thereof by the Pledgor will be a complete and full acquittance in respect of the
Pledged Collateral so delivered, and the Secured Party will thereafter be
discharged from any liability or responsibility therefor.

     

    7.7.        Remedies Cumulative; No
Waiver.

     

    7.7.1.       Cumulative
Rights.  All covenants, conditions, provisions, warranties,
guaranties, indemnities, and other undertakings of the Pledgor contained in the
Loan Documents are cumulative and not in derogation or substitution of each
other.  In particular, the rights and remedies of the Secured Party
are cumulative, may be exercised at any time and from time to time, concurrently
or in any order, and shall not be exclusive of any other rights or remedies that
the Secured Party may have, whether under any agreement, by law, at equity, or
otherwise.

     

    7.7.2.       Waivers.  The
failure or delay of the Secured Party to require strict performance by the
Pledgor with any terms of the Loan Documents, or to exercise any rights or
remedies with respect to Pledged Collateral or otherwise, shall not operate as a
waiver thereof nor as establishment of a course of dealing.  All
rights and remedies shall continue in full force and effect until all of the
Secured Obligations, both for principal and interest, have been fully paid and
satisfied and all agreements of the Secured Party to extend credit to or for the
account of the Pledgor have expired or otherwise have been
terminated.  No modification of any terms of any Loan Documents
(including any waiver thereof) shall be effective, unless such modification is
specifically provided in a writing directed to the Pledgor and executed by the
Secured Party, and such modification shall be applicable only to the matter
specified.  No waiver of any Default or Event of Default shall
constitute a waiver of any other Default or Event of Default that may exist at
such time, unless expressly stated.  If the Secured Party accepts
performance by the Pledgor under any Loan Document in a manner other than that
specified therein, or during any Default or Event of Default, or if the Secured
Party shall delay or exercise any right or remedy under any Loan Document, such
acceptance, delay, or exercise shall not operate to waive any Default or Event
of Default nor to preclude exercise of any other right or remedy.

     

    
      
        
        

      

      
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    SECTION
8.        MISCELLANEOUS

     

    8.1.         Successors
and Assigns.  All of the
rights, privileges, remedies and options given to the Secured Party hereunder
shall inure to the benefit of its successors and assigns, and all the terms,
conditions, covenants, agreements, representations and warranties of and in this
Agreement shall bind the Pledgor and its legal representatives, successors and
assigns, provided that the Pledgor may not assign its rights or delegate its
duties hereunder without the Secured Party’s prior written consent.

     

    8.2.         Notices
and Communications.  Except as
otherwise specified herein, all notices hereunder shall be in writing
(including, without limitation, notice by telecopy) and shall be given to the
relevant party at its address or telecopier number set forth below (or, if no
such address is set forth below, at the address of the Pledgor as shown on the
records of the Secured Party), or such other address or telecopier number as
such party may hereafter specify by notice to the other given by courier, by
United States certified or registered mail, by telecopy or by other
telecommunication device capable of creating a written record of such notice and
its receipt.  Notices hereunder shall be addressed:

     

    
      	
              to
      the Pledgor at:

            	
              to
      the Secured Party at:

            
	 
      	 
      
	
              CTI
      Industries Corporation

            	
              Harris
      N.A.

            
	
              22160
      North Pepper Road

            	
              111
      West Monroe Street – 5W

            
	
              Barrington,
      Illinois 60010

            	
              Chicago,
      Illinois 60603

            
	
              Attention:          Stephen
      M. Merrick

            	
              Attention:           Timothy
      J. Moran

            
	
              Telephone:       (847)
      620-1308

            	
              Telephone:         (312)
      461-2633

            
	
              Facsimile:          _______________________

            	
              Facsimile:
               (312)
      502-3922

            
	 
      	 
      
	
              with
      a copy to:

            	
              with
      a copy to:

            
	 
      	 
      
	
              Vanasco,
      Genelly & Miller

            	
              McGuireWoods
      LLP

            
	
              33
      North LaSalle Street, Suite 2200

            	
              77
      West Wacker Drive, Suite 4100

            
	
              Chicago,
      Illinois 60602

            	
              Chicago,
      Illinois 60601

            
	
              Attention:           Gerald
      Miller

            	
              Attention:           Arthur
      B. Muir

            
	
              Telephone:         (312)
      786-5100

            	
              Telephone:         (312)
      750-3595

            
	
              Facsimile:  
             (312) 786-5111

            	
              Facsimile:        
       (312) 698-4568

            


    

    


    Each such
notice, request or other communication shall be effective (i) if given by
telecopier, when such telecopy is transmitted to the telecopier number specified
in this Section and a confirmation of such telecopy has been received by the
sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered
at the addresses specified in this Section.

