Document:

EXHIBIT 10.16

                              REAL ESTATE MORTGAGE

     THIS AGREEMENT (the "Mortgage") made as of this _____ day of January, 2001,
between CTI INDUSTRIES CORPORATION, a Delaware corporation (the "Mortgagor"),
and BANCO POPULAR NORTH AMERICA (the "Mortgagee").

                              W I T N E S S E T H:

     That to secure the payment of the Notes of the Mortgagor in the principal
amounts of Two Million Seven Hundred Thousand and No/100 Dollars ($2,700,000.00)
and One Hundred Seventy-Three Thousand and No/100 Dollars ($173,000.00)
respectively, together with interest thereon and the payment of any and all sums
heretofore or hereafter loaned and advanced by Mortgagee to Mortgagor all of
which sums shall not exceed Two Million Five Hundred Thousand and No/100 Dollars
($2,500,000.00) and the performance and observance by the Mortgagor, and any
guarantors of any indebtedness secured hereby, of all of the covenants,
agreements, and conditions contained in said Note, this Mortgage, in all other
instruments pertaining to the repayment of any indebtedness secured hereby
(including any guaranty thereof) and in any other security agreement relating to
sums secured hereby, the Mortgagor hereby mortgages and conveys to the
Mortgagee:

          All those certain lots, pieces, or parcels of land with the buildings
          and improvements thereon situated, lying and being in the County of
          Lake, in the State of Illinois as set forth in Exhibit "A", attached
          hereto and made a part hereof (the "Premises").

     TOGETHER with all improvements, tenements, hereditaments, gas, oil,
minerals, easements, fixtures and appurtenances

<PAGE>

thereunto belonging or pertaining; all apparatus, equipment and appliances now
or hereafter therein or thereon used to supply heat, gas, air conditioning,
water, light, power, ventilation and refrigeration; all machinery and other
equipment of every nature and kind used or useful in connection with the
maintenance and operation of the Premises and intended for the use of tenants or
occupants; (all of the foregoing whether now on the Premises or hereafter
erected, installed or placed thereon or therein, or whether physically attached
thereto or not, are and shall be deemed a part of said real estate as between
the parties hereto and all persons claiming by, through or under them, and a
portion of the security for said indebtedness); and also all the estate, right,
title and interest of the Mortgagor in and to the Premises. As to any of the
property aforesaid which (notwithstanding the aforesaid declaration and
agreement) does not so form a part and parcel of the real estate, this Mortgage
is hereby deemed to be, as well, a Security Agreement under the Uniform
Commercial Code for the purpose of creating hereby a security interest in such
property, which Mortgagor hereby grants to Mortgagee as Secured Party (as said
term is defined in the Uniform Commercial Code), securing said indebtedness and
obligations. Notwithstanding anything contained herein to the contrary, this
Mortgage does not cover (i) inventory of Mortgagor; (ii) any of the property
described on Schedule 1 hereto; or (iii) any proceeds, replacements, additions,
substitutions or accessories of any of the foregoing. Mortgagor represents and
warrants that it is lawfully seized of the Premises, that the same are
unencumbered, and that it has good right, full power and lawful authority to
convey and mortgage the same, and covenants that it will warrant and forever
defend said Premises and the quiet and peaceful possession of the same against
any and all claims of all persons whomsoever;

     TO HAVE AND HOLD the Premises unto Mortgagee, its successors and assigns,
forever, for the purposes and uses herein set forth, free from all rights and
benefits under the Homestead Exemption Laws of the State of Illinois, which said
rights and benefits Mortgagor does hereby expressly release and waive.

     Mortgagor covenants and agrees:

     1. To pay, when due, all sums secured hereby.

     2. Not to abandon the Premises; to keep the Premises in good condition and
repair and not to commit or suffer waste; to pay for and complete within a
reasonable time any building at any time in the process of erection upon the
Premises; to promptly repair, restore, or rebuild any building or improvement
now or hereafter on the Premises which may become damaged or destroyed; to
refrain from impairing or diminishing the value of the security and to make no
material alterations of the Premises.

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     3. To comply with all requirements of law or municipal ordinances governing
the Premises and the use thereof; and to permit Mortgagee to inspect the
Premises at all reasonable times.

