Exhibit 10.15


                                                     

                AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT


                  THIS  AGREEMENT is made as of May 1, 1998,  by and between CTI
Industries  Corporation,  a Delaware  corporation  (the  "Borrower"),  and First
American Bank, an Illinois banking corporation (the "Bank").

                  Whereas,  the  Borrower and the Bank are parties to a Loan and
Security Agreement dated as of August 22, 1996, as it has been amended from time
to time and the parties wish to restate the terms and conditions under which the
Bank will make loans to the Borrower; and

                  In  consideration  of the mutual  covenants,  conditions,  and
agreements herein contained, the parties hereto agree as follows:

                  Section 1.  THE BANK'S AGREEMENT TO LEND.

                  1.1. Loan Amount. Subject to and upon the terms and conditions
set forth in this Agreement,  the Bank agrees to lend to the Borrower, from time
to time, such sums as may be requested by the Borrower and which the Bank in its
discretion  agrees  to lend  from  time to time,  the  total of which  shall not
exceed,  in  the  aggregate,  $10,224,651.16,  subject  to  the  further  limits
hereinafter  set forth (the "Loan")  pursuant to the First Term Loan, the Second
Term Loan, Third Term Loan,  Fourth Term Loan and the Revolving Loan hereinafter
provided.

                  1.1.1.  First  Term  Loan  (Loan No.  600804665-63).  The Bank
agrees to lend to the  Borrower,  subject  to and upon the terms and  conditions
herein set forth,  the sum of One Million  Seven Hundred  Eighty Eight  Thousand
Three Hundred Twenty Eight and 39/100 Dollars  ($1,788,328.39)  (herein referred
to as the "First Term  Loan").  The First Term Loan shall be evidenced by and be
repayable  with  interest in accordance  with the terms of this  Agreement and a
promissory  note  payable  to the  order of the Bank in the  original  principal
amount  of  $1,788,328.39,  which  shall  be  dated  on or  before  the  initial
disbursement  of the First Term Loan and shall be duly executed and delivered by
the Borrower (the "First Term Note").

                  1.1.2.  Second  Term Loan  (Loan No.  600804665-56).  The Bank
agrees to lend to the  Borrower,  subject  to and upon the terms and  conditions
herein set forth, the sum of Two Million One Hundred Twenty Eight Thousand Three
Hundred Twenty Two and 80/100 Dollars ($2,128,322.80)(herein  referred to as the
"Second Term Loan"). The Second Term Loan shall be evidenced by and be repayable
with  interest in accordance  with the terms of this  Agreement and a promissory
note  payable  to the  order of the Bank in the  original  principal  amount  of
$2,200,000.00, dated August 22, 1996 and having been duly executed and delivered
by the Borrower (the "Second Term Note").

                  1.1.3.  Third  Term  Loan  (Loan No.  600804665-64).  The Bank
agrees to lend to the  Borrower,  subject  to and upon the terms and  conditions
herein set forth,  the sum of Two Million Two Hundred  Fifty Eight  Thousand and
No/100 Dollars  ($2,258,000.00)  (herein  referred to as the "Third Term Loan").
The Third Term Loan shall be  evidenced  by and be  repayable  with  interest in
accordance with the terms of this Agreement and a promissory note payable to the
order of the Bank in the original principal amount of $2,258,000.00, which shall
be dated on or before the initial  disbursement of the Third Term Loan and shall
be duly executed and delivered by the Borrower (the "Third Term Note").









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                  1.1.4.  Fourth  Term Loan  (Loan No.  600804665-60).  The Bank
agrees to lend to the  Borrower,  subject  to and upon the terms and  conditions
herein set forth,  the sum of Forty Nine Thousand  Nine Hundred  Ninety Nine and
97/100 Dollars  ($49,999.67)(herein  referred to as the "Fourth Term Loan"). The
Fourth  Term Loan  shall be  evidenced  by and be  repayable  with  interest  in
accordance with the terms of this Agreement and a promissory note payable to the
order of the Bank in the original principal amount of $200,000.00, dated July 1,
1997 and having been duly  executed and  delivered by the Borrower  (the "Fourth
Term Note").

                  1.1.5.  Revolving Loan (Loan No. 600804665-65) The Bank agrees
to lend to the Borrower,  subject to and upon the terms and conditions set forth
herein,  at any time or from time to time on or after the date  hereof and on or
before  May  1,  1999,  such  amounts  (each  such  loan  and  all  such  loans,
collectively, as the context requires being herein referred to as the "Revolving
Loan") as may be requested by the Borrower and which the Bank in its  discretion
agrees to lend from time to time,  subject to the  limitations  hereinafter  set
forth. Within the limits and subject to and upon the terms and conditions herein
set forth,  amounts  under the  Revolving  Loan may be  borrowed  and repaid and
reborrowed  from time to time.  Except as otherwise  permitted by the Bank,  the
aggregate  unpaid principal amount of the Revolving Loan outstanding at any time
shall not exceed the lesser of Four Million and No/100  Dollars  ($4,000,000.00)
or the Advance  Limit (as  hereinafter  defined).  The  Revolving  Loan shall be
evidenced by and be repayable with interest in accordance with the terms of this
Agreement and a promissory note payable to the order of the Bank in the original
principal amount of $4,000,000.00  which shall be dated on or before the initial
disbursement  of the Revolving  Loan and shall be duly executed and delivered by
the Borrower (the "Revolving Note"). For purposes of this Agreement, the Advance
Limit  shall  be  equal  to the sum of:  (i) 80% of the  Eligible  Accounts  (as
hereinafter  defined)  or  $4,000,000.00,  whichever  is  less;  and (ii) 25% of
Eligible Inventory (as hereinafter defined) or $1,300,000.00, whichever is less.

                  For purposes of this  Agreement  the Eligible  Accounts  shall
mean all Accounts  Receivable (as defined in Section  4.1(a) hereof)  created by
the Borrower in the ordinary course of business arising out of the sale or lease
of goods or the  rendition  of services by the Borrower and which are and at all
times shall continue to be (to the effect that any Eligible  Account that at any
subsequent time fails to meet the  requirements to be an Eligible  Account shall
cease to be an Eligible  Account)  acceptable to the Bank in all respects as the
Bank shall from time to time determine in its  discretion,  but excluding in all
events:

                           (a)      any Accounts Receivable unpaid for more than
         90 days fromthe date of invoice;

                           (b) any  Accounts  Receivable  against the payment of
         which the account  debtor  claims to have,  may have, or has a defense,
         set-off, or counterclaim;

                           (c) any Accounts  Receivable  as to which the account
         debtor is located  outside the United  States,  unless  supported  by a
         letter of credit or other security deemed to be acceptable by the Bank;

                           (d) any Accounts  Receivable  as to which the account
         debtor is a parent, subsidiary, or affiliate of the Borrower;







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                           (e) any  Accounts  Receivable  with  respect to which
         goods are placed on consignment,  guaranteed sale, or other terms which
         are conditions precedent to payment by the account debtor;

                           (f) any  Accounts  Receivable  as to which an account
         debtor is the United States of America or any  department,  agency,  or
         instrumentality  of the United  States of America,  unless  appropriate
         assignment of claims forms are executed in advance;

                           (g) any  Accounts  Receivable  not arising out of the
         Borrower's ordinary course of trade or business;

                           (h)  any  Accounts  Receivable  not  evidenced  by an
         invoice;

                           (i) any Accounts Receivable arising out of a contract
         or order that, by its terms, forbids or makes void or unenforceable the
         assignment  by the  Borrower  to the  Bank of the  Accounts  Receivable
         arising with respect thereto; and

                           (j) any Accounts  Receivable  that the Bank elects to
         exclude from eligibility due to any actual or potential liens,  claims,
         or risks, including  unsatisfactory financial  responsibility,  payment
         record, or reputation of the account debtor.

                  For purposes of this Agreement,  the Eligible  Inventory shall
mean the  lower of cost or  market  value  (as  determined  in  accordance  with
generally accepted accounting principles  consistently applied) of the Inventory
(as defined in Section  4.1(b)  hereof) of the  Borrower and which is and at all
times  shall  continue  to be (to the  effect  that  any  Inventory  that at any
subsequent time fails to meet the  requirements  to be Eligible  Inventory shall
cease to be Eligible  Inventory)  acceptable  to the Bank in all respects as the
Bank shall from time to time determine in its  discretion,  but excluding in all
events:

                           (a)  any  Inventory  that  is  subject  to any  prior
         assignment, claim, lien, security interest, or encumbrance,  other than
         the security interest in favor of the Bank;

                           (b) any Inventory that is not new and unused,  except
         as the Bank may otherwise consent in writing;

                           (c) any  Inventory  that  is  stored  with a  bailee,
         warehouseman,  or similar party, unless such bailee,  warehouseman,  or
         similar  party  shall  issue  and  deliver  to the  Bank,  in form  and
         substance  acceptable  to the Bank,  an agreement  or other  instrument
         acknowledging the Bank's prior security interest therein; and

                           (d) any  Inventory  that the Bank  elects to  exclude
         from  eligibility  due to any actual or  potential  liens,  claims,  or
         risks, including age, type, category, and/or quantity of the Inventory.

