Exhibit 10.27

                                    GUARANTY

         FOR VALUE RECEIVED and in  consideration of any loan or other financial
accommodation  heretofore  or  hereafter  at any  time  made or  granted  to CTI
Industries   Corporation,   a  Delaware  corporation   (hereinafter  called  the
"Borrower") by First American Bank, an Illinois banking corporation (hereinafter
called the "Bank"), the undersigned hereby unconditionally guarantee(s) the full
and prompt payment when due,  whether by acceleration  or otherwise,  and at all
times  thereafter,  of all  obligations  of the Borrower to the Bank,  howsoever
created,  arising  or  evidenced,   whether  direct  or  indirect,  absolute  or
contingent,  or now or  hereafter  existing,  or due or to become  due (all such
obligations being hereinafter  collectively called the  "Obligations"),  and the
undersigned further agree(s) to pay all expenses (including  attorneys' fees and
legal  expenses)  paid or  incurred  by the Bank in  endeavoring  to collect the
Obligations, or any part thereof, and in enforcing this Guaranty.

         1. Each of the  undersigned  agrees  that,  in the event of the  death,
incompetency,  dissolution or insolvency of the Borrower or such undersigned, or
the inability of the Borrower or such  undersigned  to pay debts as they mature,
or an  assignment  by the  Borrower  or  such  undersigned  for the  benefit  of
creditors,  or the  institution of any  proceeding  against the Borrower or such
undersigned  alleging  that the  Borrower or such  undersigned  is  insolvent or
unable to pay debts as they  mature (and such  proceeding  is not  dismissed  or
withdrawn  within 90 days after the  filing  thereof),  and if such event  shall
occur at a time  when any of the  Obligations  may not then be due and  payable,
such  undersigned  will pay to the Bank  forthwith the full amount that would be
payable  hereunder  by such  undersigned  if all  Obligations  were then due and
payable.

         2. This Guaranty  shall in all respects be a  continuing,  absolute and
unconditional   guaranty,   and   shall   remain  in  full   force  and   effect
(notwithstanding,  without limitation, the death, incompetency or dissolution of
any of the  undersigned or that at any time or from time to time all Obligations
may have been paid in full).

         3. The  undersigned  further  agree(s)  that, if at any time all or any
part of any payment theretofore applied by the Bank to any of the Obligations is
or  must be  rescinded  or  returned  by the  Bank  for  any  reason  whatsoever
(including, without limitation, the insolvency,  bankruptcy or reorganization of
the Borrower), such Obligations shall, for the purposes of this Guaranty, to the
extent that such  payment is or must be  rescinded or returned be deemed to have
continued in existence,  notwithstanding  such application by the Bank, and this
Guaranty shall continue to be effective or be reinstated, as the case may be, as
to such  Obligations,  all as though such  application  by the Bank had not been
made.  The  undersigned  shall  indemnify  and defend the Bank and hold the Bank
harmless from and against any and all loss, damage, cost, or expense, (including
reasonable attorney's fees) arising out of any claim for rescission or return of
all or any part of any  payment  theretofore  applied  by the Bank to any of the
Obligations.

         4. The Bank may, from time to time, at its sole  discretion and without
notice to the  undersigned  (or any of them),  take any or all of the  following
actions:  (a) retain or obtain a security interest in any property to secure any
of the Obligations or any obligation hereunder, (b) retain or obtain the primary
or  secondary  obligation  of  any  obligor  or  obligors,  in  addition  to the
undersigned, with respect to any of the Obligations, (c) extend or renew for one
or more periods (whether or not longer than the original period), alter or


<PAGE>



exchange any of the Obligations,  or release or compromise any obligation of any
of the  undersigned  hereunder  or any  obligation  of any  nature  of any other
obligor  with  respect  to any of the  Obligations,  (d)  release  its  security
interest in, or surrender,  release, or permit any substitution or exchange for,
all or any  part  of  any  property  securing  any  of  the  Obligations  or any
obligation hereunder, or extend or renew for one or more periods (whether or not
longer than the original period) or release,  compromise,  alter or exchange any
obligations of any nature of any obligor with respect to any such property,  and
(e)  resort  to the  undersigned  (or any of  them)  for  payment  of any of the
Obligations,  whether  or not the  Bank  shall  have  resorted  to any  property
securing  any of the  Obligations  or any  obligation  hereunder  or shall  have
proceeded against any other of the undersigned or any other obligor primarily or
secondarily obligated with respect to any of the Obligations.