     4. To keep the Premises free from mechanics or other liens or claims for
liens of any kind; to pay when due any indebtedness which may be secured by a
lien or charge on the Premises, including, without limitation, any condominium
association assessments, dues or charges, and, upon request, to exhibit to
Mortgagee satisfactory evidence of the payment and discharge of such liens or
claims.

     5. To pay, ten (10) days before any penalty attaches, all general taxes and
to pay, when due, all special taxes, special assessments, water charges,
drainage charges, sewer service charges and other charges against the Premises,
of any kind whatsoever, which may be levied, assessed, charged or imposed on the
Premises or any part thereof.

     6. To promptly pay all taxes and assessments assessed or levied under or by
virtue of any state, federal or municipal law or regulation now existing or
hereafter adopted against Mortgagee upon this mortgage, or the debt hereby
secured, or upon Mortgagee's interest under this mortgage, provided however,
that the total amount so paid for any such taxes pursuant to this paragraph
together with the interest payable on said indebtedness shall not exceed the
highest lawful rate of interest in the State of Illinois for commercial business
loans of this type and provided further that in the event of the adoption of any
law or regulation affecting such highest lawful rate of interest, the entire
indebtedness secured by this mortgage shall thereupon become immediately due and
payable at the option of Mortgagee.

     7. To exhibit to Mortgagee, at least annually and at any time upon request,
official receipts showing full payment of all taxes, assessments and charges
which Mortgagor is required or shall elect to pay hereunder.

     8. To keep the Premises continuously insured until the indebtedness secured
hereby is fully paid (or in case of foreclosure until expiration of the period
of redemption, if any) against loss or damage under such types of hazard,
liability and environmental hazard insurance, in such forms and amounts and
written by such companies as may be approved or reasonably required from time to
time by Mortgagee; all policies whether or not required by the terms of this
mortgage, shall contain loss payable clauses in favor of the Mortgagee (or, in
case of foreclosure sale, in favor of the owner of the certificate of sale); in
the event of loss, penalty or judgment, Mortgagor shall immediately notify
Mortgagee in writing and Mortgagor hereby authorizes and directs each and every
insurance company concerned

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to make payments for such loss, penalty or judgment jointly to Mortgagor and
Mortgagee, and the insurance proceeds or any part thereof may be applied by
Mortgagee, at its option, either to the reduction of the indebtedness hereby
secured, or to the restoration or repair of the property damaged, or to the
payment of any fine, penalty, judgment or clean-up costs assessed against
Mortgagor or Mortgagee and any application thereof to the indebtedness shall not
relieve Mortgagor from making any payments herein required until the
indebtedness is paid in full.

     9. To deliver to Mortgagee all policies of insurance, with evidence of
premiums prepaid (renewal policies to be delivered not less than ten (10) days
prior to the respective dates of expiration), and title guarantee policies and
other evidence of title to the Premises, all of which shall be held by Mortgagee
without liability, and in the event of foreclosure of this mortgage or transfer
of title to the Premises in extinguishment of said indebtedness, shall become
the absolute property of Mortgagee. Mortgagee may, from time to time, at its
option, waive, and after any such waiver, reinstate, any or all provisions
hereof requiring deposit of insurance policies, by notice to Mortgagor in
writing.

     10. Upon default and demand by Mortgagee, to make monthly deposits with
Mortgagee, in addition to any other payments required to be made hereunder of a
sum equal to one-twelfth (1/12th) of the yearly taxes and assessments which may
be levied against the Premises and one-twelfth (1/12th) of the annual premium on
the insurance policies covering the Premises. The amount of such taxes and
assessments and premiums, when unknown, shall be estimated by Mortgagee. Such
deposits shall be used by Mortgagee to pay such taxes and assessments and
premiums when due. Any insufficiency of such deposits to pay such taxes and
assessments and premiums when due shall be paid by Mortgagor to Mortgagee on
demand. Upon any default under this mortgage, Mortgagee may apply any such
deposits to any obligation secured hereby or due hereunder. The enforceability
of the covenants relating to taxes and assessments and premiums herein otherwise
provided, shall not be affected except insofar as the obligations thereunder
have been actually met by compliance with this paragraph. Mortgagee may from
time to time at its option waive, and after any such waiver reinstate, any or
all provisions hereof requiring deposits for taxes and assessments and premiums,
by notice to Mortgagor in writing. While any such waiver is in effect, Mortgagor
shall pay taxes and assessments and premiums as herein elsewhere provided.