                  1.2.  Loan Disbursements.





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                  1.2.1.  First  Term Loan  Disbursements.  The First  Term Loan
shall be disbursed,  as the Borrower shall direct,  upon the satisfaction of the
conditions set forth in Sections 2 and 3 hereof.

                  1.2.2.  Second Term Loan  Disbursements.  The Second Term Loan
has already been disbursed as Borrower requested.

                  1.2.3.  Third  Term Loan  Disbursements.  The Third  Term Loan
shall be disbursed,  as the Borrower shall direct,  upon the satisfaction of the
conditions set forth in Sections 2 and 3 hereof.

                  1.2.4.  Fourth Term Loan  Disbursements.  The Fourth Term Loan
has already been disbursed as Borrower requested.

                  1.2.5. Revolving Loan Disbursements.  The Revolving Loan shall
be disbursed, as the Borrower shall direct, upon the submission of such evidence
as the Bank shall  request to verify the Advance Limit and the  satisfaction  of
the  conditions  set forth in  Sections 2 and 3 hereof.  Whenever  the  Borrower
desires to make a borrowing of the Revolving  Loan,  the Borrower shall give the
Bank written or telephonic  notice thereof not later than 1:00 p.m. Chicago time
on the  borrowing  date.  Each notice of borrowing  required  under this section
shall specify the amount of the proposed  borrowing  and the proposed  borrowing
date.

                  1.3.  Interest and Penalties.

                  1.3.1.  First Term Loan  Interest and Penalties The First Term
Loan shall bear interest on its principal  amount  outstanding from time to time
at a rate per annum equal to eight and  one-quarter  percent  (8.25%) per annum.
Upon and after the occurrence of an Event of Default,  the First Term Loan shall
bear interest on its principal  amount  outstanding  from time to time at a rate
per annum (the "First Term Loan Default  Rate") equal to eleven and  one-quarter
percent  (11.25%) per annum.  Interest  accruing  prior to maturity of the First
Term Loan (whether by lapse of time,  acceleration,  or otherwise)  shall be due
and payable on the first day of each calendar  month,  commencing with the month
following  the date on which the first  disbursement  of the First  Term Loan is
made.  After  maturity  of the  First  Term  Loan  (whether  by  lapse  of time,
acceleration,  or  otherwise)  accrued  interest  shall be due and payable  upon
demand.  The Borrower shall pay a late charge of five percent (5%) of the amount
of any sum payable to the Bank under this  Agreement or any of the Notes that is
received  by the Bank more than 10 days after the date on which it is due.  Such
late charges shall be due and payable on the due date of the next installment of
principal or interest, together with the regular installment then due.

                  1.3.2. Second Term Loan Interest and Penalties The Second Term
Loan shall bear interest on its principal  amount  outstanding from time to time
at a rate per annum equal to eight and  one-quarter  percent  (8.25%) per annum.
Upon and after the occurrence of an Event of Default, the Second Term Loan shall
bear interest on its principal  amount  outstanding  from time to time at a rate
per annum (the "Second Term Loan Default Rate") equal to eleven and  one-quarter
percent  (11.25%) per annum.  Interest  accruing prior to maturity of the Second
Term Loan (whether by lapse of time,  acceleration,  or otherwise)  shall be due
and payable on the first day of each calendar  month,  commencing with the month
following  the date on which the first  disbursement  of the Second Term Loan is
made. After maturity of the Second Term Loan (whether by lapse of time,






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acceleration,  or  otherwise)  accrued  interest  shall be due and payable  upon
demand.

                  1.3.3.  Third Term Loan  Interest and Penalties The Third Term
Loan shall bear interest on its principal  amount  outstanding from time to time
at a rate per annum equal to eight and  one-quarter  percent  (8.25%) per annum.
Upon and after the occurrence of an Event of Default,  the Third Term Loan shall
bear interest on its principal  amount  outstanding  from time to time at a rate
per annum (the "Third Term Loan Default  Rate") equal to eleven and  one-quarter
percent  (11.25%) per annum.  Interest  accruing  prior to maturity of the Third
Term Loan (whether by lapse of time,  acceleration,  or otherwise)  shall be due
and payable on the first day of each calendar  month,  commencing with the month
following  the date on which the first  disbursement  of the Third  Term Loan is
made.  After  maturity  of the  Third  Term  Loan  (whether  by  lapse  of time,
acceleration,  or  otherwise)  accrued  interest  shall be due and payable  upon
demand.

                  1.3.4. Fourth Term Loan Interest and Penalties The Fourth Term
Loan shall bear interest on its principal  amount  outstanding from time to time
at a rate per annum  equal to one  percent  (1%) per annum  over the Prime  Rate
announced  from time to time by the Bank (the "Bank's Prime Rate," which may not
be the Bank's lowest rate of interest) which shall be adjusted daily when and as
the Bank's  Prime Rate  changes.  Upon and after the  occurrence  of an Event of
Default,  the Fourth  Term Loan  shall bear  interest  on its  principal  amount
outstanding from time to time at a rate per annum (the "Fourth Term Loan Default
Rate") equal to five  percent  (5%) per annum over the Bank's Prime Rate,  which
shall be  adjusted  daily when and as the Bank's  Prime Rate  changes.  Interest
accruing  prior to maturity  of the Fourth Term Loan  (whether by lapse of time,
acceleration,  or  otherwise)  shall be due and payable on the first day of each
calendar month,  commencing with the month following the date on which the first
disbursement of the Fourth Term Loan is made.  After maturity of the Fourth Term
Loan (whether by lapse of time,  acceleration,  or otherwise)  accrued  interest
shall be due and payable upon demand.

                  1.3.5.  Revolving  Loan  Interest and  Penalties The Revolving
Loan shall bear interest on its principal  amount  outstanding from time to time
at a rate per annum equal to  one-half  of one percent  (.5%) per annum over the
Prime Rate  announced  from time to time by the Bank (the  "Bank's  Prime Rate,"
which may not be the Bank's  lowest  rate of  interest)  which shall be adjusted
daily when and as the Bank's Prime Rate changes.  Upon and after the  occurrence
of an Event of Default,  the Revolving Loan shall bear interest on its principal
amount  outstanding  from time to time at a rate per annum (the  "Revolving Loan
Default  Rate")  equal to three and one-half  percent  (3.5%) per annum over the
Bank's  Prime Rate,  which shall be adjusted  daily when and as the Bank's Prime
Rate changes. Interest accruing prior to maturity of the Revolving Loan (whether
by lapse of time,  acceleration,  or otherwise)  shall be due and payable on the
first day of each calendar  month,  commencing with the month following the date
on which the first disbursement of the Revolving Loan is made. After maturity of
the  Revolving  Loan  (whether  by lapse of time,  acceleration,  or  otherwise)
accrued interest shall be due and payable upon demand.

                  1.4.  Maturity of the Loan.

                  1.4.1. First Term Loan Maturity.  The First Term Loan shall be
due and payable in equal  monthly  installments  of  $43,978.98 of principal and
interest,






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commencing  on June 1,  1998,  and a like sum on the first day of each  calendar
month  thereafter  until the principal of and accrued and unpaid interest on the
First Term Loan is paid in full, provided that the outstanding  principal of and
accrued and unpaid  interest on the First Term Loan, if not sooner paid in full,
shall be due and  payable in full on May 1, 2002 (or earlier as provided in this
Agreement or the First Term Note).

                  1.4.2.  Second Term Loan Maturity.  The Second Term Loan shall
be due and payable in equal monthly  installments of $19,617.26 of principal and
interest,  commencing  on May 1,  1998,  and a like sum on the first day of each
calendar month thereafter until the principal of and accrued and unpaid interest
on the Second Term Loan is paid in full, provided that the outstanding principal
of and accrued and unpaid  interest on the Second Term Loan,  if not sooner paid
in full,  shall be due and payable in full on  September  1, 2001 (or earlier as
provided in this Agreement or the Second Term Note).