         5. Any amounts  received by the Bank from whatsoever  source on account
of the  Obligations  may be  applied  by it toward  the  payment  of such of the
Obligations, and in such order of application, as the Bank may from time to time
elect.  Notwithstanding  any  payments  made  by  or  for  the  account  of  the
undersigned  pursuant to this Guaranty,  the undersigned shall not be subrogated
to  any  rights  of the  Bank.  The  undersigned  hereby  waive  all  rights  of
subrogation, indemnity, contribution,  exoneration, reimbursement or other claim
which the undersigned now or may hereafter have or claim against the Borrower or
any other person liable in any way with respect to the Obligations.

         6.  The  undersigned  hereby  expressly  waive(s):  (a)  notice  of the
acceptance by the Bank of this Guaranty, (b) notice of the existence or creation
or non-payment of all or any of the Obligations, (c) presentment, demand, notice
of dishonor, protest, and all other notices whatsoever, and (d) all diligence in
collection or protection of or realization  upon the Obligations or any thereof,
any  obligation  hereunder,  or  any  security  for  or  guaranty  of any of the
foregoing.

         7. The Bank may, from time to time,  without notice to the  undersigned
(or any of  them),  assign  or  transfer  any or all of the  Obligations  or any
interest therein;  and,  notwithstanding  any such assignment or transfer or any
subsequent  assignment or transfer thereof, such Obligations shall be and remain
Obligations for the purposes of this Guaranty,  and each and every immediate and
successive  assignee or transferee of any of the  Obligations or of any interest
therein  shall,  to the extent of the interest of such assignee or transferee in
the Obligations, be entitled to the benefits of this Guaranty to the same extent
as if such assignee or transferee were the Bank; provided, however, that, unless
the Bank shall otherwise  consent in writing,  the Bank shall have an unimpaired
right, prior and superior to that of any such assignee or transferee, to enforce
this Guaranty, for the benefit of the Bank, as to those of the Obligations which
the Bank has not assigned or transferred.

         8. No delay on the part of the  Bank in the  exercise  of any  right or
remedy shall operate as a waiver thereof,  and no single or partial  exercise by
the Bank of any right or remedy shall preclude other or further exercise thereof
or the  exercise of any other  right or remedy;  nor shall any  modification  or
waiver of any of the provisions of this Guaranty be binding upon the Bank except
as expressly  set forth in a writing duly signed and  delivered on behalf of the
Bank.  No  action of the Bank  permitted  hereunder  shall in any way  affect or
impair the rights of the Bank and the obligation of the  undersigned  under this
Guaranty. For the purposes of this Guaranty, the Obligations shall include all


<PAGE>



obligations of the Borrower to the Bank,  notwithstanding  any right or power of
the Borrower or anyone else to assert any claim or defense as to the  invalidity
or unenforceability  of any such obligation,  and no such claim or defense shall
affect or impair the obligations of the undersigned hereunder.

         9. This Guaranty  shall be binding upon the  undersigned,  and upon the
heirs, legal representatives,  successors and assigns of the undersigned; and to
the extent that the Borrower or any of the  undersigned  is either a partnership
or a corporation,  all references herein to the Borrower and to the undersigned,
respectively,  shall be deemed to include any successor or  successors,  whether
immediate or remote, to such partnership or corporation.  If more than one party
shall execute this Guaranty,  the term  "undersigned"  as used herein shall mean
all parties executing this Guaranty and each of them, and all such parties shall
be jointly and severally obligated  hereunder.  This Guaranty shall inure to the
benefit of the Bank and its successors and assigns, and all references herein to
the Bank shall be deemed to include its successors and assigns.

         10. This Guaranty has been delivered in the State of Illinois and shall
be  construed  in  accordance  with and  governed  by the  laws of the  State of
Illinois. Wherever possible each provision of this Guaranty shall be interpreted
in such manner as to be  effective  and valid under  applicable  law, but if any
provision of this  Guaranty  shall be  prohibited  by or invalid under such law,
such  provision  shall be  ineffective  to the  extent  of such  prohibition  or
invalidity,  without  invalidating  the  remainder  of  such  provision  or  the
remaining provisions of this Guaranty.