     11. To pay to Mortgagee any awards of damage resulting from condemnation
proceedings or the taking or injury of the Premises for public use, less
reasonable costs and associated attorneys' fees and expenses of Mortgagor and
the proceeds or any part thereof shall be applied by Mortgagee, at its option,
after the

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payment of all of its expenses, including costs and attorneys' fees, to the
reduction of the indebtedness hereby secured.

     12. To deliver to the Mortgagee reports of the income and expenses of the
Premises in such reasonable detail as the Mortgagee may require signed by the
responsible operating official of the Premises, and to deliver financial
statements of the Mortgagor within ten (10) days after request by Mortgagee.

     13. In the event of default in performance of any of the covenants or
agreements herein contained, Mortgagee may, but need not, make any payment or
perform any act hereinbefore required of Mortgagor, in any form and manner
deemed expedient and may, but need not, make full or partial payments of
principal or interest on prior encumbrances, if any, and purchase, discharge,
compromise or settle any tax lien or any other lien, encumbrance, suit title or
claim thereof, or redeem from any tax sale or forfeiture affecting the Premises
or contest any tax or assessment. All monies paid for any of the purposes herein
authorized and all expenses paid or incurred in connection therewith, including
attorneys' fees, and any other monies advanced by Mortgagee to protect the
Premises and the lien hereof shall be so much additional indebtedness secured
hereby and shall become immediately due and payable without notice and with
interest thereon at the rate in effect after maturity as set forth in the note
described above. Mortgagee, making any payment hereby authorized relating to
taxes or assessments, shall be the sole judge of the legality and validity
thereof and of the amount necessary to be paid in satisfaction thereof.

     14. If (a) default be made in payment, when due, of any sum secured hereby,
or in any of the other covenants or agreements herein contained to be performed
by Mortgagor, or (b) if there be a default in the terms and/or conditions of any
other agreement between the Mortgagor and the Mortgagee relating to the sum
hereby secured or to any other indebtedness of the Mortgagor to Mortgagee or,
(c) if there be a default in the terms or conditions of any other agreement
between the Mortgagor, or any guarantor and the Mortgagee, or (d) if any
proceedings be instituted or process issued (i) to enforce any other lien,
charge, or encumbrance against the Premises, or (ii) against Mortgagor or any
guarantor under any bankruptcy or insolvency laws, or (iii) to place the
Premises or any part thereof in the custody or control of any court through its
receiver or other officer, and such proceedings are not dismissed or stayed on
appeal or such process withdrawn within ten days after written notice to
Mortgagor, or (e) in the event the Mortgagor shall create or permit to exist any
mortgage, lien or other encumbrance on the Premises other than the encumbrance
represented by this Mortgage, or (f) in the event the Mortgagor shall convey
title to any person or persons other than the Mortgagor, enter into any lease or
other agreement containing an option to purchase or

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receive title to the Premises, or shall suffer or permit Mortgagor's equity of
redemption to become vested in any person or persons other than the Mortgagor;
or (g) if Mortgagor or any guarantor makes any assignment for the benefit of
creditors, or is at any time insolvent, or (h) if, at any time, litigation is
commenced or reinstated contesting Mortgagor's ownership of the Premises or the
validity of the lien of Mortgagee in the Premises; or (i) if by or with the
consent or at the instance of Mortgagor, the Trustee, or any guarantor
proceedings to extend the time of payment of any sums secured hereby or to
change the terms of this mortgage be instituted; then,

     I.   All sums secured hereby shall, at the option of Mortgagee, become
          immediately due and payable without notice, with interest thereon.