                  1.4.3. Third Term Loan Maturity.  The Third Term Loan shall be
due and payable in equal  monthly  installments  of  $46,194.61 of principal and
interest,  commencing  on September 1, 1998,  and a like sum on the first day of
each  calendar  month  thereafter  until the principal of and accrued and unpaid
interest on the Third Term Loan is paid in full,  provided that the  outstanding
principal  of and  accrued and unpaid  interest  on the Third Term Loan,  if not
sooner  paid in full,  shall be due and  payable  in full on  August 1, 2003 (or
earlier as provided in this Agreement or the Third Term Note).

                  1.4.4.  Fourth Term Loan Maturity.  The Fourth Term Loan shall
be  due  and  payable  in  monthly  installments  of  $16,666.67  of  principal,
commencing  on May 1,  1998,  and a like sum on the first  day of each  calendar
month  thereafter  until the principal of and accrued and unpaid interest on the
Fourth Term Loan is paid in full, provided that the outstanding principal of and
accrued and unpaid interest on the Fourth Term Loan, if not sooner paid in full,
shall be due and payable in full on July 1, 1998 (or earlier as provided in this
Agreement or the Fourth Term Note).

                  1.4.5.  Revolving Loan  Maturity.  The Revolving Loan shall be
prepayable as provided in this Agreement and, if not sooner paid in full,  shall
be due and payable on May 1, 1999 (or earlier as provided in this  Agreement  or
the Revolving Note).

                  1.5.  Mandatory and Optional  Prepayments.  The Borrower shall
prepay the Revolving  Loan if and to the extent that the  outstanding  principal
amount of the Revolving Loan shall from time to time exceed the limits therefor.
In addition,  the Revolving Loan may be prepaid at any time at the option of the
Borrower  without  premium or penalty.  All  prepayments  required or  permitted
hereunder shall be applied first to prepayment of accrued and unpaid interest on
the Revolving  Loan and then to the prepayment of the  outstanding  principal of
the Revolving Loan in the inverse order of maturity thereof.

                  1.6 Second Term Loan  Prepayment Fee. The Second Term Note may
be prepaid at any time and from time to time prior to maturity, without premium,
penalty, or discount,  but only to the extent that the source of such prepayment
is not derived, directly or indirectly, from money borrowed by the Borrower, any
Guarantor,  or any  Affiliate  (as  hereinafter  defined) of the Borrower or any
Guarantor. The Borrower agrees to pay the Bank, on demand, in addition to the







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payment of all other  obligations  of the Borrower to the Bank that are then due
and  payable,  a fee (the  "Second  Term Loan  Prepayment  Fee")  determined  as
hereinafter  provided  if the Second Term Note is prepaid in whole or in part at
any time or from time to time prior to maturity, but only to the extent that the
source of such  prepayment  is  derived,  directly  or  indirectly,  from  money
borrowed by the Borrower, any Guarantor, or any Affiliate of the Borrower or any
Guarantor.  The Second Term Loan Prepayment Fee shall be equal to the applicable
Loan  Prepayment  Percentage  provided  below,  multiplied  by  the  outstanding
principal  amount of the Second  Term Note so  prepaid.  For any year in which a
prepayment  of the Second  Term Note  occurs,  the  applicable  Second Term Loan
Prepayment  Percentage  shall be the  percentage set forth opposite such year in
the following schedule:

                                                 Second Term Loan
                  Year                         Prepayment Percentage
                  ----                         ---------------------
May 1, 1998 to September 1, 1999                        3%
May 2, 1999 to September 1, 2000                        2%
May 2, 2000 to September 1, 2001                        1%


All payments shall be applied first to accrued and unpaid interest on the Second
Term Note then, at the Bank's  election,  to any Second Term Loan Prepayment Fee
due by reason of any prepayment,  and then to the  outstanding  principal of the
Second Term Note in the inverse order of maturity thereof.  For purposes of this
Section the term "Affiliate" shall mean: any director,  officer,  or stockholder
of the  Borrower,  or any  partnership  or corporate  entity  controlled  by the
Guarantors.

                  Section 2.  CONDITIONS  PRECEDENT TO THE BANK'S  OBLIGATION TO
MAKE THE INITIAL LOAN  DISBURSEMENT.  Prior to the initial  disbursement  by the
Bank of any monies  pursuant to this Agreement the following  conditions must be
satisfied:

                  2.1.  Delivery of Loan  Documents.  The Borrower shall execute
and deliver or cause to be executed and  delivered  to the Bank,  as evidence of
and as  security  for  all  obligations  under  this  Agreement,  the  following
documents (the "Loan Documents"),  all to be in form and content as specified by
the Bank:

                           (a) the First Term Note,  the Second  Term Note,  the
         Third  Term  Note,   the  Fourth  Term  Note  and  the  Revolving  Note
         (collectively, the "Notes");

                           (b) a first  mortgage  (the  "Mortgage")  on the real
         estate commonly known as 22160 N. Pepper Rd., Barrington, IL 60010 (the
         "Premises")  owned by  American  National  Bank and  Trust  Company  of
         Chicago,  not  personally,  but solely as Trustee under Trust Agreement
         dated  September 19, 1984 and known as Trust No. 61978 (the "Trust") to
         secure the  obligations  of the Borrower  under this  Agreement and the
         Second Term Note;

                           (c) a collateral assignment of beneficial interest in
         the Trust;

                           (d) the  filing  with the  Secretary  of State of the
         State of Illinois and the recording with the Recorder's  Office of Lake
         County,  Illinois duly executed U.C.C. Financing Statements showing the
         Bank as secured party;

                           (e)  guaranties  of the  obligations  of the Borrower
         under this  Agreement and the Notes,  executed and delivered by Stephen
         M. Merrick, Howard




                                      -7-
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         W. Schwan and John H. Schwan (together with any other persons obligated
         at  any  time  with  respect  to  all or  any  part  of the  Borrower's
         obligations to the Bank, the "Guarantors"); and

                           (f)   subordination   agreements  in  the  amount  of
         $315,000.00 executed by Steven M. Merrick; $350,000.00 executed by John
         H. Schwan; and $50,000.00 executed Howard W. Schwan.

                  2.2. Liens on Property.  The Bank shall have received evidence
satisfactory  to the Bank  that all real and  personal  property,  fixtures  and
equipment in which the Bank is taking a security interest will be free and clear
of all liens and  encumbrances of every nature and  description  other than: the
security interest in favor of the Bank; the Permitted  Exceptions (as defined in
Section 2.3); security interests disclosed in the search, conducted on behalf of
the Bank in July,  1996,  for  financing  statements  on file with the  Illinois
Secretary of State naming the Borrower as debtor for XL/Datacomp, Inc., Suburban
National Bank of Palatine, Fathom Technologies,  AT & T Credit Corporation,  and
Xerox  Corporation;  and  security  interests  and liens  permitted  under  this
Agreement  or to which  the Bank  shall  have  otherwise  consented  in  writing
(collectively, the "Permitted Liens").

                  2.3.  Title  Insurance.  The Borrower shall have furnished the
Bank with an ALTA  Mortgage  Loan Policy  issued by Real Estate Index Inc.  (the
"Title  Company") (such policy being referred to herein as the "Title  Policy"),
in the  aggregate  amount of  $2,200,000.00.  The Title  Policy shall insure the
Mortgage (for its full amount) as a first lien on the Premises. The Title Policy
shall be subject  only to the  exceptions  approved by the Bank (the  "Permitted
Exceptions")  and shall contain no exceptions  for  mechanic's or  materialmen's
liens.

                  2.4. Insurance.  The Borrower shall have delivered to the Bank
insurance policies with premiums prepaid, with issuing companies,  coverages and
amounts  satisfactory to the Bank, insuring the Premises and other properties of
the  Borrower  against  loss or damage by fire and such other  hazards as may be
required  by the  Bank,  including,  but  not  limited  to,  extended  coverage,
vandalism,  malicious mischief,  and comprehensive public liability insurance as
required by the Bank.  Each  policy  shall  contain  standard  mortgage  clauses
satisfactory to the Bank and loss payable clauses  satisfactory to the Bank with
respect to such other  insurance  and shall  provide  that the policy may not be
canceled by any party for any reason whatsoever without first giving the Bank at
least thirty (30) days' prior written notice of any proposed  cancellation.  The
Borrower shall provide the Bank with fully paid valid policies each year as long
as any sums are owed the Bank.  All policies  shall name the Bank as  mortgagee,
additional insured and loss payee with endorsements acceptable to the Bank.