         11. To secure all obligations of each of the undersigned hereunder, the
Bank shall have a lien upon and security interest in (and may, without demand or
notice of any kind,  at any time and from time to time when any amount  shall be
due and payable by such undersigned hereunder,  appropriate and apply toward the
payment of such amount,  in such order of application as the Bank may elect) any
and all balances,  credits,  deposits,  accounts, or monies of or in the name of
such  undersigned now or hereafter with the Bank and any and all property of any
kind or description of or in the name of such undersigned now or hereafter,  for
any reason or purpose whatsoever, in the possession or control of, or in transit
to, the Bank or any agent or bailee for the Bank.

         12.  During  such  period  that the  Borrower's  ratio of total debt to
tangible net worth is less that 3 to 1, in  accordance  with Section 5.11 of the
Amended and Restated Loan and Security Agreement dated May 1, 1998, the right of
recovery against the undersigned under this Guaranty is limited to the amount of
One Million and No/100 Dollars ($1,000,000.00), plus interest on such amount and
all expenses of collecting and enforcing the Obligations and this Guaranty.  The
creation or existence  from time to time of  Obligations in excess of the amount
to which  the  right of  recovery  under  this  Guaranty  is  limited  is hereby
authorized,  without notice to the undersigned (or any of them), and shall in no
way  affect  or  impair  the  rights  of the  Bank  and the  obligations  of the
undersigned under this Guaranty.









<PAGE>






         Signed and delivered September 1, 1998.


                                      ______________________________
                                      Stephen M. Merrick



<PAGE>



                                    GUARANTY

         FOR VALUE RECEIVED and in  consideration of any loan or other financial
accommodation  heretofore  or  hereafter  at any  time  made or  granted  to CTI
Industries   Corporation,   a  Delaware  corporation   (hereinafter  called  the
"Borrower") by First American Bank, an Illinois banking corporation (hereinafter
called the "Bank"), the undersigned hereby unconditionally guarantee(s) the full
and prompt payment when due,  whether by acceleration  or otherwise,  and at all
times  thereafter,  of all  obligations  of the Borrower to the Bank,  howsoever
created,  arising  or  evidenced,   whether  direct  or  indirect,  absolute  or
contingent,  or now or  hereafter  existing,  or due or to become  due (all such
obligations being hereinafter  collectively called the  "Obligations"),  and the
undersigned further agree(s) to pay all expenses (including  attorneys' fees and
legal  expenses)  paid or  incurred  by the Bank in  endeavoring  to collect the
Obligations, or any part thereof, and in enforcing this Guaranty.

         1. Each of the  undersigned  agrees  that,  in the event of the  death,
incompetency,  dissolution or insolvency of the Borrower or such undersigned, or
the inability of the Borrower or such  undersigned  to pay debts as they mature,
or an  assignment  by the  Borrower  or  such  undersigned  for the  benefit  of
creditors,  or the  institution of any  proceeding  against the Borrower or such
undersigned  alleging  that the  Borrower or such  undersigned  is  insolvent or
unable to pay debts as they  mature (and such  proceeding  is not  dismissed  or
withdrawn  within 90 days after the  filing  thereof),  and if such event  shall
occur at a time  when any of the  Obligations  may not then be due and  payable,
such  undersigned  will pay to the Bank  forthwith the full amount that would be
payable  hereunder  by such  undersigned  if all  Obligations  were then due and
payable.

         2. This Guaranty  shall in all respects be a  continuing,  absolute and
unconditional   guaranty,   and   shall   remain  in  full   force  and   effect
(notwithstanding,  without limitation, the death, incompetency or dissolution of
any of the  undersigned or that at any time or from time to time all Obligations
may have been paid in full).

         3. The  undersigned  further  agree(s)  that, if at any time all or any
part of any payment theretofore applied by the Bank to any of the Obligations is
or  must be  rescinded  or  returned  by the  Bank  for  any  reason  whatsoever
(including, without limitation, the insolvency,  bankruptcy or reorganization of
the Borrower), such Obligations shall, for the purposes of this Guaranty, to the
extent that such  payment is or must be  rescinded or returned be deemed to have
continued in existence,  notwithstanding  such application by the Bank, and this
Guaranty shall continue to be effective or be reinstated, as the case may be, as
to such  Obligations,  all as though such  application  by the Bank had not been
made.  The  undersigned  shall  indemnify  and defend the Bank and hold the Bank
harmless from and against any and all loss, damage, cost, or expense, (including
reasonable attorney's fees) arising out of any claim for rescission or return of
all or any part of any  payment  theretofore  applied  by the Bank to any of the
Obligations.