     II.  Mortgagee may immediately foreclose this mortgage. The Court in which
          any proceeding is pending for that purpose may, at once or at any time
          thereafter, either before or after sale, and without regard to the
          solvency or insolvency of any person liable for payment of the
          indebtedness secured hereby, and without regard to the then value of
          the Premises, appoint a receiver (the provisions for the appointment
          of a receiver and assignment of rents being an express condition upon
          which the loan hereby secured is made), for the benefit of Mortgagee,
          with power to collect the rents, issues and profits of the Premises,
          due and to become due during such foreclosure suit and the full
          statutory period of redemption notwithstanding any redemption. The
          receiver, out of such rents, issues and profits when collected, may
          pay costs incurred in the management and operation of the Premises,
          prior and subordinate liens, if any, and taxes, assessments, water and
          other utilities and insurance, then due or thereafter accruing, and
          may make and pay for any necessary repairs to the Premises, and may
          pay all or any part of the indebtedness secured hereby or any
          deficiency decree, and Mortgagor hereby grants to Mortgagee the right,
          acting through itself, its agents or attorneys, either with or without
          process of law, forcibly or otherwise, to enter upon and take
          possession of the Premises and property, expel and remove any persons,
          goods or chattels, occupying or upon the same, and to collect or
          receive all the rents, issues and profits thereof, and to manage and
          control the same, and to lease the same or any part thereof from time
          to time, and after deducting all reasonable attorneys' fees, and all
          expenses incurred in the protection, care, maintenance, management and
          operation of the Premises, apply the remaining net income upon the
          indebtedness secured hereby, or upon any deficiency

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          decree entered by virtue of any sale held pursuant to a decree of
          foreclosure.

     15. In any foreclosure of this mortgage there shall be allowed and included
in the decree for sale, to be paid out of the rents or proceeds of such sale:

          (a) All sums secured hereby and remaining unpaid,

          (b) All sums advanced or paid by Mortgagee pursuant to this mortgage
          with interest,

          (c) All court costs, attorneys' fees, appraisers' fees, expenditures
          for documentary and expert evidence, stenographers' charges,
          publication costs and costs (which may be estimated as to items to be
          expended after entry of the decree) of procuring all abstracts of
          title, title searches and examinations, title guarantee policies,
          Torrens certificates and similar data with respect to title, as
          Mortgagee may deem necessary in connection with (i) any proceeding,
          including probate and bankruptcy proceedings, to which Mortgagee shall
          be a party, either as plaintiff, claimant, or defendant, by reason of
          this Mortgage or any indebtedness hereby secured; or (ii) preparations
          for the commencement of any suit for the foreclosure hereof after
          accrual of such right to foreclose whether or not actually commenced;
          or (iii) preparations for the defense of any threatened suit or
          proceeding which might affect the Premises or the security hereof,
          whether or not actually commenced. All expenditures and expenses of
          this type mentioned in this subparagraph (c) shall become so much
          additional indebtedness secured hereby and immediately due and
          payable, with interest thereon. The proceeds of any foreclosure sale
          shall be distributed and applied to the items described in
          subparagraphs (a), (b), and (c) in order of priority inversely to the
          manner in which said subparagraphs are above listed and any surplus of
          the proceeds of such sale shall be paid to Mortgagor.

     16. Mortgagor hereby waives any and all rights of redemption from sale
under any order or decree of foreclosure of this Mortgage, on their own behalf
and on behalf of each and every person.

     17. No remedy or right of Mortgagee shall be exclusive of but shall be in
addition to every other remedy of right now, or hereafter, existing at law or in
equity. No delay in exercising, or omission to exercise, any remedy or right,
accruing on any default shall impair any such remedy or right, or shall be
construed to be a waiver of any such default, or acquiescence

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<PAGE>

therein, nor shall it affect any subsequent default of the same or a different
nature. Every such remedy or right may be exercised concurrently or
independently, and when and as often as may be deemed expedient by Mortgagee.

     18. Without affecting the liability of Mortgagor or any other person
(except any person expressly released in writing) for payment of any
indebtedness secured hereby or for performance of any obligation contained
herein, and without affecting the rights of Mortgagee with respect to any
security not expressly released in writing, Mortgagee may, at any time and from
time to time, either before or after the maturity of said note, and without
notice or consent:

     (a) release any person liable for payment of all or any part of the
     indebtedness or for performance of any obligation,

     (b) make any agreement extending the time or otherwise altering the terms
     of payment of all or any part of the indebtedness, or modifying or waiving
     any obligation, or subordinating, modifying or otherwise dealing with the
     lien or charge hereof,

     (c) exercise or refrain from exercising or waive any right Mortgagee may
     have,

     (d) accept additional security of any kind,

     (e) release or otherwise deal with any property, real or personal, securing
     the indebtedness, including all or any part of the property mortgaged
     hereby.

     Upon full payment of all sums secured hereby at the time and in the manner
provided, then this conveyance shall be null and void and a reconveyance or
release of the Premises shall be made by Mortgagee to Mortgagor.