                  2.5. Authority.  The Borrower shall have furnished to the Bank
such  documents,  in form and content  satisfactory to the Bank, as the Bank may
request as evidence of the due  organization  and good  standing of the Borrower
and the due authorization and execution of the Loan Documents by the Borrower.

                  Section 3. ADDITIONAL   CONDITIONS   PRECEDENT TO THE   BANK'S
OBLIGATIONS TO MAKE  DISBURSEMENTS  OF THE LOAN.  Prior to and as a condition to
each disbursement of the Loan by the Bank:







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                  3.1.   Accuracy  of   Representations   and  Warranties.   The
representations  and  warranties  of the Borrower  made herein shall be true and
correct as though made on and as of the date of such disbursement.

                  3.2.  No  Material  Adverse  Change.  There shall have been no
material  adverse  change in the  financial  condition of the Borrower  from the
financial condition  reflected on the financial  statements of the Borrower last
furnished to the Bank.

                  3.3. No Default.  There shall exist no Event of Default and no
event or condition  which,  with the giving of notice or lapse of time, or both,
would constitute an Event of Default.

                  Section 4.  SECURITY INTEREST.

                  4.1. Grant of Security Interest. In order to secure the timely
and full  performance of the  obligations of the Borrower to the Bank under this
Agreement and the Notes and any and all interest accruing  thereon,  and any and
all extensions,  renewals,  or refinancings  thereof,  and all other present and
future  obligations of the Borrower to the Bank,  the Borrower  hereby grants to
the Bank a  security  interest  in the  following  property  (collectively,  the
"Collateral"):

                           (a)  all  present  and  future   accounts,   accounts
         receivable,  other  receivables and claims for money due,  instruments,
         documents, chattel paper, contract rights, and general intangibles (the
         "Accounts Receivable");

                           (b) all  raw  materials,  supplies,  work-in-process,
         finished  goods,  and all other inventory of whatsoever kind or nature,
         wherever  located,   whether  now  owned  or  hereafter  acquired  (the
         "Inventory");

                           (c) all machinery,  equipment,  vehicles,  furniture,
         tools,  and  trade  fixtures  and all  substitutions  and  replacements
         thereof wherever located, and all attachments,  accessions,  parts, and
         additions thereto, whether now owned or hereafter acquired;

                           (d) all of the Borrower's  deposit accounts  (whether
         checking,  savings, or otherwise) with the Bank or any other depositary
         institution,  whether now or hereafter  existing and including accounts
         held jointly with others;

                           (e) all monies, securities,  drafts, notes, and other
         property of the  Borrower and the  proceeds  thereof,  now or hereafter
         held or received by or on behalf of the Bank from or for the  Borrower,
         whether for custody, pledge, transmission or otherwise;

                           (f)  all  books,  records,  and  general  intangibles
         evidencing or relating to any of the foregoing; and

                           (g)  any  and  all   proceeds  and  products  of  the
         foregoing.

                  4.2.  Filing and  Recording;  Perfection.  The Borrower  shall
execute and deliver to the Bank  financing  statements  and take whatever  other
actions are  requested by the Bank to perfect and  continue the Bank's  security
interest in the  Collateral.  Upon the request of the Bank,  the  Borrower  will
deliver to the Bank





                                       -9-
<PAGE>


                                                      

any and all of the documents and  instruments  evidencing  or  constituting  the
Collateral or any part  thereof,  together with an  appropriate  endorsement  or
assignment  thereof  satisfactory  to the Bank,  and the Borrower  will note the
Bank's  security  interest  upon  any  and all  chattel  paper  included  in the
Collateral.  The  Borrower  irrevocably  appoints  the  Bank  as the  agent  and
attorney-in-fact of the Borrower to execute such documents and take such actions
as the Bank deems necessary to preserve and perfect the Bank's security interest
in the Collateral.

                  4.3.  Collections of Accounts.  The Borrower hereby authorizes
the  Bank,  now and at any time or times  hereafter,  to (a)  notify  any or all
account debtors that the Accounts  Receivable have been assigned to the Bank and
that the Bank has a  security  interest  therein  and (b)  direct  such  account
debtors to make all  payments  due from them to the  Borrower  upon the Accounts
Receivable  directly to the Bank or to a lockbox  designated by the Bank.  Until
such time as the Bank shall exercise such rights, the Borrower shall collect and
enforce all of its Accounts Receivable.  The costs of collection and enforcement
of the Accounts  Receivable  shall be borne by the Borrower,  whether such costs
are incurred by the Borrower or the Bank.  All  collections  and proceeds of the
Accounts  Receivable and other  Collateral  shall be held in trust for the Bank,
separate and apart from other funds and properties of the Borrower, and shall be
promptly  delivered  by the  Borrower  to the Bank in the form in which they are
received by the Borrower  (except for any necessary  endorsement in favor of the
Bank) by mailing or delivering  the same to the Bank not later than the business
day following  receipt  thereof by the Borrower.  The Bank will,  within two (2)
business days after receipt of checks and one business day after receipt of cash
and cash  equivalents,  apply the whole or any part of such collections  against
the Borrower's  liabilities to the Bank. All checks,  drafts,  instruments,  and
other  items of payment or  proceeds  of  Collateral  shall be  endorsed  by the
Borrower to the order of the Bank.  The  Borrower  irrevocably  constitutes  and
appoints the Bank and all persons  designated by the Bank as the true and lawful
agent and  attorney-in-fact  to endorse  the  Borrower's  name to any payment or
proceeds of Collateral.

                  Section 5. GENERAL COVENANTS. The Borrower agrees that so long
as any of the Notes shall be outstanding, unless waived in writing by the Bank:

                  5.1.  Financial   Information,   Reports.  The  Borrower  will
maintain a standard and modern system of accounting in accordance with generally
accepted  practice  and  will  furnish  to the  Bank  and  its  duly  authorized
representatives  such  information  with  respect  to  the  business,   affairs,
operations,  and  financial  condition  of the  Borrower  as  may be  reasonably
requested from time to time. The Borrower shall furnish to the Bank:

                           (a) as soon as  available,  and in any event not more
         than 45 days  after the close of each  quarterly  fiscal  period of the
         Borrower,  a copy of the balance sheet and profit and loss statement of
         the  Borrower for the period from the  beginning of the current  fiscal
         year to the end of such  quarterly  period,  prepared by an independent
         public accounting firm of recognized standing selected by the Borrower;

                           (b) as soon as available,  and in any event within 30
         days after the close of each monthly  fiscal period of the Borrower,  a
         copy of the  balance  sheet  and  profit  and  loss  statement  for the
         Borrower (of its domestic





                                      -10-

<PAGE>


                                                      

         operations  only)  prepared by the  Borrower  and signed by a principal
         officer of the Borrower for such monthly period and the period from the
         beginning of the current fiscal year to the end of such monthly period;

                           (c) as soon as  practicable  and in any event  within
         120 days after the end of each  fiscal year of the  Borrower,  a profit
         and loss  statement  and a  reconciliation  of surplus  accounts of the
         Borrower for such year,  and a balance  sheet of the Borrower as of the
         end of such  year,  setting  forth  in each  case in  comparative  form
         corresponding figures from the preceding fiscal year, all in reasonable
         detail and  satisfactory  to the Bank and  certified by an  independent
         certified public accounting firm of recognized standing selected by the
         Borrower;

                           (d)  within 15 days  after the close of each  monthly
         fiscal period of the Borrower,  and otherwise  from time to time as the
         Bank may  request,  a schedule of the  Eligible  Accounts  and Eligible
         Inventory and an aging of the Accounts Receivable and accounts payable,
         and a report of Inventory in form  acceptable to the Bank,  signed by a
         principal officer of the Borrower, together with copies of invoices, if
         requested by the Bank pertaining to the Eligible Accounts arising since
         the previous such report to the Bank;

                           (a)  promptly  upon  receipt  thereof,  copies of any
         detailed reports  submitted to the Borrower by independent  accountants
         in connection with each annual audit or any annual or interim review of
         the books and records of the Borrower made by such accountants; and

                           (b) with reasonable promptness,  such other financial
         information,  including annual financial  statements of the Guarantors,
         as the Bank may reasonably request.