         4. The Bank may, from time to time, at its sole  discretion and without
notice to the  undersigned  (or any of them),  take any or all of the  following
actions:  (a) retain or obtain a security interest in any property to secure any
of the Obligations or any obligation hereunder, (b) retain or obtain the primary
or  secondary  obligation  of  any  obligor  or  obligors,  in  addition  to the
undersigned, with respect to any of the Obligations, (c) extend or renew for one


<PAGE>



or more  periods  (whether or not longer  than the  original  period),  alter or
exchange any of the Obligations,  or release or compromise any obligation of any
of the  undersigned  hereunder  or any  obligation  of any  nature  of any other
obligor  with  respect  to any of the  Obligations,  (d)  release  its  security
interest in, or surrender,  release, or permit any substitution or exchange for,
all or any  part  of  any  property  securing  any  of  the  Obligations  or any
obligation hereunder, or extend or renew for one or more periods (whether or not
longer than the original period) or release,  compromise,  alter or exchange any
obligations of any nature of any obligor with respect to any such property,  and
(e)  resort  to the  undersigned  (or any of  them)  for  payment  of any of the
Obligations,  whether  or not the  Bank  shall  have  resorted  to any  property
securing  any of the  Obligations  or any  obligation  hereunder  or shall  have
proceeded against any other of the undersigned or any other obligor primarily or
secondarily obligated with respect to any of the Obligations.

         5. Any amounts  received by the Bank from whatsoever  source on account
of the  Obligations  may be  applied  by it toward  the  payment  of such of the
Obligations, and in such order of application, as the Bank may from time to time
elect.  Notwithstanding  any  payments  made  by  or  for  the  account  of  the
undersigned  pursuant to this Guaranty,  the undersigned shall not be subrogated
to  any  rights  of the  Bank.  The  undersigned  hereby  waive  all  rights  of
subrogation, indemnity, contribution,  exoneration, reimbursement or other claim
which the undersigned now or may hereafter have or claim against the Borrower or
any other person liable in any way with respect to the Obligations.

         6.  The  undersigned  hereby  expressly  waive(s):  (a)  notice  of the
acceptance by the Bank of this Guaranty, (b) notice of the existence or creation
or non-payment of all or any of the Obligations, (c) presentment, demand, notice
of dishonor, protest, and all other notices whatsoever, and (d) all diligence in
collection or protection of or realization  upon the Obligations or any thereof,
any  obligation  hereunder,  or  any  security  for  or  guaranty  of any of the
foregoing.

         7. The Bank may, from time to time,  without notice to the  undersigned
(or any of  them),  assign  or  transfer  any or all of the  Obligations  or any
interest therein;  and,  notwithstanding  any such assignment or transfer or any
subsequent  assignment or transfer thereof, such Obligations shall be and remain
Obligations for the purposes of this Guaranty,  and each and every immediate and
successive  assignee or transferee of any of the  Obligations or of any interest
therein  shall,  to the extent of the interest of such assignee or transferee in
the Obligations, be entitled to the benefits of this Guaranty to the same extent
as if such assignee or transferee were the Bank; provided, however, that, unless
the Bank shall otherwise  consent in writing,  the Bank shall have an unimpaired
right, prior and superior to that of any such assignee or transferee, to enforce
this Guaranty, for the benefit of the Bank, as to those of the Obligations which
the Bank has not assigned or transferred.

         8. No delay on the part of the  Bank in the  exercise  of any  right or
remedy shall operate as a waiver thereof,  and no single or partial  exercise by
the Bank of any right or remedy shall preclude other or further exercise thereof
or the  exercise of any other  right or remedy;  nor shall any  modification  or
waiver of any of the provisions of this Guaranty be binding upon the Bank except
as expressly  set forth in a writing duly signed and  delivered on behalf of the
Bank.  No  action of the Bank  permitted  hereunder  shall in any way  affect or
impair the rights of the Bank and the obligation of the undersigned under this


<PAGE>



Guaranty.  For the purposes of this Guaranty,  the Obligations shall include all
obligations of the Borrower to the Bank,  notwithstanding  any right or power of
the Borrower or anyone else to assert any claim or defense as to the  invalidity
or unenforceability  of any such obligation,  and no such claim or defense shall
affect or impair the obligations of the undersigned hereunder.