    


    8.3.         Performance
of Secured Obligations.  The Secured Party
may, in its discretion at any time and from time to time, at the Pledgor’s
expense, pay any amount or do any act required of the Pledgor hereunder or
otherwise lawfully requested by the Secured Party to (a) enforce any Loan
Document or collect any Secured Obligations; (b) protect, insure, maintain, or
realize upon any Pledged Collateral; or (c) defend or maintain the validity or
priority of the Secured Party’s Liens in any Pledged Collateral, including any
payment of a judgment, insurance premium, warehouse charge, finishing or
processing charge, or landlord claim, or any discharge of a Lien.  All
payments, costs, and expenses (including extraordinary expenses) of the Secured
Party under this Section shall be reimbursed to the Secured Party by the
Pledgor, on demand, with
interest from the date incurred to the date of payment thereof at the rate of
interest applicable to Base Rate Portions during the existence of any Event of
Default.  Any payment made or action taken by the Secured Party under
this Section shall be without prejudice to any right to assert an Event of
Default or to exercise any other rights or remedies under the Loan
Documents.

     

    
      
        
        

      

      
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    8.4.         Severability.  In the event and
to the extent that any provision hereof shall be deemed to be invalid or
unenforceable by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Agreement shall to such extent
be construed as not containing such provision, but only as to such locations
where such law or interpretation is operative, and the invalidity or
unenforceability of such provision shall not affect the validity of any
remaining provisions hereof, and any and all other provisions hereof which are
otherwise lawful and valid shall remain in full force and effect.

     

    8.5.         Cumulative
Effect; Conflict of Terms.  The provisions of
this Agreement and the other the Loan Documents are cumulative.  The
parties acknowledge that the Loan Documents may use several limitations, tests,
or measurements to regulate similar matters, and they agree that these are
cumulative and that each must be performed as provided.  Except as
otherwise provided in another Loan Document (by specific reference to the
applicable provision of this Agreement), if any provision contained herein is in
direct conflict with any provision in another Loan Document, the provision
herein shall govern and control.

     

    8.6.         Counterparts.  This Agreement
may be executed in any number of counterparts, and by different parties hereto
on separate counterpart signature pages, and all such counterparts taken
together shall be deemed to constitute one and the same
instrument.  The Pledgor acknowledges that this Agreement is and shall
be effective upon its execution and delivery by the Pledgor to the Secured
Party, and it shall not be necessary for the Secured Party to execute this
Agreement or any other acceptance hereof or otherwise to signify or express its
acceptance hereof.

     

    8.7.         Entire
Agreement.  Time is of the
essence of the Loan Documents.  The Loan Documents constitute the
entire contract among the parties relating to the subject matter hereof, and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof.

     

    8.8.         Governing
Law.  This Agreement
shall be deemed to have been made in the State of Illinois and shall be governed
by, and construed in accordance with, the laws of the State of
Illinois.  Section headings used in this Agreement are for convenience
of reference only and are not a part of this Agreement for any other
purpose.

     

    8.9.         Consent
to Forum;
Waivers.  The Pledgor
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Northern District of Illinois and of any Illinois State court
sitting in the City of Chicago for purposes of all legal proceedings arising out
of or relating to this Agreement or the transactions contemplated hereby. The
Pledgor irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient
forum.  The
Pledgor and the Secured Party each hereby irrevocably waives any and all right
to trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.

     

    8.10.       Advice of
Counsel.  The Pledgor
acknowledges that it has either obtained the advice of counsel or has had the
opportunity to obtain such advice in connection with the terms and provisions of
this Agreement.

     

    [Remainder
of Page Intentionally Left Blank]


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    In
Witness Whereof, the parties hereto have caused this Agreement to be duly
executed and delivered in Chicago, Illinois, as of the date and year first above
written.

    


    
      
        	 
      	 
      	
                CTI
      Industries Corporation

              
	 
      	 
      	 
      
	 
      	
                By: 

              	
                /s/ Stephen M. Merrick

              
	 
      	 
      	
                Executive
      Vice-President and Chief Financial

                Officer

              
	 
      	 
      	 
      
	 
      	 
      	
                Harris
      N.A.

              
	 
      	 
      	 
      
	 
      	
                By: 

              	
                /s/ Timothy J. Moran

              
	 
      	 
      	
                Senior
      Vice-President

              


      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
I

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    Issuer and Jurisdiction of its

                                    Organization

                                  	 	
                                    Class of Equity

                                  	 	
                                    Certificate

                                    No(s).

                                  	 	 	
                                    Number of

                                    Shares/Units

                                  	 	 	
                                    % of

                                    Outstanding

                                    Equity

                                  	 
	
                                    Flexo
      Universal, S.A. de C.V. (Mexico)

                                  	 	
                                    Series
      A

                                  	 	
                                    *

                                  	 	 	
                                    32,500

                                  	 	 	
                                    65%

                                  	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
                                    Flexo
      Universal, S.A. de C.V. (Mexico)

                                  	 	
                                    Series
      B

                                  	 	
                                    2

                                  	 	 	
                                    1,480,400

                                  	 	 	
                                    97.9%

                                  	 


                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    


    *  To
be provided post-closing.


    
      
        
        

      

      
        11