All financial  statements of the Borrower specified in the preceding clauses (a)
and (c)  shall be  furnished  in  consolidated  and  consolidating  form for the
Borrower and all subsidiaries  that the Borrower may at any time have.  Together
with each delivery of financial  statements  required by the  preceding  clauses
(a),  (b) and (c),  the Borrower  will  deliver to the Bank a  certificate  of a
principal  officer of the Borrower stating that there exists no Event of Default
or any event or condition  that,  with notice or lapse of time,  or both,  would
constitute  an Event of  Default,  or, if any such  Event of Default or event or
condition  exists,  specifying  the  nature  thereof,  the  period of  existence
thereof, and what action the Borrower proposes to take with respect thereto. The
Borrower will permit any person  designated by the Bank to visit and inspect any
of the properties,  corporate books, and financial records of the Borrower,  and
to discuss the  affairs,  finances,  and accounts of the  Borrower,  all at such
reasonable times and as often as the Bank may reasonably request.

                  5.2.  Taxes.  The Borrower  shall cause to be paid on a timely
basis  all taxes and  assessments,  special  or  otherwise,  and any other  such
charges which are due and payable.  In the event the Borrower fails to pay taxes
as required herein,  the Bank reserves the right to require the Borrower to make
monthly deposits into an escrow account  established for the payment of taxes in
an amount  satisfactory  to the Bank. The Borrower may contest in good faith and
through  appropriate  proceedings  any tax or assessment or other charge due and
payable provided that the Borrower shall have deposited with the Bank a cash sum
sufficient to discharge such tax assessment or charge.




                                      -11-
<PAGE>


                                                   


                  5.3. Insurance.  The Borrower will maintain insurance coverage
by reputable  insurance  companies  in such forms and amounts,  and against such
hazards,  as are ordinarily  carried by other  companies  similarly  situated in
operating like businesses and properties. Without limiting the generality of the
foregoing,  property  and  casualty  insurance  shall be in  amounts  and  forms
insuring the full replacement cost of fixed assets of the Borrower.

                  5.4.  Liens and  Encumbrances.  The Borrower shall not create,
assume,  or suffer to exist any mortgage,  deed of trust,  pledge,  encumbrance,
lien, or charge of any kind  (including  the charge upon the property  purchased
under  conditional  sales or other title retention  agreements)  upon any of the
property or assets of the  Borrower,  whether now owned or  hereafter  acquired,
except:  (a) liens for  taxes not yet due or which are being  contested  in good
faith by appropriate  proceedings;  (b) other liens,  charges,  and encumbrances
incidental  to the conduct of the  Borrower's  business or the  ownership of its
property and assets which are not incurred in  connection  with the borrowing of
money or the  obtaining of advances of credit and which do not in the  aggregate
materially  impair the use of such  property or assets in the  operation  of the
Borrower's  business;  (c) Permitted Liens; and (d) purchase money mortgages and
other purchase money liens or security interests (including finance leases) upon
any fixed or capital assets hereafter acquired by the Borrower, provided that no
such  mortgage,  lien, or security  interest  shall extend to or cover any other
property of the Borrower,  and further provided that the principal amount of the
aggregate of all such  indebtedness  secured by all such mortgages,  liens,  and
security interests shall not exceed $50,000.00.

                  5.5.  Maintenance of  Properties.  The Borrower will maintain,
keep, and preserve all of its properties (tangible and intangible)  necessary or
useful  in the  proper  conduct  of its  business  in  good  working  order  and
condition, ordinary wear and tear excepted. The Borrower shall from time to time
make  or  cause  to  be  made  all  necessary  and  proper  repairs,   renewals,
replacements, additions, and improvements to its properties so that the business
carried on by the Borrower may be properly and  advantageously  conducted at all
times in accordance with prudent business management.

                  5.6.  Compliance  With Laws.  The Borrower shall comply in all
material  respects  with all laws,  ordinances,  regulations,  and orders of all
governmental   authorities  applicable  to  its  business  or  the  use  of  its
properties.  The Borrower may contest,  in good faith, any such law,  ordinance,
regulation,  or order and withhold  compliance during any proceeding,  including
appropriate  appeals,  so long as the Bank's security interest in the Collateral
or lien in the Premises, in the opinion of the Bank, is not jeopardized.

                  5.7.  Location of Collateral.  All Collateral now owned by the
Borrower is and will be, and all Collateral  hereafter  acquired by the Borrower
will be, and to the extent the Collateral  consists of intangible  property such
as  accounts,  the  records  concerning  the  Collateral  will  be,  kept at the
Borrower's facilities at either 22160 North Pepper Road, Barrington, IL 60010 or
675  Industrial  Drive,  Cary,  Illinois.  Except in the ordinary  course of its
business,  the  Borrower  shall not  remove  the  Collateral  from its  existing
locations.  To the extent the Collateral consists of vehicles or other property,
the  ownership  of which is evidenced by a  certificate  of title,  the Borrower
shall not take or




                                      -12-
<PAGE>


                                                       

permit any action that would require registration of such Collateral outside the
State of Illinois.

                  5.8. Mergers, Sales of Assets. The Borrower shall not merge or
consolidate with any other  corporation or sell, lease,  transfer,  or otherwise
dispose of all or any  substantial  part of the assets of the  Borrower or enter
into any sale and  leaseback  transaction  or  arrangement  with  respect to any
properties  of the  Borrower,  change  the  name of the  Borrower,  or wind  up,
liquidate,  or dissolve,  or agree to do any of the  foregoing,  except that the
Borrower may sell in the ordinary  course of business  assets or  properties  no
longer necessary for the proper conduct of the business of the Borrower having a
value amounting, in any single transaction, to not more than $50,000.00.

                  5.9. Bank Account.  The Borrower  shall maintain its principal
deposit  relationship,  including its corporate  operating  checking account and
money market deposit account, with the Bank.

                  5.10.  Tangible  Net Worth.  The  Borrower  shall at all times
maintain a  Tangible  Net Worth in an amount  greater  than  $6,000,000.00.  For
purposes  of this  Agreement,  Tangible  Net Worth  shall  mean the total of all
assets appearing on a balance sheet of the Borrower  prepared in accordance with
generally accepted accounting  principles  consistently  applied, less the total
liabilities of the Borrower, as determined in accordance with generally accepted
accounting  principles  consistently  applied, less the amount of any intangible
assets as determined by the Bank in its discretion.

                  5.11 Debt to Worth Ratio. At the end of each fiscal quarter of
the Borrower,  the Borrower  shall achieve a ratio of total debt to tangible net
worth of no more than 3 to 1. For  purposes of this  Agreement  total debt shall
mean  all  items  that,  in  accordance  with  generally   accepted   accounting
principles,  would be included in determining  total liabilities as shown on the
liabilities  side  of a  balance  sheet  as of the  date  the  amount  of  total
liabilities  is to be  determined  and,  in any event,  shall  include  (without
duplication)   capitalized  lease  obligations,   letters  of  credit,  and  all
obligations relating thereto,  any liabilities secured by any mortgage,  pledge,
lien, or security  interest on property  owned or acquired,  whether or not such
liabilities shall have been assumed and guaranties and endorsements  (other than
for  collection  in the  ordinary  course  of  business)  and  other  contingent
obligations.  Tangible net worth shall mean the total of all assets appearing on
a balance  sheet  prepared in  accordance  with  generally  accepted  accounting
principles  consistently  applied,  less total  liabilities,  as  determined  in
accordance with generally accepted accounting  principles  consistently applied,
less the  amount  of any  intangible  assets  as  determined  by the Bank in its
discretion.

                  5.12 Permitted  Debt.  The Borrower  shall not create,  incur,
assume, or suffer to exist any funded or current debt, or guarantee,  endorse or
otherwise be or become  contingently  liable in connection with the obligations,
stock, or dividends of any person,  except:  (a) debt  represented by the Notes;
(b) funded or current debt secured by mortgages  and other liens and  retentions
permitted under Section 5.4 hereof;  (c) contingent  liabilities  arising out of
the endorsement in the ordinary course of business of negotiable  instruments in
the  course of  collection  thereof;  (d)  current  liabilities  arising  in the
ordinary course of business of the Borrower and which are not incurred for money
borrowed; and (e) debt subordinated to the Bank.




                                      -13-
<PAGE>


                                                      


                  5.13 Leases and  Purchases.  The  Borrower  shall not incur or
have  outstanding  any  obligations for the payment for purchases of property or
for rentals on account of the use or  possession  of real or  personal  property
(whether or not any express or implied  arrangement is made for the  acquisition
by the Borrower of title thereto at any time) if after giving effect thereto the
maximum  aggregate  amount of rentals for which the Borrower is obligated in any
fiscal year on all leases  having a term in excess of three  years would  exceed
$50,000.00.