         9. This Guaranty  shall be binding upon the  undersigned,  and upon the
heirs, legal representatives,  successors and assigns of the undersigned; and to
the extent that the Borrower or any of the  undersigned  is either a partnership
or a corporation,  all references herein to the Borrower and to the undersigned,
respectively,  shall be deemed to include any successor or  successors,  whether
immediate or remote, to such partnership or corporation.  If more than one party
shall execute this Guaranty,  the term  "undersigned"  as used herein shall mean
all parties executing this Guaranty and each of them, and all such parties shall
be jointly and severally obligated  hereunder.  This Guaranty shall inure to the
benefit of the Bank and its successors and assigns, and all references herein to
the Bank shall be deemed to include its successors and assigns.

         10. This Guaranty has been delivered in the State of Illinois and shall
be  construed  in  accordance  with and  governed  by the  laws of the  State of
Illinois. Wherever possible each provision of this Guaranty shall be interpreted
in such manner as to be  effective  and valid under  applicable  law, but if any
provision of this  Guaranty  shall be  prohibited  by or invalid under such law,
such  provision  shall be  ineffective  to the  extent  of such  prohibition  or
invalidity,  without  invalidating  the  remainder  of  such  provision  or  the
remaining provisions of this Guaranty.

         11. To secure all obligations of each of the undersigned hereunder, the
Bank shall have a lien upon and security interest in (and may, without demand or
notice of any kind,  at any time and from time to time when any amount  shall be
due and payable by such undersigned hereunder,  appropriate and apply toward the
payment of such amount,  in such order of application as the Bank may elect) any
and all balances,  credits,  deposits,  accounts, or monies of or in the name of
such  undersigned now or hereafter with the Bank and any and all property of any
kind or description of or in the name of such undersigned now or hereafter,  for
any reason or purpose whatsoever, in the possession or control of, or in transit
to, the Bank or any agent or bailee for the Bank.

         12.  During  such  period  that the  Borrower's  ratio of total debt to
tangible net worth is less that 3 to 1, in  accordance  with Section 5.11 of the
Amended and Restated Loan and Security Agreement dated May 1, 1998, the right of
recovery against the undersigned under this Guaranty is limited to the amount of
One Million and No/100 Dollars ($1,000,000.00), plus interest on such amount and
all expenses of collecting and enforcing the Obligations and this Guaranty.  The
creation or existence  from time to time of  Obligations in excess of the amount
to which  the  right of  recovery  under  this  Guaranty  is  limited  is hereby
authorized,  without notice to the undersigned (or any of them), and shall in no
way  affect  or  impair  the  rights  of the  Bank  and the  obligations  of the
undersigned under this Guaranty.








<PAGE>





         Signed and delivered September 1, 1998.


                                                 _____________________________ 
                                                 John H. Schwan




<PAGE>



                                    GUARANTY

         FOR VALUE RECEIVED and in  consideration of any loan or other financial
accommodation  heretofore  or  hereafter  at any  time  made or  granted  to CTI
Industries   Corporation,   a  Delaware  corporation   (hereinafter  called  the
"Borrower") by First American Bank, an Illinois banking corporation (hereinafter
called the "Bank"), the undersigned hereby unconditionally guarantee(s) the full
and prompt payment when due,  whether by acceleration  or otherwise,  and at all
times  thereafter,  of all  obligations  of the Borrower to the Bank,  howsoever
created,  arising  or  evidenced,   whether  direct  or  indirect,  absolute  or
contingent,  or now or  hereafter  existing,  or due or to become  due (all such
obligations being hereinafter  collectively called the  "Obligations"),  and the
undersigned further agree(s) to pay all expenses (including  attorneys' fees and
legal  expenses)  paid or  incurred  by the Bank in  endeavoring  to collect the
Obligations, or any part thereof, and in enforcing this Guaranty.

         1. Each of the  undersigned  agrees  that,  in the event of the  death,
incompetency,  dissolution or insolvency of the Borrower or such undersigned, or
the inability of the Borrower or such  undersigned  to pay debts as they mature,
or an  assignment  by the  Borrower  or  such  undersigned  for the  benefit  of
creditors,  or the  institution of any  proceeding  against the Borrower or such
undersigned  alleging  that the  Borrower or such  undersigned  is  insolvent or
unable to pay debts as they  mature (and such  proceeding  is not  dismissed  or
withdrawn  within 90 days after the  filing  thereof),  and if such event  shall
occur at a time  when any of the  Obligations  may not then be due and  payable,
such  undersigned  will pay to the Bank  forthwith the full amount that would be
payable  hereunder  by such  undersigned  if all  Obligations  were then due and
payable.