     19. Mortgagor represents and warrants that, to the best of Mortgagor's
knowledge, after due inquiry, the Premises complies as of the date hereof, and
Mortgagor covenants and agrees that it and the Premises will from the date
hereof comply, in all material respects with all applicable federal, state,
regional, county or local laws, statutes, rules, regulations or ordinances,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C.ss.9601 et seq., the Resource
Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous
Waste Amendments of 1984, 42 U.S.C.ss.6901 et seq., the Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C.ss.1251 et
seq., the Toxic

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Substances Control Act of 1976, 15 U.S.C.ss.2601 et seq., the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C.ss.11001 et seq., the Clean
Air Act of 1966, as amended 42 U.S.C.ss.7401 et seq., the National Environmental
Policy Act of 1975, 42 U.S.C.ss.4321, the Rivers and Harbors Act of 1899, 33
U.S.C.ss.401 et seq., the Occupational Safety and Health Act of 1970, 29
U.S.C.ss.651 et seq., the Safe Drinking Water Act of 1974, as amended, 42
U.S.C.ss.300, the Illinois Environmental Protection Act, as amended 415, ILCS
5/1, et. seq. (1987), the Illinois Chemical Safety Act, as amended, 430 ILCS
45/1, et. seq. (1987) and the Illinois Responsible Property Transfer Act, as
amended, 765 ILCS 90/1, et. seq. (1987), and all rules, regulations and guidance
documents promulgated or published thereunder, and any state, regional, county
or local statute, law, rule, regulation or ordinance relating to public health,
safety or the environment, including, without limitation, relating to releases,
discharges, emissions or disposals to air, water, land or groundwater, to the
withdrawal or use of groundwater, to the use, handling or disposal of
polychlorinated biphenyls (PCB's), asbestos or urea formaldehyde, to the
treatment, storage, disposal or management of hazardous substances (including,
without limitation, petroleum, its derivatives by-products or other
hydrocarbons), to exposure to toxic, hazardous, or other controlled, prohibited
or regulated substances, to the transportation, storage, disposal, management or
release of gaseous or liquid substances, and any regulation, order, injunction,
judgment, declaration, notice or demand issued thereunder.

     20. Mortgagor warrants and represents that, to the best of its knowledge,
after due inquiry, the Premises, including all personal property, is free from
contamination, that there has not been thereon a release, discharge or emission,
or threat of release, discharge or emission, of any hazardous substances, gas or
liquid (including without limitation, petroleum, its derivatives or by-products,
or other hydrocarbons), or any other substance, gas or liquid, which is
prohibited, controlled or regulated under applicable law, or which poses a
threat or nuisance to safety, health or the environment, and that the Premises
does not contain, or is not affected by: (i) asbestos, (ii) urea formaldehyde
foam insulation, (iii) polychlorinated biphenyls (PCB's), (iv) underground
storage tanks, (v) landfills, land disposals or dumps.

     21. Mortgagor represents and warrants that it has not given, nor should it
give, nor has it received, any notice, letter, citation, order, warning,
complaint, inquiry, claim or demand that: (i) Mortgagor has violated, or is
about to violate, any federal, state, regional, county or local environmental,
healthy or safety statute, law, rule, regulation, ordinance, judgment or order;
(ii) there has been a release, or there is threat of release, of hazardous
substances (including, without

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<PAGE>

limitation, petroleum, its by-products or derivatives or other hydrocarbons)
from the Premises; (iii) Mortgagor may be or is liable, in whole or in part, for
the costs or cleaning up, remediating or responding to a release of hazardous
substances on or from the Premises (including, without limitation, petroleum,
its by-products or derivatives, or other hydrocarbons); (iv) any of the
Mortgagor's property or assets are subject to a lien in favor of any
Governmental Body for any liability, costs or damages, under federal, state or
local environmental law, rule or regulation arising from or costs incurred by
such governmental entity in response to a release of a hazardous substances
(including, without limitation, petroleum, its by-products or derivatives, or
other hydrocarbons). In the event that Mortgagor receives any notice of the type
described in this Section 4, Mortgagor shall promptly provide a copy to
Mortgagee, and in no event, later than fifteen (15) days from Mortgagor's
receipt or submission thereof.