                  5.14 Investments. Except for investments in PTF and CTF (which
will not exceed  $500,000.00 in the  aggregate),  the Borrower shall not make or
permit to remain  outstanding  any loan or  advance  to,  or own,  purchase,  or
acquire any stock or securities of, any person, excepting loans to employees not
exceeding, at any time, in the aggregate, $50,000.00 outstanding.

                  5.15  Restricted  Payments.  The  Borrower  shall  not  pay or
declare any dividend on any shares of any class of its capital stock or make any
other  distribution  on  account  of any  shares of any class of its  stock,  or
redeem, pur chase, or otherwise acquire,  directly or indirectly,  any shares of
any class of its capital stock in excess of $250,000.00 in any year.

                  5.16  Transactions  with  Affiliates.  The Borrower shall not,
directly or indirectly,  purchase,  acquire,  or lease any material  property or
service from, or sell,  transfer,  or lease any material property or service to,
any  Affiliate  (as  hereinafter  defined)  except in the  usual,  regular,  and
ordinary  course of business of the Borrower and upon fair and reasonable  terms
no less favorable to the Borrower than would result from arm's-length bargaining
with an unaffiliated  person. For purposes of this Agreement,  "Affiliate" shall
mean:  any  person  or  entity,  directly  or  indirectly,  through  one or more
intermediaries,  controlling,  controlled  by, or under common  control with the
Borrower; or any director,  officer,  trustee, or shareholder of the Borrower or
any  entity,  directly  or  indirectly,  through  one  or  more  intermediaries,
controlling, controlled by, or under common control with the Borrower.

                  Section 6.  DEFAULT AND REMEDIES.

                  6.1. Events of Default. Each of the following shall constitute
an "Event of Default" under this Agreement:

                           (a) The Borrower  fails to pay,  within ten (10) days
         after the date on which  payment  thereof is due,  any  installment  of
         principal  or  interest  on any of the  Notes or any  other sum due and
         payable under this Agreement, any of the Notes, or the Mortgage; or

                           (b)  the  Borrower  fails  to  keep  or  perform  any
         agreement, undertaking,  obligation, covenant or condition set forth in
         Section 5.2, 5.3 or 5.4 of this Agreement; or

                           (c) the  Borrower  fails to keep or perform any other
         agreement, undertaking, obligation, covenant, or condition set forth in
         this  Agreement  or any of the Loan  Documents  or any other  agreement
         between the Borrower and the Bank within  thirty (30) days after notice
         that  such  performance  is due and such  performance  remains  uncured
         within that period; or







                                      -14-
<PAGE>


                                                       


                           (d) if  default  shall  occur in the  payment  of any
         principal, interest, or premium with respect to any indebtedness of the
         Borrower or any  Guarantor  for borrowed  money and such default  shall
         continue for more than the period of grace, if any,  therein  specified
         and shall not have been effectively waived, or if any such indebtedness
         shall be declared due and payable prior to the stated maturity thereof;
         or

                           (e)   (i)    any    representation,    warranty    or
         certification,  made or given in or pursuant to this  Agreement  by the
         Borrower or  otherwise  made by the  Borrower in writing in  connection
         with this  Agreement,  proves to be  untrue  in any  respect  when such
         representation,  warranty or  certification is made or given hereunder;
         or (ii) any representation, warranty or certification, made or given in
         or pursuant to this  Agreement by the Borrower or otherwise made by the
         Borrower in writing in connection with this Agreement, although true in
         all respects when such  representation,  warranty or certification  was
         made or  given,  proves to be untrue  in any  material  respect  at any
         subsequent time when such representation,  warranty or certification is
         operative  or   applicable   and  such   representation,   warranty  or
         certification continues to be untrue ten (10) days after written notice
         from the Bank to the Borrower; or

                           (f) the  Collateral or the Premises,  or any material
         part thereof, is damaged or destroyed by fire or other casualty and the
         cost to rebuild or  reconstruct  exceeds the face  amount of  insurance
         actually  collected or in the process of  collection  through  diligent
         efforts of the  Borrower,  and if the  Borrower  fails to deposit or to
         cause to be deposited with the Bank the deficiency within ten (10) days
         after the Bank's written  request  therefor,  unless such deficiency is
         less than $50,000.00; or

                           (g)  an  order  of  condemnation  by  eminent  domain
         proceedings is entered with respect to the Premises or any part thereof
         and is not dismissed or stayed; or

                           (h) any petition is filed or  proceeding is commenced
         for any  attachment,  levy,  or seizure of any property of the Borrower
         subject to a lien in favor of the Bank;  or any judgment or  judgments,
         writ or writs,  warrant  or  warrants  of  attachment,  or any  similar
         process or  processes in an  aggregate  amount in excess of  $50,000.00
         shall be entered or filed  against the Borrower or against any property
         or assets of the Borrower and remains  unvacated,  unbonded or unstayed
         for a period of sixty (60) days; or

                           (i) if the Borrower or any Guarantor: shall be unable
         to pay its debts as they become due; files a petition to take advantage
         of any  insolvency  act;  makes an  assignment  for the  benefit of its
         creditors; commences a proceeding for or consents to the appointment of
         a receiver,  trustee,  liquidator,  or  conservator of itself or of the
         whole or any  substantial  part of its property;  files a petition to a
         petition  under any chapter of the  Bankruptcy  Reform Act of 1994,  as
         amended,  or files a petition or seeks relief under or takes  advantage
         of any  other  reorganization,  arrangement  or  readjustment  of debt,
         insolvency,  or  receivership  law or statute  of the United  States of
         America or any state  thereof;  or if there is  commenced  against  the
         Borrower  or any  Guarantor  any  proceeding  for any of the  foregoing
         relief which is not  dismissed  or  withdrawn  within 90 days after the
         filing thereof; or if





                                      -15-

<PAGE>


                                                     

         the Borrower or any Guarantor by any  act indicates its consent  to, or
         approval or authorization of, any such proceeding or petition; or

                           (j) if  Stephen  M.  Merrick  shall  cease  to own of
         record  and  beneficially  at least  406,401  shares  of  common  stock
         representing  14.34% of 2,833,188 shares of common stock, if Stephen M.
         Merrick,  John H.  Schwan  and  Howard W.  Schwan  shall  cease to have
         beneficial  interest in shares of preferred stock as follows:  571,429,
         857,143 and 428,571.  There are a total of  5,690,331  shares of common
         and preferred outstanding of which Stephen M. Merrick owns 17.18%, John
         H. Schwan 15.06% and Howard W. Schwan 7.53%; or

                           (k) if either  Stephen M. Merrick,  John H. Schwan or
         Howard W.  Schwan  ceases to be actively  employed in their  respective
         offices and positions held as of the date hereof; or

                           (l)  if  any  Guarantor  shall  die  or  be  declared
         incompetent; or

                           (m) if, in the reasonable  opinion of the Bank, there
         shall be any material adverse change in the financial  condition of the
         Borrower or any Guarantor.

                  6.2.  Remedies.  After the occurrence of any Event of Default,
the Bank shall have the right in addition to all the remedies conferred upon the
Bank by law or equity or the  terms of any of the Loan  Documents,  to do any or
all of the  following,  concurrently  or  successively,  without  notice  to the
Borrower:

                           (a)  Declare  the Notes to be,  and the  Notes  shall
         thereupon  become,  immediately  due and payable,  provided  that if an
         Event of Default  described in Section 6.1(i) shall occur or exist, the
         Notes shall  automatically  become immediately due and payable, in each
         case without presentment, demand, protest or notice of any kind, all of
         which are hereby expressly waived,  anything contained herein or in the
         Loan Documents to the contrary notwithstanding;

                           (b)  terminate  the  Bank's  obligations  under  this
         Agreement  to extend  credit  of any kind or to make any  disbursement,
         whereupon the commitment  and  obligations of the Bank to extend credit
         or to make disbursements hereunder shall terminate; and

                           (c)  exercise  all rights and  remedies  of a secured
         party  under the  Uniform  Commercial  Code and  otherwise,  including,
         without  limitation,  the  right to  foreclose  the  security  interest
         granted herein by any available  judicial or other procedure  and/or to
         take  possession  of any or all of the  Collateral  and the  books  and
         records relating thereto with or without  judicial  process,  for which
         purpose the Bank may enter on any or all of the  premises  where any of
         the Collateral or books or records may be situated and take  possession
         and remove the same  therefrom;  proceed to  protect  and  enforce  its
         rights or  remedies  either  by suit in equity or by action at law,  or
         both; require the Borrower to assemble any or all of the Collateral and
         any or all  certificates of title and other  documents  relating to the
         Collateral  at a place  designated  by the Bank;  charge or set off all
         sums  owing  to the  Bank by the  Borrower  against  any and all of the
         Borrower's  accounts  (including accounts held jointly with others) and
         credit balances at the Bank, regardless of the stated maturity thereof;
         and exercise in the Borrower's name all rights with






                                      -16-
<PAGE>


                                                      

         respect to the  Collateral,  including the right to collect any and all
         money due or to become due, endorse checks, notes, drafts, instruments,
         or other  evidences of payment,  receive and open mail addressed to the
         Borrower, and settle, adjust, or compromise any dispute with respect to
         any item of Collateral.