         2. This Guaranty  shall in all respects be a  continuing,  absolute and
unconditional   guaranty,   and   shall   remain  in  full   force  and   effect
(notwithstanding,  without limitation, the death, incompetency or dissolution of
any of the  undersigned or that at any time or from time to time all Obligations
may have been paid in full).

         3. The  undersigned  further  agree(s)  that, if at any time all or any
part of any payment theretofore applied by the Bank to any of the Obligations is
or  must be  rescinded  or  returned  by the  Bank  for  any  reason  whatsoever
(including, without limitation, the insolvency,  bankruptcy or reorganization of
the Borrower), such Obligations shall, for the purposes of this Guaranty, to the
extent that such  payment is or must be  rescinded or returned be deemed to have
continued in existence,  notwithstanding  such application by the Bank, and this
Guaranty shall continue to be effective or be reinstated, as the case may be, as
to such  Obligations,  all as though such  application  by the Bank had not been
made.  The  undersigned  shall  indemnify  and defend the Bank and hold the Bank
harmless from and against any and all loss, damage, cost, or expense, (including
reasonable attorney's fees) arising out of any claim for rescission or return of
all or any part of any  payment  theretofore  applied  by the Bank to any of the
Obligations.

         4. The Bank may, from time to time, at its sole  discretion and without
notice to the  undersigned  (or any of them),  take any or all of the  following
actions:  (a) retain or obtain a security interest in any property to secure any
of the Obligations or any obligation hereunder, (b) retain or obtain the primary
or  secondary  obligation  of  any  obligor  or  obligors,  in  addition  to the
undersigned, with respect to any of the Obligations, (c) extend or renew for one


<PAGE>



or more  periods  (whether or not longer  than the  original  period),  alter or
exchange any of the Obligations,  or release or compromise any obligation of any
of the  undersigned  hereunder  or any  obligation  of any  nature  of any other
obligor  with  respect  to any of the  Obligations,  (d)  release  its  security
interest in, or surrender,  release, or permit any substitution or exchange for,
all or any  part  of  any  property  securing  any  of  the  Obligations  or any
obligation hereunder, or extend or renew for one or more periods (whether or not
longer than the original period) or release,  compromise,  alter or exchange any
obligations of any nature of any obligor with respect to any such property,  and
(e)  resort  to the  undersigned  (or any of  them)  for  payment  of any of the
Obligations,  whether  or not the  Bank  shall  have  resorted  to any  property
securing  any of the  Obligations  or any  obligation  hereunder  or shall  have
proceeded against any other of the undersigned or any other obligor primarily or
secondarily obligated with respect to any of the Obligations.

         5. Any amounts  received by the Bank from whatsoever  source on account
of the  Obligations  may be  applied  by it toward  the  payment  of such of the
Obligations, and in such order of application, as the Bank may from time to time
elect.  Notwithstanding  any  payments  made  by  or  for  the  account  of  the
undersigned  pursuant to this Guaranty,  the undersigned shall not be subrogated
to  any  rights  of the  Bank.  The  undersigned  hereby  waive  all  rights  of
subrogation, indemnity, contribution,  exoneration, reimbursement or other claim
which the undersigned now or may hereafter have or claim against the Borrower or
any other person liable in any way with respect to the Obligations.

         6.  The  undersigned  hereby  expressly  waive(s):  (a)  notice  of the
acceptance by the Bank of this Guaranty, (b) notice of the existence or creation
or non-payment of all or any of the Obligations, (c) presentment, demand, notice
of dishonor, protest, and all other notices whatsoever, and (d) all diligence in
collection or protection of or realization  upon the Obligations or any thereof,
any  obligation  hereunder,  or  any  security  for  or  guaranty  of any of the
foregoing.