     22. Mortgagor represents and warrants that to the best of its knowledge,
after due inquiry, it has never in the past engaged in, and agrees that in the
future it shall not conduct, any business, operations or activity on the
Premises, or employ or use the personal property or facilities, to manufacture,
use, generate, treat, store, transport or dispose of any hazardous substance
(including without limitation, petroleum, its derivatives or by-products, or
other hydrocarbons), or any other substance which is prohibited, controlled or
regulated under applicable law, or which poses a threat or nuisance to safety,
healthy or the environment, including, without limitation, any business,
operation or activity which would bring Mortgagor, its property or facilities,
within the ambit of the Resource Conservation and Recovery Act of 1976, as
amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. ss.6901
et seq., the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. ss.9601 et seq., the Illinois Environmental Protection Act, as
amended, 415 ILCS 5/1 et. seq. (1987), the Clean Air Act of 1966, as amended, 42
U.S.C. ss.7401 et seq., or any similar, state, county regional or local statute,
law, regulation, rule or ordinance, including, without limitation, any state
statute providing for financial responsibility for cleanup for the release or
threatened release of substances provided for thereunder.

     23. All provisions hereof shall inure to and bind the respective heirs,
executors, administrators, successors, vendees and assigns of the parties
hereto, and the word Mortgagor shall include all persons claiming under or
through Mortgagor (including, if this Mortgage is executed by a trust or
trustee, any beneficiary thereof) and all persons liable for the payment of the
indebtedness or any part thereof, whether or not such

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persons shall have executed the Note, any guaranty or this mortgage. Wherever
used, the singular number shall include the plural and the singular, and the use
of any gender shall be applicable to all genders.

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     IN WITNESS WHEREOF, the undersigned has executed this Mortgage as of the
day and year first written above.

                                      CTI INDUSTRIES CORPORATION

                                      By: /s/ Howard Schwan
                                          --------------------------
                                          Its:President

ATTEST:

____________________

Its: _______________

This instrument was
prepared by:                                Mail To:

David A. Kallick                            David A. Kallick
Tishler & Wald, Ltd.                        Tishler & Wald, Ltd.
200 S. Wacker Drive                         200 S. Wacker Drive
Suite 2600                                  Suite 2600
Chicago, IL  60606                          Chicago, IL  60606
(312) 876-3800

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<PAGE>

                                 ACKNOWLEDGMENT

STATE OF ILLINOIS)
                 )   ss.
COUNTY OF COOK   )

     I, , a Notary Public _____________________________________ in and for and
residing in said County and State, DO HEREBY CERTIFY that
______________________________, _______________ and ____________________,
___________________ of CTI INDUSTRIES CORPORATION, personally known to me to be
the same persons whose names are subscribed to the foregoing instrument,
appeared before me this day in person and acknowledged that they signed and
delivered said instrument as their own free and voluntary acts and the acts of
the Company for the uses and purposes set forth therein.

     GIVEN under my hand and notarial seal this day of __________________, 2001.

                                                     ---------------------------
                                                     Notary Public

                                                     My commission expires:

                                                     ---------------------------

                                      -13-EXHIBIT 10.17

Amount:  $2,700,000.00                                   Date: January ___, 2001

                                                            Due: January 5, 2006

                             SECURED PROMISSORY NOTE

     FOR VALUE RECEIVED, the undersigned, CTI INDUSTRIES CORPORATION, a Delaware
corporation, promises to pay to the order of BANCO POPULAR NORTH AMERICA (the
"Bank") at its offices in Chicago, Illinois the principal sum of Two Million
Seven Hundred Thousand and No/100 Dollars ($2,700,000.00), upon the terms and
conditions set forth below together with interest on the principal balance
hereof from time to time unpaid at a rate per annum of nine and three-quarters
percent (9.75%). Interest shall be payable from the date of disbursement,
calculated on the basis of the actual number of days elapsed over a year of 360
days but shall not exceed the maximum rate of interest allowable under
applicable law for loans of this type. Principal due hereunder shall bear
interest after maturity, whether pursuant to acceleration, expiration of the
term of this Note or otherwise, at five percent (5%) per annum plus the
prematurity rate.

     Principal and interest due hereunder shall be payable in fifty-nine (59)
consecutive monthly installments on the fifth day of each month, commencing on
February 5, 2001 of $24,060.71 each, with a final installment due on January 5,
2006, of all sums

<PAGE>

remaining unpaid hereon. The undersigned shall pay to the Bank a late charge of
five percent (5%) of any installment not received by the Bank within fifteen
(15) days after the installment is due.