                  6.3. Rights and Remedies Cumulative.  All of the Bank's rights
and remedies, whether evidenced by this Agreement or by any other writing, shall
be cumulative and may be exercised  singularly or concurrently.  Election by the
Bank to pursue any remedy shall not exclude pursuit of any other remedy,  and an
election to make  expenditures or to take action to perform an obligation of the
Borrower  under this  Agreement,  after the failure of the  Borrower to perform,
shall not affect  the Bank's  right to  declare a default  and to  exercise  its
remedies.

                  Section  7.  REPRESENTATIONS  AND  WARRANTIES.   The  Borrower
represents and warrants to the Bank as follows:

                  7.1. Power and Authority.  The Borrower is a corporation  duly
organized and validly  existing and in good standing under the laws of its state
of incorporation.  The Borrower has the requisite authority to execute,  deliver
and carry out the terms and provisions of this Agreement, and the Loan Documents
and other  documents to be executed and delivered by it in connection  with this
Agreement.  This  Agreement  constitutes,  and  the  Loan  Documents  and  other
documents to be executed and delivered in connection with this  Agreement,  when
executed and delivered  pursuant  hereto will  constitute,  the duly  authorized
obligations of the party or parties (other than the Bank) executing the same and
will be enforceable in accordance with their respective terms.

                  7.2. No Violation of  Agreements,  Etc. The Borrower is not in
default  under any  agreement  to which it is a party,  the effect of which will
materially  adversely  affect  performance  by the  Borrower of its  obligations
pursuant to and as contemplated by the terms and provisions of this Agreement or
any of the Loan Documents. Neither the execution and delivery of this Agreement,
the Loan  Documents  or other  documents  to be executed  and  delivered  by the
Borrower, or the performance of its obligations under this Agreement (a) violate
any presently existing  provisions of law or any presently  existing  applicable
order,  writ,  injunction  or  decree  of any  court or  government  department,
commission,  board,  bureau,  agency or instrumentality,  or (b) conflict or are
inconsistent  with or  result  in any  breach  of any of the  terms,  covenants,
conditions  or  provisions  of, or constitute a default  under,  any  indenture,
mortgage, deed of trust, instrument, document, agreement or contract of any kind
which  creates,  represents,  evidences  or  provides  for any  lien,  charge or
encumbrance  upon any of the  assets of the  Borrower,  or any other  indenture,
mortgage, deed of trust, instrument, document, agreement or contract of any kind
to which the Borrower is a party or by which the Borrower may be bound.

                  7.3. Financial Statements,  Financial Condition.  The Borrower
has furnished the Bank with  financial  statements of the Borrower as of and for
the fiscal year ended October 31 in each of the years 1995, 1996, and 1997 and a
balance sheet as of January 31, 1998 and  statement of operations  for the seven
month  period  then  ended.  Such  financial  statements  are true and  correct,
subject,  as to the  interim  statements,  to changes  resulting  from  year-end
reviews and  adjustments,  and have been prepared in accordance  with  generally
accepted





                                      -17-
<PAGE>


                                                      

accounting principles consistently followed throughout the periods involved. The
balance sheets included  therein fairly present the condition of the Borrower as
at the dates thereof,  and the profit and loss and surplus  statements  included
therein fairly present the results of operations of the Borrower for the periods
indicated. There has been no material adverse change in the condition, financial
or otherwise, of the Borrower since January 31, 1998.

                  7.4.  No  Litigation.  Except  for an action  filed by NRS for
services performed by NRS in the aggregate of approximately  $105,000.00,  there
are no  actions,  suits or  proceedings  pending  or,  to the  knowledge  of the
Borrower,  threatened  against or affecting the Borrower before any court or any
governmental,  administrative, regulatory, adjudicatory or arbitrational body or
agency of any kind which will materially  adversely affect performance by any of
such parties of its obligations pursuant to and as contemplated by the terms and
provisions of this Agreement or the Loan Documents.

                  7.5.  Taxes.  The  Borrower  has filed  all state and  federal
income tax returns that are  required to be filed,  and has paid all taxes shown
to be due on such returns and such  assessments  received by the Borrower to the
extent that the same had become due.

                  7.6.  Title to Property.  The Borrower holds and will hold all
right,  title, and interest in and to its properties,  including the Collateral,
free and clear of all liens, claims and encumbrances,  except as permitted under
this Agreement.  The Trust holds and will hold all right, title, and interest in
and to its  properties,  including  the  Premises,  free and clear of all liens,
claims and encumbrances,  except as permitted under this Agreement. The Borrower
has no subsidiaries.

                  7.7.  Accounts  Receivable.   With  respect  to  the  Accounts
Receivable,   the  Borrower  represents  and  warrants  that,  unless  otherwise
indicated in writing by the Borrower:

                           (a) all Accounts  Receivable are genuine,  are in all
         respects  what they purport to be, are not  evidenced by a judgment and
         are  evidenced  by only  one,  if any,  executed  original  instrument,
         agreement, contract, or document;

                           (b) all Accounts Receivable represent undisputed bona
         fide transactions completed in accordance with the terms and provisions
         contained in any documents or agreements related thereto;

                           (c) the face amount shown on any schedule of Accounts
         Receivable  heretofore  or  hereafter  provided  to the  Bank  and  all
         invoices  and  statements  delivered  to the Bank with  respect  to any
         Accounts Receivable are or will be actually and absolutely owing to the
         Borrower and are not contingent for any reason;

                           (d) to the best of the  Borrower's  knowledge,  there
         are no set-offs,  counterclaims,  or disputes existing or asserted with
         respect to the Accounts  Receivable,  and the Borrower has not made any
         agreement with any account debtor for any deduction  therefrom,  except
         for  discounts and  allowances  allowed by the Borrower in the ordinary
         course of its business for prompt  payment,  all of which  discounts or
         allowances are reflected in the calculation





                                      -18-
<PAGE>


                                                      

         of  the  face  amount  of  the  invoices  to  which  such  discounts or
         allowances relate;

                           (e) to the best of the  Borrower's  knowledge,  there
         are no  facts,  events,  or  conditions  which  in any way  impair  the
         validity or  enforcement  of the Accounts  Receivable or tend to reduce
         the amount payable thereunder from the invoice face amount shown on any
         schedule of Accounts Receivable delivered to the Bank;

                           (f) the  Borrower  has no  knowledge  of any  fact or
         circumstance  that would impair the validity or  collectibility  of the
         Accounts Receivable; and

                           (g) the Accounts  Receivable that the Borrower shall,
         expressly  or by  implication,  request  the Bank to treat as  Eligible
         Accounts  will,  as of the time such  request  is made,  conform in all
         requests to the conditions to be treated as Eligible Accounts.

                  7.8.  Inventory.  With respect to the Inventory,  the Borrower
represents  and  warrants  that,  unless  otherwise  indicated in writing by the
Borrower:

                           (a) all  inventory  is  located at the  location  set
         forth in Section 5.7 hereof or is Inventory that is in transit;

                           (b) no  Inventory  is,  or shall at any time or times
         hereafter  be,  stored with a bailee,  warehouseman,  or similar  party
         without the prior written consent of the Bank;

                           (c) no Inventory is under  consignment to or from any
         person;

                           (d) all Inventory is currently  usable and salable in
         the normal course of the Borrower's business; and

                           (e) the Inventory that the Borrower shall,  expressly
         or by  implication,  request  the Bank to treat as  Eligible  Inventory
         will,  as of the time such request is made,  conform in all respects to
         the conditions to be treated as Eligible Inventory.