         7. The Bank may, from time to time,  without notice to the  undersigned
(or any of  them),  assign  or  transfer  any or all of the  Obligations  or any
interest therein;  and,  notwithstanding  any such assignment or transfer or any
subsequent  assignment or transfer thereof, such Obligations shall be and remain
Obligations for the purposes of this Guaranty,  and each and every immediate and
successive  assignee or transferee of any of the  Obligations or of any interest
therein  shall,  to the extent of the interest of such assignee or transferee in
the Obligations, be entitled to the benefits of this Guaranty to the same extent
as if such assignee or transferee were the Bank; provided, however, that, unless
the Bank shall otherwise  consent in writing,  the Bank shall have an unimpaired
right, prior and superior to that of any such assignee or transferee, to enforce
this Guaranty, for the benefit of the Bank, as to those of the Obligations which
the Bank has not assigned or transferred.

         8. No delay on the part of the  Bank in the  exercise  of any  right or
remedy shall operate as a waiver thereof,  and no single or partial  exercise by
the Bank of any right or remedy shall preclude other or further exercise thereof
or the  exercise of any other  right or remedy;  nor shall any  modification  or
waiver of any of the provisions of this Guaranty be binding upon the Bank except
as expressly  set forth in a writing duly signed and  delivered on behalf of the
Bank.  No  action of the Bank  permitted  hereunder  shall in any way  affect or
impair the rights of the Bank and the obligation of the undersigned under this


<PAGE>



Guaranty.  For the purposes of this Guaranty,  the Obligations shall include all
obligations of the Borrower to the Bank,  notwithstanding  any right or power of
the Borrower or anyone else to assert any claim or defense as to the  invalidity
or unenforceability  of any such obligation,  and no such claim or defense shall
affect or impair the obligations of the undersigned hereunder.

         9. This Guaranty  shall be binding upon the  undersigned,  and upon the
heirs, legal representatives,  successors and assigns of the undersigned; and to
the extent that the Borrower or any of the  undersigned  is either a partnership
or a corporation,  all references herein to the Borrower and to the undersigned,
respectively,  shall be deemed to include any successor or  successors,  whether
immediate or remote, to such partnership or corporation.  If more than one party
shall execute this Guaranty,  the term  "undersigned"  as used herein shall mean
all parties executing this Guaranty and each of them, and all such parties shall
be jointly and severally obligated  hereunder.  This Guaranty shall inure to the
benefit of the Bank and its successors and assigns, and all references herein to
the Bank shall be deemed to include its successors and assigns.

         10. This Guaranty has been delivered in the State of Illinois and shall
be  construed  in  accordance  with and  governed  by the  laws of the  State of
Illinois. Wherever possible each provision of this Guaranty shall be interpreted
in such manner as to be  effective  and valid under  applicable  law, but if any
provision of this  Guaranty  shall be  prohibited  by or invalid under such law,
such  provision  shall be  ineffective  to the  extent  of such  prohibition  or
invalidity,  without  invalidating  the  remainder  of  such  provision  or  the
remaining provisions of this Guaranty.

         11. To secure all obligations of each of the undersigned hereunder, the
Bank shall have a lien upon and security interest in (and may, without demand or
notice of any kind,  at any time and from time to time when any amount  shall be
due and payable by such undersigned hereunder,  appropriate and apply toward the
payment of such amount,  in such order of application as the Bank may elect) any
and all balances,  credits,  deposits,  accounts, or monies of or in the name of
such  undersigned now or hereafter with the Bank and any and all property of any
kind or description of or in the name of such undersigned now or hereafter,  for
any reason or purpose whatsoever, in the possession or control of, or in transit
to, the Bank or any agent or bailee for the Bank.

         12.  During  such  period  that the  Borrower's  ratio of total debt to
tangible net worth is less that 3 to 1, in  accordance  with Section 5.11 of the
Amended and Restated Loan and Security Agreement dated May 1, 1998, the right of
recovery against the undersigned under this Guaranty is limited to the amount of
One Million and No/100 Dollars ($1,000,000.00), plus interest on such amount and
all expenses of collecting and enforcing the Obligations and this Guaranty.  The
creation or existence  from time to time of  Obligations in excess of the amount
to which  the  right of  recovery  under  this  Guaranty  is  limited  is hereby
authorized,  without notice to the undersigned (or any of them), and shall in no
way  affect  or  impair  the  rights  of the  Bank  and the  obligations  of the
undersigned under this Guaranty.








<PAGE>




         Signed and delivered September 1, 1998.


                                                     _________________________
                                                     Howard W. Schwan