     At any time any deposit or other indebtedness credited by or due from the
holder hereof to the undersigned may be set off against or applied in whole or
partial payment of amounts owing hereunder or in whole or partial payment of any
other liability of the undersigned to the holder whether now existing or
hereafter arising, direct or indirect, absolute or contingent, or whether due or
to become due. Amounts owing hereunder are secured as set forth in that certain
Real Estate Mortgage and Assignment of Leases and Rents of even date herewith,
executed by the undersigned and delivered to the Bank, the terms and conditions
of which are incorporated by reference herein; and as additional security for
amounts owing hereunder the undersigned grants to the holder a continuing
security interest in all property of the undersigned now or hereafter in the
possession or control of the holder hereof.

     Upon nonpayment of the indebtedness evidenced by this Note or any
obligation or liability of the undersigned to the holder hereof in accordance
with its terms or upon the occurrence of an event of default as defined in the
aforesaid Real Estate Mortgage and Assignment of Leases and Rents or any
agreement given to secure this Note or any other Note or obligation of the
undersigned or the Trustee to the Bank, or if Bank shall in good

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<PAGE>

faith deem itself to be insecure for any reason whatsoever then unless Bank
shall otherwise elect the full amount due hereunder shall be immediately due and
payable, without notice or demand.

     No delay on the part of the holder hereof in the exercise of any right or
remedy shall operate as a waiver thereof, no single or partial exercise by said
holder of any right or remedy shall preclude any other future exercise thereof
or the exercise of any other right or remedy and no waiver or indulgence by said
holder of any default shall be effective unless in writing and signed by the
holder hereof nor shall waiver by the holder hereof of any right on one occasion
be construed as or be a bar to or waiver of any such right on any future
occasion.

     The undersigned, each endorser hereof and any other party liable for the
indebtedness evidenced hereby severally waive demand, presentment, notice of
dishonor and consent to: any extension or postponement of the time for its
payment; release of any security interest securing this Note; or the addition of
any party hereto or the release or discharge of or suspension of any rights or
remedies against any person who may be liable for the payment of the
indebtedness evidenced hereby.

     The undersigned may prepay this Note on any scheduled installment date by
giving the Bank ten (10) days prior written notice and paying a premium (the
"Premium") equal to the following: five percent (5%) of the Note balance on the
date of prepayment if prepaid between December 15, 2000 and January 4, 2002;
four percent (4%) of the Note balance if prepaid between

                                       -3-
<PAGE>

January 5, 2002 and January 4, 2003; three percent (3%) of the Note balance on
the date of prepayment if prepaid between January 5, 2003 and January 4, 2004;
two percent (2%) of the Note balance on the day of prepayment if prepaid between
January 5, 2004 and January 4, 2005; and one percent (1%) of the Note balance on
the date of prepayment if prepaid between January 5, 2005 and January 4, 2006.
The Premium shall not be due if the undersigned prepays the Note by refinancing
the Note with the Bank.

     The undersigned warrants and agrees that (1) the obligation evidenced by
this Note is an exempted transaction under the Truth-in-Lending Act, 15 U.S.C.
ss. 1601, et seq.; and (2) said obligation constitutes a business loan which
comes within the purview of subparagraph (1)(c) of Section 4, and a loan secured
by a mortgage on real estate which comes within the purview of subparagraph
(1)(1) of Section 4 of "an Act in relation to the rate of interest and other
charges in connection with sales on credit and the lending of money," approved
May 24, 1879, as amended (815 ILCS 205/4(1)(c) and 205/4(1)(l)).

     The loan evidenced hereby has been made and this Note has been delivered at
Chicago, Illinois, and shall be governed by the laws of the State of Illinois.
Wherever possible each provision of this Note shall be interpreted in such
manner as to be effective and valid under applicable law but if any provision of
this Note shall be prohibited by or invalid under such law such

                                       -4-
<PAGE>

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 Note.

     The undersigned agrees to pay all expenses of collection of the amounts
evidenced under this Note including reasonable attorneys' fees, costs and
expenses. This Note shall be binding upon the heirs, successors, and assigns of
the undersigned.

                                                     CTI INDUSTRIES CORPORATION

                                                     By: /s/ Howard Schwan
                                                         -----------------------
                                                         Its President

ATTEST:

--------------------
Its Secretary

                                       -5-

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