                  7.9.  Compliance with Environmental  Laws. Except as disclosed
in  writing  to the Bank on or before  the date  hereof,  the  Premises  and its
present use complies,  and at all times shall comply,  with all applicable  laws
and govern mental  regulations  including,  without  limitation,  all applicable
federal,  state and local laws  pertaining to air and water  quality,  hazardous
waste, waste disposal, air emissions and other environmental matters, all zoning
and other land use  matters,  and utility  availability.  Except as disclosed in
writing to the Bank on or before the date hereof,  neither the Borrower  nor, to
the best of the  Borrower's  knowledge,  any  previous  owner or occupier of the
Premises,  used,  generated,  stored  or  disposed  of,  on,  under or about the
Premises any  Hazardous  Materials.  For purposes of this  Agreement,  Hazardous
Materials  shall mean and include any  hazardous  substance or any  pollutant or
contaminant   defined  as  such  in  (or  for  purposes  of)  the  Comprehensive
Environmental   Response,   Compensation,   and  Liability  Act,  any  so-called
applicable  "Superfund"  or  "Superlien"  or "Non- priority Lien" law, the Toxic
Substances  Control Act, or the Resource  Conservation  and Recovery Act, all as
amended from time to time. Further, to the






                                      -19-
<PAGE>


                                                       

best of the Borrower's knowledge,  except as disclosed in writing to the Bank on
or before the date hereof,  the Premises does not contain any underground  tanks
and does not contain and has not in the past  contained any  asbestos-containing
material in friable form.

                  7.10. Material Facts. Neither this Agreement nor any document,
financial statement,  credit information,  certificate or statement furnished to
the Bank by the Borrower  contains,  or will contain,  any untrue statement of a
material fact or omits, or will omit, to state a material fact necessary to make
the statements made not misleading.

                  7.11.  Representations and Warranties to be Continuing. All of
the foregoing  representations  and  warranties  will be true at the date of the
initial  disbursement  and at the dates of all subsequent  disbursements  of the
Loan. All representations,  warranties, covenants, and agreements made herein or
in any  certificate or other  document  delivered to the Bank by or on behalf of
the   Borrower   shall  be  deemed  to  have  been   relied  upon  by  the  Bank
notwithstanding any investigation heretofore or hereafter made by the Bank or on
its  behalf,  and shall  survive  the making of any or all of the  disbursements
contemplated hereby and shall continue in full force and effect as long as there
remains  unperformed  any  obligation to the Bank  hereunder or under any of the
Loan Documents.

                  Section 8.  MISCELLANEOUS PROVISIONS.

                  8.1. Notices. Any communications, requests or notices required
or appropriate  to be given under this Agreement  shall be in writing and deemed
given when delivered in person or when mailed by certified mail,  return receipt
requested,  deposited in the United States mail postage  pre-paid,  addressed to
the party for whom the notice is intended as follows:

         BORROWER:                  CTI Industries Corporation
                                    22160 North Pepper Road
                                    Barrington, IL 60010
                                    Attention: Stephen M. Merrick
                                               hief Executive Officer

         BANK:                      First American Bank
                                    1650 Louis Avenue
                                    Elk Grove Village, Illinois 60007
                                    Attention:  Martin J. Carmody
                                                Exec. Vice President

These addresses may be changed by notice as provided herein.

                  8.2. No Waiver.  No failure by the Bank to exercise,  or delay
by the Bank in exercising, any right, power or privilege hereunder shall operate
as a waiver  thereof,  nor shall any  single or partial  exercise  of any right,
power or privilege  hereunder preclude any other or further exercise thereof, or
the exercise of any other  right,  power or  privilege.  The rights and remedies
provided in this  Agreement  are  cumulative  and not  exclusive of any right or
remedy  provided  by law.  No notice to or  demand on the  Borrower  in any case
shall, in itself,  entitle the Borrower to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the






                                      -20-
<PAGE>



Bank to any other or  further  action  in any  circumstances  without  notice or
demand.

                  8.3.  Binding  Effect.  This  Agreement and the Loan Documents
shall be binding upon and inure to the benefit of the respective  parties hereto
and their respective successors and assigns. This Agreement is made for the sole
benefit of the Borrower  and the Bank and no other person or persons  shall have
any bene fits, rights or remedies under or by reason of this Agreement.

                  8.4. Further Assurances. The Borrower agrees that, at any time
or from time to time,  upon the written request of the Bank, it will execute and
deliver all such further  documents and do all such other acts and things as the
Bank may  reasonably  request  to give  effect  to this  Agreement  and the Loan
Documents.

                  8.5.  Time  of the  Essence.  Time is of the  essence  of this
Agreement and of every part hereof.

                  8.6. Fees and  Expenses.  The Borrower  shall  promptly pay or
reimburse the Bank for all reasonable  expenses,  regardless of whether the Loan
is disbursed in whole or in part,  incurred in  connection  with the issuance of
the Bank's  commitment  letter and the  making of the Loan,  including,  but not
limited to, examination and insurance of title by the Title Company, preparation
and review of all Loan  Documents by the Bank's  outside  counsel,  taxes of any
kind, appraisal, surveys, recording costs, escrow disbursement costs, inspection
costs and  attorney's  fees. The Borrower shall also pay promptly to the Bank on
demand the customary fees and  out-of-pocket  expenses of the Bank in connection
with the Bank's periodic examinations of the Collateral and inspections of books
and records of the  Borrower.  The  Borrower  shall pay  promptly to the Bank on
demand  reasonable  attorneys'  fees and all costs and  other  expenses  paid or
incurred  by the Bank in duly  enforcing  or  exercising  its rights or remedies
created  by,  connected  with or  provided  in this  Agreement,  the Notes,  the
Mortgage  or the  other  Loan  Documents  or as a result  of any  litigation  or
threatened  litigation or the preparation  therefor in which the Bank is a party
or threatened to be made a party and which in any way whatsoever relates to this
Agreement.

                  8.7.  Indemnity  Agreement.  The Borrower agrees to indemnify,
defend, and hold the Bank harmless from and against any and all losses, damages,
liabilities,  and expenses (including  reasonable  attorneys' fees) the Bank may
sustain as a consequence of the occurrence of any Event of Default or the breach
or  inaccuracy of any  representation  and warranty made by the Borrower in this
Agreement or any document, financial statement, credit information, certificate,
or statement  furnished to the Bank. The Borrower  agrees to indemnify,  defend,
and  hold the  Bank  harmless  from and  against  any and all  losses,  damages,
liabilities,  and expenses  (including  reasonable  attorneys' fees) that at any
time or from time to time may be paid,  incurred,  or  suffered  by, or asserted
against, the Bank for, with respect to, or as a direct or indirect result of the
presence on or under,  or the escape,  seepage,  leakage,  spillage,  discharge,
emission,  or release from,  the Premises or any part thereof,  into or upon any
land, the atmosphere,  or any water course,  body of water, or wet lands, of any
Hazardous  Material  occurring during or prior to the period of ownership of the
Premises  or any part  thereof  by the  Borrower  or as a result  of  conditions
existing  during  such  period  (including,   without  limitation,  any  losses,
liabilities,  damages,  or expenses asserted or arising under any applicable law
or regulation).  The provisions of and  undertakings  and  indemnifications  set
forth in this  Section  shall  survive  the  payment  of the Notes and the other
obligations of the Borrower






                                      -21-
<PAGE>



to the Bank and shall not be affected by the Bank's  acquisition of any interest
in the Premises, whether by foreclosure or otherwise.

                  8.8.  Security for  Disbursements  and  Payments.  Any and all
disbursements,  payments  and  amounts  expended  by the Bank  pursuant  to this
Agreement,  and all other expenses  reimbursable by the Borrower,  shall, as and
when advanced or incurred, be and become evidenced and secured by this Agreement
and the Loan  Documents  and shall  bear  interest  from the date of  advance or
expenditure  at the rate  provided  in this  Agreement  or,  if no such  rate is
provided,  then at the highest  applicable  interest rate provided in the Notes.
Any Event of Default  which may occur under this  Agreement  shall  constitute a
default under the Loan Documents.

                  8.9. Entire  Agreement.  This Agreement and the Loan Documents
constitute  the  entire  agreement  between  the  parties  hereto and may not be
modified or amended in any manner other than by supplemental  written  agreement
executed by the parties  hereto.  This Agreement  supersedes any other agreement
made by the Bank with or for the benefit of the Borrower.

                  8.10.  Governing  Law.  This  Agreement  shall  be a  contract
governed by and construed in accordance with the laws of the State of Illinois.

                  IN WITNESS  WHEREOF,  the parties hereto caused this Agreement
to be executed as of the day and year first written above.

BORROWER:                                   CTI Industries Corporation


                                                     BY:______________________ 
                                                        Stephen M. Merrick
                                                        Chief Executive Officer




BANK:                                       First American Bank

                                                     BY:_______________________ 
                                                        Martin J. Carmody
                                                        Exec. Vice President





















                                      -22-